How to pay yourself as a business owner

One of the best things about being your own boss is being in charge of your income. Unfortunately, it’s simultaneously one of the hardest. 

On some days, the hard slog of running a business might tempt you to reward yourself with a generous payday. On others, you might find yourself hesitant to take a penny, worried your indulgence will sink the whole operation.

As with many things in business (and life), a balanced approach is best. Start by understanding your business structure, whether you’re a sole trader, part of a partnership, or running a limited company. Then you can begin running the numbers and deciding what a realistic and sustainable income looks like for you.

In this guide, we’ll break down how to pay yourself as a business owner, navigate payroll if you need it, and keep your business afloat while keeping mouths at home fed and watered.

How much do business owners typically get paid?

According to Glassdoor’s May 2025 stats, small business owners typically take home £39,000 per year, on average. 

But there’s a huge range, base pay can fluctuate anywhere from £28,000 to £54,000 per year. 

Your earnings will depend on factors such as your experience, years in business, industry, and the market conditions. The truth is that small businesses can often take months or years to actually start turning a profit. 

How to pay yourself as a business owner

You’ll pay yourself and be taxed differently according to how your business is set up. 

Here’s a breakdown of the available business structures in the UK and how you’d be paid in each scenario.

As a sole trader

If you’ve never formally registered your business, you’re automatically considered a sole trader. For individuals and freelancers, this set-up might make the most sense as the business owner is the business, which means you can pay yourself by simply taking a share of the profits. This is different from paying yourself a salary.

These profits are what’s left after allowable business expenses. You don’t need to set up payroll; you simply draw out money from your business account as needed. 

Some sole traders might only have a personal bank account, so they won’t even need to transfer money out. However, experts advise keeping funds in a specialist business bank account and transferring them to your bank card each month, as this makes managing finances easier.

As a company

If you run a limited company, you’re legally separate from your business. This means the company pays you, not the other way around.

Most company directors who are also shareholders pay themselves through a mix of salary and dividends. A modest salary keeps you within your personal Income Tax allowance and qualifies you for National Insurance credits. Dividends, which come from your company’s post-tax profits, are taxed separately, often at a lower rate than salary.

As a partner

In a business partnership, profits are typically split according to the partnership agreement. If you’re a partner, you won’t be paid a salary. Like sole traders, you take a “draw” from your share of the profits. 

You’ll pay Income Tax and National Insurance on your share, even if you reinvest some profits into the business. It’s important to keep clear records of how profits are divided and withdrawn.

Tax considerations

Whatever your business structure, it’s important to be aware of the differences in how your income is taxed to avoid confusion at year’s end. 

Sole traders

When you’re self-employed, you must file a Self-Assessment tax return annually. This is different to how employees are automatically taxed at source. 

While you’re taxed on your total profit, you’ll still benefit from the standard personal allowance (£12,570 for 2025/26), which helps reduce your Income Tax bill. Remember that Class 2 and Class 4 National Insurance may also still apply. 

Business partners

Like sole traders, partners don’t typically pay themselves a salary but instead take draws from their share of the profits. You’re each taxed individually on your portion of the profits through a Self-Assessment tax return.

You’ll pay Income Tax on your share of the profits after deducting expenses, and you still benefit from the personal allowance (£12,570). Business partners are also liable to pay Class 2 and Class 4 National Insurance contributions based on their profits.

Limited company directors

Like your employees, company directors pay their Income Tax and employee National Insurance on salaries via PAYE. Where dividends are taken, these will be taxed separately at dividend tax rates. The company itself will pay employer National Insurance and Corporation Tax. 

It’s a lot to keep on top of, so we’d strongly recommend using both payroll software and an accountant. 

How much should I pay myself?

Deciding how much to pay yourself as a business owner is not as simple as “take whatever’s left.” You need to find the happy medium between paying yourself fairly and keeping your business financially healthy. 

Here’s how to think it through.

What the business needs to survive

Before taking money from the business, you need to ensure there’s enough cash left to cover your overheads, like:

• Rent on physical spaces
• Utilities, like electricity and gas
• Employee wages and benefits
• Cost of goods sold (COGS)
• Supplier invoices
• Insurance and subscriptions
• Tax liabilities (set aside money for VAT, Corporation Tax or Self Assessment)

Beyond that, it’s important to also keep an emergency fund as a buffer for when business is slow. Experts recommend you have an emergency fund to cover your essential outgoings for a minimum of 3 months, but ideally 6.

In an ideal world, your business will do more than just survive; it’ll thrive. Once you’ve covered your basic expenses and built an emergency fund, you can start getting more creative with your profits. You might start putting money aside for reinvestment, such as buying new technology, hiring extra staff, or just a fresh lick of paint. 

What you need to survive

When deciding how much to pay yourself, it can help to work backwards and work out how much you actually need, rather than pulling random figures. 

Similarly to working out what your business needs, you need to think about all of your essential outgoings, like:

• Rent or mortgage payments
• Household bills
• Insurance and debt repayments
• Childcare or family expenses
• Healthcare costs
• Minimum lifestyle costs (food, transport, etc.)

It’s smart to build your own personal emergency fund, too, separate from your business finances. Again, the rule of thumb is to have enough to cover 3-6 months of essential expenses.

You don’t have to pay yourself monthly like a salaried employee, but building a regular rhythm (e.g. monthly or quarterly) helps with budgeting and makes your business feel more stable.

When thinking about how much you need to get by, don’t neglect your future planning. If you’re self-employed, you won’t be enrolled in any workplace pension schemes. Therefore, it’s important to make your own retirement plan, such as taking out a private pension or thinking about alternative investments and saving strategies. 

When can I increase my salary?

If your business is consistently bringing in more money than it needs to operate and you’ve built up both business and personal emergency funds, it may be time to review how much you’re paying yourself.

Ask yourself:

• Have profits been stable (or growing) for 6+ months?
• Have I paid all business debts and taxes?
• Can I take more cash without dipping into reserves?

If you answered “yes” to all, you may decide to increase your salary or take larger or more frequent dividend payments. Either way, review your pay at regular intervals, ideally quarterly, so you’re adjusting in line with your business’s performance, not just your needs.

Summary

Paying yourself as a business owner isn’t straightforward, especially in the early days when profits are unpredictable. Most business owners start off taking just enough to get by, which makes sense. But once your company is in a more stable place, it’s completely fair to start thinking about how you’ll make a living.

Keeping a level head about how much you take (and when) can make a big difference in the long run, for both your finances and the future of your business. The key is to approach it with a bit of structure, rather than guesswork.

A few final points to keep in mind:

• Your business setup matters: sole traders, business partners, and company directors all take money out differently, so make sure your business is set up in a way that suits you.
• Understand your taxes: Income Tax, National Insurance, and Corporation Tax all influence your take-home pay, depending on your setup. It’s worth getting an accountant or using good software to demystify this process.
• Cover your bases before paying yourself: make sure your business can pay all its bills, set aside tax money, and build an emergency fund (three to six months of expenses). Once that’s in place, you can start thinking about paying yourself more confidently.
• Give yourself permission, while staying grounded: if things are going well and the business can support it, it’s perfectly okay to consider a pay increase. Just make sure it’s based on business performance, not just because you fancy a holiday, as much as you probably need one.