Work, pay & shifts
Freelance Business Expenses to Include in Your Rate
As an employee, someone else pays for your laptop, software, insurance, and the accountant. As a freelancer, your rate does. Leaving these out is one of the commonest reasons a rate that looked fine turns out not to be. This guide lists what to include and shows what it adds to each billable hour.
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Costs an employer used to cover
- Equipment: computer, phone, peripherals, and their replacement.
- Software and subscriptions.
- Insurance: professional liability, equipment, and — where it isn’t provided publicly — health cover.
- Accounting, bookkeeping, and legal help.
- Internet and phone.
- Workspace: a coworking membership or the business share of a home office.
- Marketing: website, portfolio, listings.
- Training and professional memberships.
- Payment and platform fees.
An example budget
What each line adds per hour at 1,150 billable hours a year:
| Expense | A year | Per billable hour |
|---|---|---|
| Software and subscriptions | $1,800.00 | $1.57 |
| Equipment (spread over 3 years) | $1,000.00 | $0.87 |
| Health insurance | $6,000.00 | $5.22 |
| Professional insurance | $600.00 | $0.52 |
| Accounting | $1,200.00 | $1.04 |
| Internet and phone | $900.00 | $0.78 |
| Marketing and website | $500.00 | $0.43 |
| Total | $12,000.00 | $10.43 |
Every figure is an illustration — use your own.
Spreading large purchases
A $3,000 computer you replace every three years costs $1,000 a year. Put the yearly figure in your budget so the rate saves for the next one, rather than taking a hit the year you buy it.
Costs that grow with revenue
Payment-processing and platform fees are a percentage of what you bill. At 3% on $92,000 of invoices, that is $2,760 a year — enter an estimate as a yearly amount, and revisit it if your revenue changes a lot.
Expenses, buffer, and tax are different
- Expenses are costs you expect to pay.
- A buffer covers what you can’t predict: slow months, late payers, a broken laptop.
- Tax is a share of your profit, worked out separately — don’t list it as an expense.
Freelance Expenses FAQ
- Is health insurance a business expense?
- For tax purposes that depends on where you live and how your business is set up. For your rate, include it either way — the rate has to pay for it.
- Should taxes count as an expense?
- No. Tax depends on profit, so it is set aside from income rather than listed as a cost.
- What about a home office?
- Include the share of rent, energy, and internet the business uses, however you estimate it.
- Should I include a salary for myself as an expense?
- No — that is the income goal. Expenses are the costs of running the business on top of what you pay yourself.
- What if my expenses vary a lot from year to year?
- Use an average of recent years, and put the uncertainty into a buffer rather than the expense figure.
Related guides
- Freelance Hourly RateThe freelance hourly rate formula, a step-by-step example, why dividing by 2,080 hours underprices you, and how billable hours change the minimum rate.
- Freelance Tax Set-AsideHow to gross up a take-home income goal for tax, why multiplying by 1.25 comes up short, a table of set-aside rates, and practical ways to put the money aside. Not tax advice.
Open the tool
Jump into Freelance Hourly Rate Calculator when you are ready to process your files.
