Freelance Rate Calculator

How the calculator works out your rate

It works backwards from the money you want to keep. Each step adds something the client has to pay for, whether or not it appears on the invoice.

1. Start with your take-home target for the year: what you want to move into your personal account after the business is paid for and the tax is settled.
2. Add a buffer: a percentage of that target kept back for savings, slow months and the client who pays in 90 days instead of 30.
3. Add a year of business costs: software, internet and data, power and generator fuel, equipment and any workspace you pay for.
4. Gross up for personal income tax. Business costs are deductible, so tax is charged on revenue minus costs (minus rent relief, if you enter your rent). The calculator searches for the revenue figure that leaves exactly your take-home plus buffer once tax and costs are paid.
5. Divide that revenue by the hours you can genuinely bill in a year: hours worked per week, times the share of those hours that is billable, times the weeks you actually work.

The tax step uses the same bands as the PAYE calculator on this site: the first ₦800,000 of chargeable income at 0%, the next ₦2,200,000 at 15%, the next ₦9,000,000 at 18%, the next ₦13,000,000 at 21%, the next ₦25,000,000 at 23% and anything above ₦50,000,000 at 25%. As a sole trader or business name you pay the same personal income tax as an employee, through self-assessment instead of PAYE.

A worked example: ₦500,000 a month take-home

Take a Lagos designer who wants ₦500,000 a month in take-home pay, which is ₦6,000,000 a year, plus a 10% buffer of ₦600,000. The business costs ₦155,000 a month: ₦25,000 for software, ₦30,000 for internet and data, ₦60,000 for power and generator fuel and ₦40,000 set aside for replacing a laptop and phone. That is ₦1,860,000 a year.

They work 40 hours a week for 46 weeks, leaving six weeks for leave, public holidays and sick days. About 60% of their time is billable; the rest goes on proposals, invoicing, admin and chasing payments. That is 24 billable hours a week and 1,104 a year. No rent relief is entered.

The revenue that leaves ₦6,600,000 after costs and tax is ₦9,652,683. Chargeable income is ₦9,652,683 − ₦1,860,000 = ₦7,792,683. Tax on that is ₦0 on the first ₦800,000, ₦330,000 on the next ₦2,200,000 and 18% of the remaining ₦4,792,683, which is ₦862,683, so ₦1,192,683 in all.

Divided over 1,104 billable hours, that is ₦8,743 an hour. At eight hours a day the day rate is ₦69,947, a full billable week is ₦209,841, and a client who wanted all of their time would need a retainer of about ₦804,390 a month. A 30-hour project comes to ₦262,301. Enter the same figures above, or press the example button, and you will see the same numbers.

Notice that the hourly rate is nearly double what you would get by dividing ₦500,000 by 160 working hours. That gap is costs, tax, the buffer, unbillable time and the weeks you do not work. It is the reason rates copied from salary figures leave freelancers short.

Withholding tax and VAT: what reaches your bank

Companies and government bodies that pay you for professional or consultancy work usually deduct withholding tax before paying. For a resident individual the rate on consultancy, professional and technical fees is 5%; some other services are 2%, and a non-resident consultant normally suffers 10%. On the ₦262,301 project above, a 5% deduction leaves ₦249,186 in the bank.

That ₦13,115 is not lost. It is part of your income tax, collected early, and you set it against your bill when you file. Two things follow. You declare the full ₦262,301 as revenue, not the cash received. And you keep every WHT credit note, because without it you pay the same tax twice. The calculator shows the cash you receive after WHT, but the rate it gives you does not need to change, since the deduction comes off your tax rather than on top of it.

VAT works the other way. Below ₦25,000,000 of taxable supplies in twelve months you do not have to register, and most freelancers selling to individuals and small businesses stay out. Once you are registered, you add 7.5% on top of your fee and pass it on to the Nigeria Revenue Service; it is never part of your income. WHT is worked out on the fee before VAT.

Common mistakes when setting a freelance rate

• Dividing a salary by 160 hours. Nobody bills 160 hours a month, and a salary already has the employer paying for the laptop, the data and the generator.
• Assuming every working hour is billable. Finding work, quoting, invoicing and following up all take time. 50–70% billable is common for a solo freelancer; very few manage more than 75% for long.
• Forgetting power. For many Nigerian freelancers, fuel for the generator or a solar and inverter setup is the biggest running cost after data.
• Pricing in naira for clients who pay in dollars, then absorbing the swing when the exchange rate moves. If you quote in foreign currency, review the rate whenever you send a new quote.
• Treating cash after WHT as the price. If a client deducts 5% and you quoted to land a round number in the bank, you have given a 5% discount and still owe the full tax.
• Leaving no buffer. Late payment is normal. Without savings, one slow client becomes a month of borrowing.

Turning the rate into prices clients accept

The hourly figure is a floor, not a price list. Many clients prefer a fixed project fee or a monthly retainer, and both are easier to sell than an hourly rate. Estimate the hours honestly, multiply by the rate, add a margin for revisions you know will come, and quote the total. For ongoing work, a retainer at the monthly figure gives both sides a predictable bill.

Once you have a price, the invoice is where money is won or lost. ereQa lets you set the WHT rate on an invoice so the amount payable is shown correctly, add VAT as its own line if you are registered, and create recurring draft invoices for retainers each month for you to check and send. Your expenses sit in the same place, so the costs you entered here become numbers you can check against at the end of the year.