How to set your day rate as a tradesperson

Most tradespeople set their day rate by copying what the bloke down the road charges, then wondering why there's nothing left at the end of the month. A day rate isn't a number you pick, it's a number you work out. Get it wrong and you're either pricing yourself out of work or quietly working for less than you think. Here is how to calculate a rate from your actual costs, your overheads and the income you need, so the figure you charge is one you can stand behind. This is general guidance, not financial advice, so run your own numbers.

Why copying someone else's rate fails

The rate the next trade charges tells you nothing about your costs, your overheads or the income you need to live on. They might have a paid-off van and no mortgage; you might have new tools on finance and three kids. A day rate has to cover your situation, not theirs. Start from your own numbers and the market becomes a sense-check at the end, not the thing that decides your price.

Start with your real costs and overheads

Before you can set a rate, you need to know what it actually costs you to be in business for a year. These costs don't disappear on the days you're not earning, so your rate has to carry them across the days you do work.

• The van: finance or lease, fuel, insurance, tax, servicing and repairs.
• Tools and equipment: replacement, repair, hire and consumables.
• Insurance: public liability and any other cover your work needs.
• Business costs: phone, accountant, software, memberships, certification and training.
• Pension, time off, sick days and bank holidays, because nobody pays you for those.

Work out your target income

Next, decide what you actually need to take home in a year. Be honest: your personal outgoings, what you want to put aside, and a buffer for quiet months. Remember this is take-home after tax and National Insurance, so you'll need to earn more than your target to land on it. Add your annual business costs from the step above to your target income, and you've got the total your work has to bring in across the year.

Count your real billable days

This is the step most people skip, and it's the one that wrecks rates. You do not bill 365 days, or even close. Strip out weekends, holiday, bank holidays, likely sick days, and the days you spend quoting, buying materials, doing paperwork and chasing payments instead of earning. Then knock off the days you simply won't have work booked. What's left is your realistic billable days, and it's a lot fewer than you'd guess.

• Start from the working days in a year, then take out holiday and bank holidays.
• Allow for sick days and the odd day lost to weather or cancellations.
• Subtract non-earning days: quoting, sourcing materials, admin and travel.
• Be realistic about gaps between jobs, especially if work is seasonal.

Do the calculation

Now it's simple arithmetic. Take your total required income for the year (your target take-home grossed up for tax, plus your annual business costs) and divide it by your realistic billable days. That gives you the day rate your business actually needs to stand still, before profit. Whatever number that is, it'll usually be higher than you expected, which is exactly why so many trades quietly undercharge. If the figure feels uncomfortable, the honest fix is to reduce costs or win more billable days, not to pretend your overheads don't exist.

Sense-check against the local market

Once you've got a rate from your own numbers, then look at the local market. If your calculated rate sits within what your area and trade will bear, you're sound. If it's well above, ask whether you can win work on quality, reliability and a professional quote rather than price, or whether your costs are higher than they need to be. If it's well below the going rate, you're leaving money on the table. The market is the reality check at the end, not the starting point. A clean, professional quote helps you hold a fair rate without competing purely on being the cheapest.

Once you know your rate, our guide on what every professional quote should include shows where it sits in the document. And if you're deciding whether to commit to a fixed price or leave room to move, our guide on quote vs estimate explains when to use each.