{"id":1159,"date":"2022-01-04T04:31:49","date_gmt":"2022-01-04T04:31:49","guid":{"rendered":"https:\/\/uk.legalvision.com.au\/?p=1159"},"modified":"2025-07-02T00:42:15","modified_gmt":"2025-07-01T23:42:15","slug":"im-a-startup-founder-when-start-paying-myself-salary","status":"publish","type":"post","link":"https:\/\/legalvision.co.uk\/startups\/im-a-startup-founder-when-start-paying-myself-salary\/","title":{"rendered":"I am a Startup Founder in the UK. When Do I Start Paying Myself a Salary?"},"content":{"rendered":"

Suppose you are a small business owner with no employees who has just invoiced your first client or sold a good to your first customer. After making some profit, you will probably wonder how to pay yourself a portion of the proceeds. For early-stage startups, this process may be confusing. This article will explain how paying your own salary as a startup founder<\/a> works, either as a sole trader or through a private limited company. In addition, it will also briefly explain your tax liabilities in the early stages.<\/p>\n

Paying Yourself as a Sole Trader\u00a0<\/span><\/h2>\n

If you are a sole trader, there is no legal distinction between your earnings and your business’ earnings. In other words, when you receive money from a customer or client, they are essentially paying you directly.\u00a0<\/span><\/p>\n

This means that there are no formalities when it comes to paying yourself a startup founder salary, or founder compensation. Your business profits are legally your profits. Therefore, you are free to spend your business’ earnings as you see fit, keeping in mind any liabilities or debts you may have to cover.<\/p>\n

\n

Consequently, your only obligations are to keep sufficient records of your business’ earnings and expenses so that you can meet your tax obligations to HM Revenue Council (HMRC). You will need to register for ‘Self Assessment’<\/a> to do so. Additionally, you will then need to use your business records to file a Self Assessment tax return every year.<\/p>\n<\/div>\n

Income Tax<\/h3>\n

Depending on how much you earn, you may need to pay income tax on your salary as a startup CEO. As of the current tax year (6 April 2021 – 5 April 2022), your income tax rates are as follows:\u00a0<\/p>\n\n\n\n\n\n\n\n
\n

Band<\/b><\/p>\n<\/td>\n

\n

Taxable Income<\/b><\/p>\n<\/td>\n

\n

Tax Rate<\/b><\/p>\n<\/td>\n<\/tr>\n

\n

Personal Allowance*<\/b><\/p>\n<\/td>\n

\n

Up to \u00a312,570<\/span><\/p>\n<\/td>\n

\n

0%<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Basic Rate<\/b><\/p>\n<\/td>\n

\n

\u00a312,571 – \u00a350,270<\/span><\/p>\n<\/td>\n

\n

20%<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Higher Rate<\/b><\/p>\n<\/td>\n

\n

\u00a350,270 – \u00a3150,000<\/span><\/p>\n<\/td>\n

\n

40%<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Additional Rate<\/b><\/p>\n<\/td>\n

\n

in excess of \u00a3150,000<\/span><\/p>\n<\/td>\n

\n

45%<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

*<\/b>Your Personal Allowance may be different if you either:<\/span><\/p>\n