How to Pay Yourself as a Business Owner

20 Mar

Hi MOBsters!

We hope you're having a fantastic month! As always, Mums Who Build is here to help you take control of your finances and create financial security. This week, we’re covering how business owners can pay themselves, a crucial topic for any mum running a business. As Jo Dean, an award-winning financial advisor, shared in our latest Instagram Live, understanding how to pay yourself efficiently can help you plan for financial stability and tax efficiency.

Whether you’re a sole trader or running a limited company, knowing your options for withdrawing money from your business is essential.

1. Choosing Your Business Structure & How It Affects Payments

Jo explained that how you pay yourself depends on your business structure. Here are the main options:

Sole Trader – Your earnings are considered personal income and are taxed through Self-Assessment.
Limited Company – You can withdraw money through salary, dividends, or a combination of both.
Partnership – Profits are shared between partners and taxed as personal income.

💡 MOB Tip: Your business structure impacts your tax obligations—an accountant can help determine what’s best for you.

2. How to Pay Yourself as a Business Owner

Jo discussed the different ways business owners can take income from their business:

Salary: A regular income, often subject to PAYE tax and National Insurance Contributions (NICs).
Dividends: If your company makes a profit, dividends can be paid to shareholders and taxed at different rates.
Pension Contributions: A tax-efficient way to extract money from your business while saving for the future.
Retained Profits: Some business owners choose to leave money in the business for reinvestment or future planning.

💡 MOB Tip: Choosing the right mix of salary and dividends can help optimise tax efficiency—speak to an accountant to explore your best options.

3. Keeping It in the Family: Paying Family Members

Jo noted that some business owners involve family members in their business. If you’re considering this, make sure:

The family member has a legitimate role in the business.
Their payment is appropriate for the work they do.
It aligns with employment and tax regulations.

💡 MOB Tip: If you’re thinking of employing a spouse or sibling, check with an accountant to ensure compliance with tax rules.

4. Pension Contributions as a Tax-Efficient Strategy

Jo highlighted that pension contributions can be a tax-efficient way to take money out of your business.

Contributions made directly from the business are not subject to Corporation Tax, Income Tax, or National Insurance.
It’s a great way to reduce taxable income while securing long-term financial stability.

💡 MOB Tip: A pension is one of the most tax-efficient ways to withdraw money—speak to a financial advisor to explore your options.

5. Planning for Business Growth & Larger Withdrawals

Jo discussed how business owners can plan for taking larger sums of money out of their business, especially if planning to sell in the future.

Understanding Capital Gains Tax (CGT) is important if you’re selling business assets.
Structuring withdrawals efficiently over time can help with tax planning and financial security.

💡 MOB Tip: If you're planning a business exit, seek professional advice early to plan your withdrawals tax-efficiently.

6. Seeking Professional Guidance

Jo emphasised that the best way to pay yourself depends on your business structure, income level, and financial goals.

Jo does not provide accountancy services but can recommend trusted accountants - please get in touch!
A qualified accountant can help determine the best way to withdraw money efficiently and legally.

💡 MOB Tip: If you're unsure how to structure your income, an accountant can provide clarity on the best approach for your business.

Join Our Monthly Instagram Live with Jo Dean

📅 Mums Who Build hosts a FREE monthly Instagram Live Jo Dean - the next one is on the 24 march at 11.30am.
📲 Join us to:

Ask your finance-related questions live.
Gain expert insights into business finances, tax efficiency, and salary planning.
Learn how to make smart financial decisions as a business owner.

Final Thoughts

We hope this blog helps you understand how to pay yourself as a business owner. The right approach depends on your financial situation, tax obligations, and long-term plans.

💬 We’d love to hear from you – How do you currently pay yourself? Drop your thoughts in the comments below!

📅 Don’t forget to join us for our Instagram Live with Jo Dean!

Who is Jo Dean?

Jo Dean is an award-winning financial advisor and was named ‘Woman of the Year, Investment Advice’. She helps clients simplify their path to financial security through personalised strategies. Her expertise covers tax mitigation, retirement & investment planning, asset protection, estate & inheritance planning, and cash & currency management.

🚀 How Jo Can Help:
Jo takes a tailored, bespoke approach to financial planning, recognizing that no two individuals share the same financial journey. Her ability to see the bigger picture and build trust with clients ensures that financial strategies align perfectly with individual aspirations.

📲 Want to connect with Jo for personalised financial guidance? Reach out to her via LinkedIn or contact her directly at jo@avantiwm.co.uk | 07972 114 038. Jo can also recommend accountants for those needing tax or accountancy support.

🚨 Disclaimer: This article is for educational purposes only and does not constitute financial advice. Always seek professional guidance for your unique circumstances.

MOB MOBSTER