Paying yourself - how much?

[Steve Bullman]

5 minutes ago, kelsey said:

Ah, makes sense.

 

I wasn't talking about in a tax sense, more how do you work out the amount that you can afford do pay yourself?

 

Do you just take bits as you need it?

Do you take it when you have bills to pay?

Do you have a set amount you like to pay yourself every month?

When I was a sole trader I would just dig in to it as I needed it. Now I am limited I pay myself a monthly pay, this can vary, Someone above said that that as a limited company you can't help yourself to money like a sole trader. This isn't strictly true, just takes a bit more work for the accountant at the end of the year.

 

Limited or not, it makes better sense to pay yourself a monthly salary, It will make you more disiplined with your money for one thing. As for how much? That all depends how much you're earning, how much you need to live on a month.

[kevinjohnsonmbe]

(Don’t take this at all seriously, since it doesn’t in any way seek to answer the question)

 

Don’t bother paying yourself anything. 
 

Just run up a load of liabilities through HP, property lease / rental, and any other spurious debt that your business could never realistically hope to cover, don’t bother with any contingency planning and responsible financial planning then just sit back, wait for the next pandemic and the government to throw money at you to cover the reckless and irresponsible lack of preparedness. 
 

Job done, money for old rope. 
 

 

[Paddy1000111]

It's really worth becoming a ltd company and getting an accountant. Mine costs me around £600 a year. They will tell you everything you need to know about how much to pay, how to pay it and how it all works with things like directors loan amounts and the most tax efficient way. Most directors on get <£9500 a year PAYE as that's the threshold. Everything else is done with dividends etc etc.

 

You can also register for fixed rate VAT. You charge 20% VAT and then you pay 11% to the government and pocket 9%. It's basically a way to do VAT without having to do the full VAT claims etc. In saying that I can't remember what the fix rate VAT is. Are we Agriculture, Other Agriculture or Forestry? ?

Edited December 3, 2020 by Paddy1000111

[eggsarascal]

1 hour ago, kelsey said:

Ah, makes sense.

 

I wasn't talking about in a tax sense, more how do you work out the amount that you can afford do pay yourself?

 

Do you just take bits as you need it?

Do you take it when you have bills to pay?

Do you have a set amount you like to pay yourself every month?

1: yes.

2: yes.

3: No, (if it all comes out in the wash I'm happy).

 

 

[skyhuck]

7 hours ago, Paddy1000111 said:

You can also register for fixed rate VAT. You charge 20% VAT and then you pay 11% to the government and pocket 9%. It's basically a way to do VAT without having to do the full VAT claims etc. In saying that I can't remember what the fix rate VAT is. Are we Agriculture, Other Agriculture or Forestry? ?

Its Flat rate not Fixed rate. 

 

You don't simply "pocket the 9%".

 

On the Flat rate scheme you cannot reclaim VAT on everyday business expenditure, such as fuel, repairs etc. You can only claim back VAT capital expenditure over £2k. So you need to look at your business and decide if its beneficial for your business or not.

[skyhuck]

When it comes to paying yourself, the important thing to remember is you can only really take your wage from your "profit". In order to do this you first need to have a proper handle on what your actual profit is. Its very easy to confuse turnover with profit, especially if your busy and paying loads into the bank, but its easy to be very busy, turning over loads, but not actually making any money. 

[Paddy1000111]

2 hours ago, skyhuck said:

Its Flat rate not Fixed rate. 

 

You don't simply "pocket the 9%".

 

On the Flat rate scheme you cannot reclaim VAT on everyday business expenditure, such as fuel, repairs etc. You can only claim back VAT capital expenditure over £2k. So you need to look at your business and decide if its beneficial for your business or not.

Flat rate and fixed rate are pretty much the same thing..I know how it works and how much you are required to spend on "non-movable" goods etc to make it worthwhile. I was just giving a really basic explanation, his accountant will tell him if he should or not. 

[aspenarb]

16 hours ago, kelsey said:

Hi all,

 

First time poster. Just curious - how do you all work out how much to pay yourselves? Are you worried about taking too much and it affecting your company?

That would depend on how long you have been running, most start ups would take a minimum liveable wage to allow a business to grow. If you are still on this ten years down the road something's probably wrong.That said even when established drawings still need to be a realistic sustainable amount.

 

Bob

[kelsey]

Thanks everyone for getting involved.

I've found something online called the elevate profit method. It says it helps landscapers calculate how much they can pay themselves. Is this something anyone has heard of before?

[donnk]

1 hour ago, kelsey said:

Thanks everyone for getting involved.

I've found something online called the elevate profit method. It says it helps landscapers calculate how much they can pay themselves. Is this something anyone has heard of before?

yes.

 

you have to use a 3 toothed hand saw all the time.