If you own your own business

[hellohaute]

AIBU and also am I being nosey to ask if you own your own business how much turnover do you make per year and how much do you pay yourself?

I am 3 years into my business and have not taken a salary yet as I keep putting money back into the business to grow it but surely I need to start. I just am very interested to know how and when others have made that leap to pay themselves?

I was never in a position to not take a salary. My business is my livelihood. Can I ask what you live on?

Turnover has nothing to do with what you pay yourself .You take income from profit

Turnover is a bad way of looking at it. I have high expenses for example.

All of my profit is my wage! Don’t you have bills to pay?

What is the business? Are you reinvesting in stock? Marketing?

Blimey, what are you living on? My own view is that if a business won’t cover your living costs after one year, it’s not viable.

Hi all, I had a full time job for the first 2 years so it was my side business, then went on maternity leave and just now started taking a salary as am full time on the business.

It's a clothing business so all money has gone into buying stock and have wanted to really shove a rocket up it in a marketing sense so have thrown all money into making it work. We are making profit but trying not to make lots of profit as the tax man just takes it away.

I'm just very interested in how much other small businesses (1 - 3 person) are making per year and how much you pay yourselves to get a gauge on things as I don't have any friends who are in this position who I can ask

I'm a sole trader and have very low overheads so aside from the first year where I was getting established, I've always earned a decent amount and taken it as salary, minus a little for training courses and that sort of thing. It must be trickier if you have stock, though.

Mines a service business so very low costs / overheads.

I was advised to aim to pay yourself enough to trigger your NI contributions and under the personal tax allowance (changes every year but its around 8/9k) then any additional profit in dividends.

It's good to have a regular income showing for personal credit checks etc and also for viability of the business. Plus no salary equals a big hole in NI contributions.

I think this totally depends on the business. My dh has a business. The overheads are low. Think creative field where raw materials are cheap and most of it is just his skill Like being an artist.

He paid himself a salary from year 1, though it wasn’t loads, maybe like mid 20s. He’s in year 7 now and brings in probably £80,000 with a salary of about £55,000.

I don't think anyone can really answer you in the way you want.

We have our own businesses. The main one earns a decent chunk as it's service based, another is effectively service based but very new so not earning a lot, and the third has stock and that'll take a couple of years to return anything decent.

I’ve heard same approach as FusionChefGeoff
The primary threshold rate for NI is currently £166pw (£719.33 per month) so pay that in payroll.

My cousin and her husband have a business that does this. They are both directors with different shares (class A and class B). They pay the £8k-£9k bit to each of them in payroll and then pay extra monies out of profit as dividends to the share classes.

Sole trade or limited company?

I did the same as @FusionChefGeoff - at the time it was just under £700 a month, which was enough for me to live on, and the rest in dividends.

Speak to an accountant. The general thing (if you set up as a Ltd company and are small) is to pay yourself £719 and then take the rest in dividends.

I take pretty much everything out that isn’t allocated to something (but don’t have huge overheads and am not looking to reinvest at the moment)

You are deliberately trying to avoid making profit so as to avoid the tax man taking what will only ever amount to a proportion of that profit? Isn’t that the definition of cutting off your nose to spite your face?

And if you are, in fact, a sole trader then you don’t pay yourself a wage. You are taxed on your profit and the money you take from the business is your drawings. The situation is, of course, different if you are a limited company.

I am a sole trader. I leave a decent amount this per month in as a safety blanket that's meant I've got a nice safety blanket. I have very low overheads and don't need to purchase things up front generally. I take everything else out. My turnover is pretty much all profit.

DH is a ltd company, he pays the £700 a month as mentioned by others and then rest in dividends.

The more money you make the more money you earn regardless of the tax you pay. You just get to a point where you need to set more aside for tax but you'll still earn more!

Thanks everyone. We are a ltd company. We've just been so focused on growing the business quickly everything has gone into maximum growth acceleration and investing in stock.

We are at a stage where I think I can now take salary, so this is all very helpful.

As others have said, it will be better for you personally if you take out money in dividends. But you will have to make profit in order to do that!

Don't forget to pay pension contributions from the business. Allowable as expenses of the business against taxable profits and not taxable on you as an individual in the way salary would be. Just make sure you keep the annual contributions within the tax free limit.

Dh started his own business a couple of years ago. It's service sector but we have a couple of employees, so he takes a low wage every month which doesn't trigger NI contributions as he wouldn't get any benefit from them. And the rest is taken in dividends. He pays me an hourly rate and all my wages will be paid into my pension. We have a cushion saved to pay staff and ourselves in hungry months if/when they happen, so even though the business did well from day one, we are still being quite careful about the amount we withdraw from the business.

The tax benefits of dividends are almost all gone since the Tory government changed the rules so you pay lower tax on first 5k of dividends. It used to be all dividends were taxed at the lower rate.