Boost Your Income as a Business Owner Pay Yourself Properly

5 Aug 2023 · 1 min

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In this concise video, the speaker advises UK small‑business owners to pay themselves a full‑time equivalent (FTE) salary that mirrors what it would cost to hire an employee for the same role. Using a dog‑groomer example, he suggests a payroll salary of about £2,000 per month. He explains that while this approach raises the owner’s personal tax bill (approximately £20,000 annually), it aligns the business’s corporation tax and personal tax liabilities. After consulting his accountant, he estimates that an owner can comfortably draw up to £30‑33k in salary before the tax advantage of taking dividends overtakes the salary route. Once the salary reaches that threshold, shifting to dividend payments becomes more tax‑efficient. The overall message is a pragmatic balance between salary and dividends to optimise tax and cash flow for business owners.

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My recommendation is that business owners should pay themselves their full-time equivalent salary. So for example, if you were a dog groomer and you own your business, and if you had to hire in another dog groomer and it would cost you, say, £2,000 a month, that's the salary that you should be putting through payroll. Now you will end up paying a little bit more tax over the course of a year, round about £20,000. It won't be too dissimilar really to what your corporation tax bill and put like a few hundred pounds in it. And I, I worked out with my account— my own accountant that I could probably pay myself up to about £30K, £33K before all of the different— the business taxes and my personal taxes started to kind of balance each other out. And all of a sudden, doing it the dividend approach way started to become really a lot more beneficial when you start to hit that— start to hit that £30K mark. Yeah, you're going to pay more tax, fine.