Most trades set a rate by looking at what the last job paid, or what the bloke down the road charges. That number is a guess. It is not a rate.
A rate has to cover three things:
- What you need to live on.
- What it costs to keep the van and the business running.
- The fact that a lot of your week is unpaid.
If you only divide “what I want to earn” by a 40-hour week, you are giving away the driving and the quotes for free.
The formula
True hourly rate = (pay you need + annual business costs) ÷ billable hours
- Pay you need — drawings: rent or mortgage, food, tax buffer, a normal life. Use what you actually need to take out of the business, not a fantasy salary.
- Annual business costs — van, fuel, insurance, tools you cannot bill to a job, accountant, phone, advertising, tickets, waste that never makes a worksheet. Here we only need the yearly total.
- Billable hours — hours a customer pays for. Not hours on the motorway. Not hours writing quotes that go nowhere.
This is not a tax return. Your accountant still does tax and National Insurance. The rate has to be high enough that what is left after those still pays you. If you are under CIS, do not set a rate off gross you never see — use what lands in the bank.
Worked example (round numbers)
These figures are a worked example, not a recommendation for your trade.
What you need the year to produce
| Cost | Amount |
|---|---|
| Pay you need from the business | £36,000 |
| Van (finance or wear, insurance, fuel, tax, MOT) | £7,200 |
| Public liability and tools cover | £800 |
| Tools and consumables you do not bill | £1,200 |
| Accountant | £900 |
| Phone, lead sites, cards, software | £1,500 |
| Tickets, training, other | £400 |
| Total the business must invoice | £48,000 |
Hours you can actually charge
| Weeks you are available | 46 (four weeks holiday, two weeks sick or empty) |
| Hours in a working week | 40 |
| Gross hours | 1,840 |
Now take off a normal unpaid week — not a perfect one:
| Unpaid work | Hours / week |
|---|---|
| Quotes, photos, “can you just price this” | 4 |
| Driving and parking | 5 |
| Merchant runs | 2 |
| Invoices, chasing, admin | 3 |
| Unpaid | 14 |
Billable hours ≈ 26 × 46 = 1,196.
£48,000 ÷ 1,196 ≈ £40 per hour.
That is the floor for this example. It is not the call-out, and it is not the fixed price on a bathroom. It is the number you must not go below once you know how long the job will take.
If you had divided £36,000 by 1,840 hours you would have quoted about £20/hour and told yourself you were competitive. You would have been funding the van out of evenings.
What people miss
Holiday is not a bonus. If you do not put it in the weeks, you are working it for free.
A day on site is not a billable day. A boiler swap with an hour each way is not eight charged hours unless you price the travel.
Quotes are a cost. Time on a survey that does not convert still has to be paid for by the jobs that do. Either charge for surveys, or bake the time into the rate. The rate still has to know the time exists.
The cheap local rate is often a broken rate. If someone is £15/hour under you, they are usually missing the van, the tax, or the unpaid hours. Matching them is how you stay busy and broke.
Small jobs punch below the rate. Forty-five minutes on site plus forty minutes of driving is not “one hour.” A minimum call-out exists to stop that job stealing the day.
How to use the number on a quote
- Time you can see: hours × this rate, then materials (with markup if you use it).
- Time you cannot see: do not guess a low number to win the job.
- Day rate: true hourly × the hours you can honestly charge in a day — not × 8 if two of those hours are the van.
- Fixed price: still start from this rate. The customer buys a job, not a lecture about your overheads.
Write the rate down. Use it for a month. If the bank does not match the plan, the leak is almost always billable hours (you invoiced fewer than you thought) or overheads (the van cost more than the spreadsheet).
Related guides
FAQ
- Is this the same as a day rate?
- No. A day rate is this number multiplied by the hours you can charge in a day. If you only get six charged hours, a “day” is six hours, not eight.
- Do I tell the customer this hourly rate?
- You do not have to. Many quotes show a job price, or labour as a lump. The rate is for you so the job price is not a guess.
- What if the number comes out higher than people around me?
- Then either they are missing costs, or you are missing billable hours. Do not cut the floor to match a rate that cannot run a van.
- Should I add VAT on top?
- Only if you are VAT-registered. If you are not, do not show VAT. That is a separate guide.
