Can I pay myself a salary if I’m a sole trader?

If you’ve recently started working for yourself, you might be wondering how to take money out of your business.

A common question is whether you can “put yourself on the payroll” or take a regular salary like you would in a normal job. In fact, we get asked this a lot at ByteStart.

The short answer is no – at least, not in the same way a limited company director can.

But you can still pay yourself from the business. It just works a bit differently when you’re a sole trader.

This guide explains exactly how it works, what HMRC expects, and how to avoid mixing up your personal and business finances.

There’s no salary when you’re self-employed

When you’re a sole trader, there’s no legal separation between you and your business. That means you don’t get a salary from the business – because you are the business.

Instead of being paid a wage, you take what’s called a “drawing” – money you withdraw from your business account for personal use.

You don’t need to register for PAYE or issue payslips to yourself. You simply keep track of your business income and expenses, and pay tax and National Insurance on the profits at the end of the year.

How much can I take out?

You can take out as much as you like from your business account, as long as there’s money in it. There’s no upper or lower limit, and you don’t need to report each withdrawal to HMRC.

However, it’s wise to keep enough back to cover your tax bill, and to avoid withdrawing so much that you struggle with cash flow. Many sole traders use a separate savings account to set aside a portion of their income for tax purposes.

What matters for tax purposes is how much profit your business makes over the year – not how much you personally take out.

What records do I need to keep?

You don’t need to log drawings as a business expense or put them on your Self Assessment return. But you should still record them in your bookkeeping, so you can keep track of how much you’re taking and why.

It’s best to have a separate business account, even if HMRC doesn’t legally require one. That way, your drawings are clearly visible as transfers to your personal account, not muddled in with business expenses.

More on this: How to open a business bank account as a sole trader

Do I need to pay National Insurance?

Yes – if your profits are over the threshold, you’ll need to pay Class 2 and Class 4 National Insurance through your Self Assessment tax return.

You don’t pay NI based on your drawings, only your profit. However, many sole traders often confuse the two, especially if they withdraw money regularly, such as every month.

For the 2025/26 tax year, Class 2 has been abolished (although you can make voluntary contributions), and Class 4 is paid at 6% on profits between £12,570 and £50,270, and 2% above that. You can find more on this at GOV.UK.

What about pensions?

As a sole trader, you won’t have a workplace pension or employer contributions. But you can still set up a personal pension – and claim tax relief on your contributions.

You can usually pay in up to 100% of your profits each year, capped at the annual limit of £ 60,000. If you haven’t used up your allowance from previous years, you might also be able to carry it forward.

More here: How to set up a pension as a sole trader

Should I register for PAYE?

Only if you employ someone else. You don’t need to register for PAYE to pay yourself – and in fact, doing so would create unnecessary admin.

The only time PAYE becomes relevant is if you grow to the point of hiring employees, or if you incorporate and become a limited company director.

Would a limited company give me a salary?

Yes – if you run a limited company, you can pay yourself a salary through PAYE, and take additional income via dividends (if the company makes a profit). Find out more here.

That setup comes with additional administrative and reporting requirements, but can be tax-efficient in some instances. It’s worth weighing up the pros and cons before making the switch.

See: Should I stay a sole trader or form a limited company?

Final word

You can’t pay yourself a “salary” as a sole trader in the traditional sense – but you can take drawings whenever you like, as long as you’re tracking your business income and setting aside enough for tax.

There’s no need for payslips or payroll software. Just ensure that your records are accurate, your business and personal finances are kept separate, and your Self Assessment return accurately reflects the actual profits you made.