Self Employed - Paying Yourself
After 3 blogs about paying yourself when you are a limited company, I’ve had a few questions about how you do this when you are self employed, so here goes …
- When you are self employed you and the business are one and the same, by this I mean that there is no legal separation of the business.
- When you are self employed there is no legal need to have a separate bank account, I do always highly recommend it so that you can keep a closer eye on money in and out, but it is not legally required.
- When you are self employed you are taxed (and pay National Insurance) on the profits of the business, these are BEFORE any money that you take out of the business.
So, basically, the profits are your earnings ... ideally, you have a separate bank account and then transfer yourself money on a regular basis, this is then recorded as drawings, not salary and you ignore these for your tax return.
If you don’t have a separate bank account then the money is all in one place and is essentially yours to spend.
BUT .. yep, there is always a big BUT!
You do need to remember the following, whether you have a separate bank account or not:
- Leave enough money to pay the bills of the business i.e. your suppliers etc
- Remember you will need to pay your tax and NI so set aside the money for this.
Hope that helps, as always, any questions please get in touch.