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If you’re self employed or a freelancer then I know I’m preaching to the converted here. If you’re not then this may help you understand where we are coming from when you ask us for a quote. I often hear people (who aren’t self-employed) grumbling about the cost of a plumber’s quote or the price of a beautifully handmade handbag at a local craft fair.

So, I thought it might be a good time to break down the real costs of being self-employed. This isn’t just for me—it’s for all of us freelancers and business owners who sometimes need a reminder (or a handy explanation for our clients) of why we charge what we do.

Let’s dive in.

The Employed vs. Self-Employed Reality Check

If you’re employed, here’s what you get:

• Minimum wage: £12.21 per hour (£23,809 per year).
• Paid holidays: At least 28 days, including bank holidays.
• Sick pay: £116.75 per week (not great, but it’s something).
• Work equipment: Provided by your employer.
• Uniforms and travel expenses: Often covered.

Now, if you’re self-employed, here’s what you don’t get:

• No safety net of minimum wage.
• No paid holidays.
• No sick pay.
• You buy your own equipment, tools, and uniforms.
• You cover your own travel expenses.

And that’s just the start.

The Costs of Being Self-Employed

Let’s look at the numbers. I run a work-from-home business where I sell my time, not a product. It’s probably one of the most cost-efficient setups out there—no stock, no premises, no vehicles to maintain. Even so, here’s what it costs me annually:

• ICO registration: £52
• Phone bill: £420
• Insurance: £720
• Software subscriptions: £1,950
• Accountancy: £600
• Office costs: £144
• Memberships: £540

That’s a total of £4,426 per year—and that doesn’t even include the initial outlay for equipment like a laptop (£1,000), phone (£800), or headphones (£100).

Some businesses if not most will also have additional costs which I have not factored in, such as:

– Office/workshop rent

– Tools

– Machinery

– Stock

– Consumables

– Heating & Lighting

– Phone bill

– Employee costs (I also have these costs)

And let’s not forget the unbillable hours: marketing, networking, handling enquiries, onboarding clients, customer service, researching, and training to keep skills up to date (which often costs money too).

Breaking It Down

Here’s how it looks for my business:

1. I’ve based this on working 44 weeks per year (to account for quiet periods, illness, or holidays).
2. I can realistically bill for 30 hours per week because the rest of my time is spent running the business.
3. I also haven’t accounted for the fact I have employees costs to cover.

So, if I want to earn minimum wage (£23,809) and cover my business costs (£4,426), I need to charge at least £21.39 per hour.

But here’s the thing: I didn’t become self-employed to scrape by on minimum wage.

I chose this path to create a better life for myself and my family, to have the flexibility to spend time with my kids during school holidays, and to use the skills I’ve worked hard to develop over my career.

So, let’s say I charge £25 per hour.

What £25 Per Hour Really Looks Like

At £25 per hour, working 30 hours per week for 44 weeks, I’d earn £33,000 per year. After tax and National Insurance, that’s a take-home pay of £2,239 per month.

Now, let’s deduct my business costs of £368 per month. That leaves me with £1,871 per month.

From that, I still have to pay my household bills: mortgage, council tax, car and fuel costs, food, utilities, and so on.

Even at £25 per hour, I’m hardly living a life of luxury.

Why Your Rates Matter

Yes, I could work more hours, and yes, some years are better than others. But I also need to save for rainy days (like when my laptop dies or my car breaks down) and invest in my development to keep improving for my clients.

So, if you’re self-employed or freelancing, don’t be afraid to stand your ground when someone questions your rates. You’re not “overcharging”—you’re simply covering your costs and valuing your time, skills, and experience.

And if you’re a client reading this, I hope it gives you a better understanding of what goes into that hourly rate.

Final Thoughts

Being self-employed isn’t just a job—it’s a lifestyle. It’s flexibility, freedom, and fulfillment, but it’s also risk, responsibility, and a lot of hard work.

So, the next time someone questions your rates, remember this: you’re not just charging for your time—you’re charging for your expertise, your costs, and the value you bring to the table.

And £25 per hour? That’s the minimum you should be charging.