How to Calculate Your Hourly Rate as a Tradesperson

Most tradespeople set their hourly rate by guessing what the bloke down the road charges, then knocking a few quid off to win the work. It feels safe, but it's how you end up busy all year and skint at Christmas. Your rate isn't a number you pluck from the air — it's a number you work out from your actual costs and the hours you can really sell.

This guide walks through that calculation step by step, so you can set a rate that pays you properly and keeps the business running.

Why your hourly rate is not your wage

The biggest mistake is treating your hourly rate as your take-home pay. If you want to earn £25 an hour and you charge £25 an hour, you'll lose money on every job.

Your rate has to cover far more than your wage:

• The wage you actually want to take home
• Tax and National Insurance
• Tools, van, fuel and insurance
• Phone, software, accountancy and other overheads
• Unpaid time — quoting, travel, admin, chasing payments
• A profit margin so the business can grow and survive lean months

Think of it as two separate things. There's you, the worker, who deserves a fair wage. And there's the business, which has bills of its own. Your hourly rate has to feed both.

Step one: work out your real annual costs

Before you can set a rate, you need to know what it costs to keep the doors open for a year. Add up everything the business spends whether or not you do a single job:

• Van finance or lease, plus tax, MOT, servicing and insurance
• Public liability and any other insurance
• Tools and equipment, including replacements
• Phone, fuel, parking and accountancy fees
• Software and subscriptions
• Marketing, website and trade body memberships
• Protective clothing and consumables

Total it for the year. Most sole traders are surprised — once you add it all up, it's rarely under £10,000, and often a good deal more.

Then add the wage you want to draw. Be honest about what you need to live on, and remember you'll pay tax and National Insurance on it. Speak to your accountant about the right figure, and check the current HMRC thresholds rather than relying on last year's numbers.

Step two: count the hours you can actually sell

Here's where most rates fall apart. There are 24 hours in a day, but you can't bill for most of them.

Start with the realistic maths:

1. There are about 260 weekdays in a year.
2. Take off holiday, bank holidays and a sensible allowance for sickness — say 30 to 35 days.
3. That leaves roughly 225 working days.

Now the hard truth: not every working hour is billable. Quoting, travelling between jobs, ordering materials, invoicing and chasing late payers all eat your day. For many trades, only 60–70% of working hours actually end up on an invoice.

A rough guide: if you work 8 hours a day across 225 days, that's 1,800 hours — but you might only be able to bill 1,100 to 1,300 of them. Build your rate on the billable hours, not the total.

If you base your rate on hours you can't sell, you'll never hit your target income.

Step three: do the calculation

Now put the two halves together. The formula is simple:

Hourly rate = (annual costs + your target wage + tax + profit) ÷ billable hours

A worked example, as a rough guide only:

• Annual business costs: £14,000
• Wage you want to draw: £35,000
• Allowance for tax and NI: £9,000
• Profit margin (say 10%): £5,800
• Total to recover: £63,800
• Billable hours: 1,200

£63,800 ÷ 1,200 = roughly £53 an hour.

That number often shocks people who've been charging £30. But the £30 rate was quietly funding the business out of their own wage. The calculation just makes the real cost visible.

Adjust the inputs to match your own trade and area, and recheck it once a year. Costs creep up, and a rate you set three years ago is almost certainly too low now.

Hourly rate, day rate or fixed price?

An hourly rate is a tool for working out your numbers — it isn't always the best way to charge a customer. Once you know your true hourly cost, you can convert it into whatever pricing model suits the job.

• Day rate is cleaner for full-day jobs and easier for customers to understand.
• Fixed-price quotes reward you for working efficiently and protect you from awkward "why did it take so long?" conversations.
• Hourly billing suits unpredictable work like fault-finding and small repairs.

It's worth reading day rate vs price work to decide which model actually makes you more money. Whichever you choose, the hourly rate you've just calculated is the floor you must never drop below.

Stop the hidden hours from eating your rate

Notice how much of the problem is unbillable time — quoting, admin and chasing money. Every hour spent on paperwork in the evening is an hour you're effectively working for free, which drags your real rate down.

This is where a job-management system earns its keep. With Gaffer, quotes go out in minutes instead of evenings, invoices send automatically when a job is marked complete, and payment reminders chase themselves. Cut the admin and more of your day becomes billable — which means your hourly rate works harder without you putting your prices up.

If slow paperwork is costing you work, it's also worth tackling getting paid faster so the money you've earned actually lands in your account.

FAQs

What is a good hourly rate for a tradesperson in the UK?

There's no single right figure — it depends on your trade, your overheads and your area. Rather than copying a competitor, run the calculation above so your rate reflects your real costs. For many established trades the true figure lands well above £40 an hour once everything is accounted for.

Should my hourly rate include materials?

No. Your labour rate covers your time and overheads only. Materials are priced separately, usually with a markup added to cover your time sourcing and handling them. Keeping the two apart makes your quotes clearer and your margins easier to track.

How often should I review my hourly rate?

At least once a year. Van costs, insurance, fuel and material prices all creep up, and a rate set a few years ago is almost always too low. A quick annual recalculation keeps you from quietly working for less each year.

Why does my hourly rate feel too high to charge?

Because you're comparing it to your wage, not your costs. The rate looks big because it has to cover tax, the van, insurance, unpaid hours and profit — not just the money in your pocket. Customers pay for the whole business, not only the time on the tools.