How to work out a day rate that actually pays

Plenty of trades pick a day rate by copying the person next to them, or by nudging last year's figure up a bit. The problem is that a day rate has to cover three things at once: the money you want to take home, the cost of running the business, and the days you cannot bill for. Miss any of them and you end up working flat out for less than you think.

1. Start with the take-home you want

This is the money you want in your pocket across the year, before tax. Be honest about it. It is the wage the business owes you, not what is left over after everything else has taken its share.

2. Add the cost of running the business

The van, fuel, tools, insurance, phone, accountant, workwear, certifications and the rest. These come out before you have earned a penny for yourself, so they belong in the rate.

3. Divide by the days you can really bill

This is where most rates go wrong. There are 365 days in a year, but you cannot charge for weekends, holidays, sick days, quoting, chasing invoices, admin or the days the weather stops the job. Most self-employed trades land somewhere around 200 to 230 billable days. Divide by that, not by 250 and definitely not by 365.

4. Add a margin

The figure so far only keeps you level. A margin on top is your buffer for the quiet weeks, the price rises and the jobs that overrun, and it is where the business makes a profit rather than just paying you a wage.

A worked example

Say you want to take home £45,000, your business costs are £12,000 a year, and you can bill 220 days.

  • Cost of a working year: £45,000 plus £12,000 is £57,000.
  • Base day rate: £57,000 divided by 220 days is about £259 a day. That is break-even for what you want.
  • Add a 15% margin: your rate becomes about £298 a day.
  • Price a 5 day job with £800 of materials at 10% markup: 5 days at £298 is £1,490, plus £880 of materials, so you quote £2,370.
How Sitewise helps

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Sitewise tracks your hours and days against the live job, works out invoices and CIS, and shows the money on each job as it runs, so you find out whether your rate is really paying before the job is finished, not after.

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Day rates: common questions

How do I work out my day rate?
Add the take-home you want in a year to your yearly business costs, then divide by the days you will actually bill. That is not 365: take off weekends, holidays, sick days, quoting, admin and weather, which usually leaves around 200 to 230 chargeable days. The result is your minimum rate before profit.
How many days a year can I actually bill?
Most self-employed trades bill between 200 and 230 days a year once weekends, holidays, sickness, quoting, admin and lost weather days are taken out. Using 365, or even 250, sets your rate too low.
Should I add a margin?
Yes. The base figure only covers your costs and the wage you want. A margin gives you a buffer for quiet spells and overruns, and it is where the business makes a profit rather than just paying you.
Does this include tax and VAT?
No. The take-home you enter is before tax, and the figures exclude VAT. You still set aside Income Tax and National Insurance. If you work under CIS, deductions come off your labour at source and are settled with your tax bill later. See our CIS deduction calculator.

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