Hourly rate tax calculator

From hourly rate to annual take-home

The calculation chain is: hourly rate × hours per week × billable weeks = annual turnover, minus business expenses = taxable profit. Tax is calculated on taxable profit.

The hourly mode is the default on this page. Enter your hourly rate, typical weekly hours and estimated annual expenses. A realistic billable weeks estimate is 46–48 weeks to account for holidays and non-billable time.

• Billable weeks: 46 is a common realistic estimate (minus 5 weeks holiday and 1 week non-billable).
• Watch out for over-claiming hours: use typical rather than maximum hours for an accurate picture.
• Expenses reduce taxable profit — include software, equipment, insurance and professional fees.

Rates checked against Budget 2026 Annex A on 30 October 2026. Written and reviewed by James Whitfield against current GOV.UK and HMRC guidance. Estimates for planning only — not tax, accounting or financial advice.

Turning an hourly rate into a tax bill

An hourly rate only becomes taxable profit once you multiply it by the hours a client actually pays for, across the weeks you actually work, and take off your business costs. HMRC taxes that profit, not the rate. So the honest starting point is your billable year: paid hours, after holidays, bank holidays, quiet weeks and the unpaid time spent quoting, invoicing and keeping records.

There are 52 weeks in a year. Take off the 8 bank holidays in England and Wales (Scotland and Northern Ireland each have 10 in 2026), four or five weeks of holiday and some allowance for illness or gaps between clients, and 44 to 48 billable weeks is a more realistic figure than 52; 46 is a sensible middle estimate. Billable hours are usually well below hours worked: if a day a week goes on admin and finding work, a 37-hour week may produce 30 billable hours.

The hourly mode in the calculator above runs the chain for you: rate × billable hours a week × weeks = turnover, then turnover − allowable expenses = taxable profit. Income Tax and Class 4 National Insurance are worked out on the profit for the whole tax year, in exactly the same way as the annual mode.

Three hourly rates, worked through for 2026/27

England, Wales or Northern Ireland, no other income, no student loan or pension. Example A uses the calculator's starting values.

Example C needs a second look. Its turnover of £96,600 is over the £90,000 VAT registration threshold. That test is on taxable turnover over any rolling 12 months, not on profit and not on the tax year, and you must register within 30 days of the end of the month you went over. VAT you charge belongs to HMRC and is not part of your profit, so it does not change the Income Tax above. But if your clients cannot reclaim VAT, adding 20% to your rate may not be possible, and the VAT then comes out of what you keep.

Working backwards: to keep £30,000 after Income Tax and Class 4 NI you need about £36,130 of profit. With £2,000 of expenses and 1,380 billable hours (30 a week for 46 weeks), that means charging at least £27.63 an hour. A student loan, a pension contribution or higher costs push it up.

Every figure here comes from the calculator above, using 2026/27 rates. Estimates for planning only, not tax advice.

Where hourly estimates go wrong

• Using 52 weeks or your busiest week's hours. Using 52 weeks instead of 46 overstates turnover by 13%, and so overstates the tax and what you keep.
• Judging a rise by your average rate. Once profit passes £50,270, each extra £1,000 keeps you about 58p in the pound (40% Income Tax plus 2% Class 4), and between £100,000 and £125,140 only about 38p, because the Personal Allowance is withdrawn.
• Comparing your rate with an employee's hourly wage. An employee's rate comes with paid holiday, sick pay and an employer pension contribution. Your rate has to cover the weeks you are not paid.
• Leaving out costs. Software, equipment, insurance, professional fees and the business share of a phone all come off turnover before tax, if they are allowable.

Hourly rate tax — questions