How should I pay myself?

Answer

if you are a Limited Company you will pay yourself a mix of salary and dividends typically to optimise for tax. Note, as soon as you pay a salary you have a reporting obligation, so ask your accountant for advice before you do. Visit our Tax Calculator page for guidance on what mix to use. For a Sole Trader it is a little simpler. Simply keep a record of how much you have taken out and move the funds into your personal account.

In short, if you are a Sole Trader, this question is not relevant. For 2020/21 tax year, for a limited company you would normally pay yourself either £8,788 or £12,500 if your business can claim the Employment Allowance. This assumes however that you have no other income. The remaining profit is paid in dividends.

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