Contractor finances
Contractor finances: turning a target income into a day rate
Billable days, non-billable time, expenses and tax, and how they set a sustainable rate.
Last reviewed 22 August 2026
Start with billable days, not calendar days
A year has around 260 weekdays, but few contractors bill all of them. Holiday, sickness, admin, business development and gaps between contracts all reduce billable capacity. Using a realistic billable-day count is the single biggest factor in a day rate calculation.
Our day rate calculator asks for billable days directly, so the assumption is explicit rather than buried.
Expenses and pension come before tax
Business expenses reduce taxable profit, and personal pension contributions reduce the income that is taxed. Both change the revenue you need to reach the same take-home figure.
The calculator models a sole trader. Working through a limited company, an umbrella company, or inside IR35 changes the tax picture significantly and is not covered here.
Sense-check with an hourly figure
Converting a day rate into an hourly equivalent makes long days visible. A rate that looks strong for eight hours can look very different at eleven.
Calculators for this topic
- Hourly rate calculatorConvert an annual salary into hourly, daily, weekly and monthly equivalents.
- Self-employed tax calculatorEstimate income tax and Class 2/4 National Insurance on trading profit.
- Contractor day rate calculatorEstimate the day rate needed to reach a target take-home as a sole trader.
This guide explains how the rules generally work. It is not tax advice, and your own position depends on your full circumstances — you may wish to seek professional advice.