Blog Layout

How much should you pay yourself?

Anna Stubbs • November 20, 2023

Being the boss means you get to make all the big decisions about your business – including how much to pay yourself in wages, salary or drawings.

As the owner, you might need to underpay yourself in the early stages of building your business, so you can reinvest the profits. But your time is valuable – and you need enough money to pay the bills. So how can you find the right level of pay? It has to be enough to keep the mortgage paid, while also building a thriving business.

If you’re trying to decide how much to pay yourself, here are a few questions to ask yourself:

  • What can the business afford? - You need to leave enough cash in the business to keep it ticking along, pay your basic costs, and meet your tax obligations. Once you’ve considered all those outgoings, how much does that leave you as a potential salary? We can help you work out what that number is, so you can establish a sustainable rate of pay.
  • What’s the market rate for your role? - What would you have to pay someone to do the work you’re undertaking in this business? Maybe you wouldn’t actually be able to find anyone to work the same long hours, but if you were hiring someone with your experience, to do the same sort of work for 40 hours a week, what would they expect to be paid? That number is a good starting point for thinking about your own salary or drawings. If you’re being underpaid, it’s time to think about ways to grow your profits. If you’re being overpaid, congratulations on building a highly profitable business!
  • Could reinvesting profits grow your income faster? - You can take all the profits out of your business, which should give you a strong and sustainable income. Or, could you reinvest your profits and grow the business faster, leading to a higher income in the long-term? You might choose to spend some of your profits on advertising, a better website, or developing a new offering, for example. Or you could pay for assistance in some area of the business. If the investment leads to higher growth, it might be well worthwhile.

We’ll help you run the numbers

We can help you figure out how much your business can afford to pay you, analyse the potential gains of a business investment, or weigh up the pros and cons of hiring someone to help you.

Get in touch, we’d love to hear from you.

Making Tax Digital to be extended to more sole traders and landlords

By Anna Stubbs • April 9, 2025
Hiding in the HM Revenue & Customs (HMRC) announcements published on 26 March was a technical note entitled ‘Modernising the tax system through Making Tax Digital‘. This note announces that the income threshold for Making Tax Digital for Income Tax & Self Assessment (or MTD for ITSA) is to drop to £20,000 per annum for sole traders and landlords. If you fall into this category, this means moving your tax completely over to digital by April 2026. But don’t worry, let’s see what MTD for ITSA is all about.

Reducing the uncertainty: financial forecasting and planning

By Anna Stubbs • April 9, 2025
Uncertainty can be a major threat to your strategic financial planning. Being unsure of what lies around the corner makes it difficult to make those important financial decisions around operational budgets, investment and growth funding. But by using forecasting and scenario-planning, you make it easier to manage your finances and reduce some of the financial uncertainty.

What's new in Xero (Spring 2025)

By Anna Stubbs • April 9, 2025
Some great new enhancements have come to Xero in the first few months of the year, here's some important features that have been released: Enhancements to the new invoicing Keyboard shortcuts. Drag and drop attachments. Date Picker quick select. Exchange rate adjustments in the invoice. Tracking categories for invoices. Automated bill entry The ability to upload bills directly to Xero, create one or many bills by dragging and dropping multiple files. Xero creates draft bills with the key details, and the original document is attached. Other important features (region dependent) Bank feed updates (Australia adds Suncorp Bank, United States gains PNC Commercial). Simplified whole operations with improved sales orders (United States). Easier 1099 reporting and filing (United States). Streamlined tax workflow and compliance (United Kingdom). Easier reporting (United States Schedule C compliance report, New Zealand not-for-profit tier 3 & 4 PBE reports). For the full breakdown read Xero's update .
Share by: