How to pay yourself as a sole trader
When you start working as a sole trader it can be confusing to know how to pay yourself when you no longer receive a salary from your employer. Find out how to pay yourself as a sole trader, how much to pay yourself, and why it’s a good idea to have a separate bank account for your business.
Have a separate business account
The first step to paying yourself the right way as a sole trader is to have a business bank account.
There’s lots of benefits to having both business and personal bank accounts. You not only keep the money for your business separate, but also all your finances too.
Having a separate business account will make it easier to do your accounting. You can clearly see if your accounts match your bank balances, and it will be quicker to identify any expenses you need to record.
If you’re using automated bank feeds to do your accounting with software, using a personal bank account can be tricky. You’ll need to sort through transactions manually to remove any personal ones, so it’s easy to make mistakes. When you use a separate business bank account, you can be sure that you’re only recording transactions that are relevant to your business.
How to pay yourself as a sole trader
To pay yourself as a sole trader, all you need to do is ‘draw’ money from your business account to your personal one.
You’ll need to record these drawings in your bookkeeping, which you can easily do with accounting software like Bokio.
How much do I pay myself as a sole trader?
How much you pay yourself is up to you! If you’re using separate business and personal accounts, it’s important to leave money in your business account to pay for expenses.
Take into consideration how much you pay for expenses each month. You also need to make sure there’s enough money for you to pay your taxes and National Insurance contribution each year.
It’s a good idea to plan ahead for your taxes, and set aside money each month to make sure you’re prepared when it’s time to pay.
Do your accounting with Bokio
Keeping a close eye on your finances is really important. Using an accounting software like Bokio is a great way to see how your business is performing so you can prepare for the future.
With Bokio accounting software, you can do your bookkeeping, invoicing, and manage your finances in the same place. We have everything you need to help you prepare for your Self Assessment tax return, submit your VAT Return for Making Tax Digital and keep the right financial records. If you need an extra hand, we can help you find an accountant to work with.
Accounting is kept simple with Bokio, so you have more time to spend running your business.
