How do I pay myself as a sole trader?
As a sole trader, you don't take a salary. You take drawings from your business profit. Here's how it works, how your tax is calculated, and how to plan your cash flow.
7/15/20262 min read
How do I pay myself as a sole trader?
One of the things that confuses a lot of new sole traders is how to actually pay themselves. The short answer: there's no salary, no payroll, and no tax deducted at source. You simply take money from your business whenever you need it - and pay tax on your profits via Self Assessment.
What are drawings?
When you take money out of your business as a sole trader, it's called a drawing. You can take drawings as often as you like - weekly, monthly, or whenever suits you. There's no formal process and nothing to file with HMRC.
The important thing to understand is that drawings are not the same as expenses. They don't reduce your tax bill. Your tax is calculated on your business profit (income minus allowable expenses), not on how much you withdraw.
How your tax is calculated
In the 2025/26 tax year, sole traders pay:
• Income tax at 0% on profit up to the personal allowance of £12,570
• Income tax at 20% on profit between £12,570 and £50,270
• Income tax at 40% on profit between £50,270 and £125,140
• Class 4 National Insurance at 6% on profit between £12,570 and £50,270, and 2% above that
So if your profit is £30,000, you'd pay income tax on £17,430 (the amount above the personal allowance) and Class 4 NI on the same amount. The amount you actually withdraw in drawings makes no difference to this calculation.
Setting money aside for tax
Because no tax is deducted automatically, it's your responsibility to set money aside throughout the year. A common rule of thumb is 25-30% of your profit, set aside into a separate savings account each time you take a drawing or get paid.
If your tax bill exceeds £1,000, HMRC will require you to make payments on account - advance payments towards next year's bill due in January and July. This catches a lot of sole traders out in their second year. Our post on what is payment on account? explains this in full.
Does it matter how often I take drawings?
No. From a tax perspective, it makes no difference whether you take weekly drawings, a monthly amount, or irregular lump sums. HMRC doesn't see your drawings - only your annual profit.
From a practical cash flow perspective, taking a regular monthly amount that you've calculated based on your expected profit is the most straightforward approach. It makes it easier to budget and to keep your personal and business finances separate.
Do I need a separate bank account?
You're not legally required to have a separate business bank account as a sole trader, but it makes life significantly easier. It means your income and expenses are all in one place, and it's much quicker to work out your profit at the end of the year.
Several free business bank accounts are available specifically for sole traders - you can compare them in our Business Banking directory.
Can I pay myself a salary instead?
No - sole traders can't pay themselves a salary in the way that limited company directors can. If you were to convert your business to a limited company, you'd become an employee of that company and could then pay yourself a salary through PAYE. But as a sole trader, drawings are the only mechanism available, and they're simply transfers of money from your business to yourself.
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