If you have just gone self-employed, one of the first practical questions is how to pay yourself. The answer is simpler than for a company director, but it catches people out at tax time: what you take out and what you are taxed on are two different numbers.
Written and reviewed by James Whitfield · Last reviewed 19 October 2026 · Checked against 2026/27 HMRC rates · Editorial standards · Methodology
A sole trader does not pay themselves a salary. You simply move money from the business account to your own whenever you like; these transfers are called drawings. Drawings are not a business expense,1 so they do not reduce your tax: Income Tax and Class 4 National Insurance are charged on your profit.23 On £40,000 of profit the 2026/27 bill is £7,131.80 whether you draw £20,000 or all £40,000. There is no PAYE on drawings; you pay through Self Assessment by 31 January, usually with payments on account.4
Related: Tax set-aside calculator · Payments on account · Sole trader vs limited company
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As a sole trader you and the business are the same person in law. There is no separate employer to run a payroll, so PAYE and Class 1 National Insurance do not apply to the money you take out. GOV.UK puts it simply: you keep all the profits after paying tax, and you are personally responsible for the business's debts.2
Wages are allowable only when you pay someone else: employees, staff and subcontractors are business costs.5 Money you take for yourself is not. GOV.UK's expenses guidance says allowable expenses do not include money taken from your business for personal use.1 That is why there is no tax benefit in calling a transfer to yourself a "salary" in your bookkeeping.
Sam is a self-employed bookkeeper in England. In 2026/27 the business earns £52,000 and has £12,000 of allowable expenses, so profit is £40,000. Sam has no other income and transfers £2,500 a month to a personal account.
| Profit for 2026/27 (£52,000 − £12,000) | £40,000.00 |
| Income Tax: 20% × (£40,000 − £12,570) | £5,486.00 |
| Class 4 NI: 6% × (£40,000 − £12,570) | £1,645.80 |
| 2026/27 tax and NI | £7,131.80 |
| Drawings: 12 × £2,500 | £30,000.00 |
| Left in the business account | £10,000.00 |
| Set aside each month to cover the bill (£7,131.80 ÷ 12) | £594.32 |
If 2026/27 is Sam's first year, the first January payment is larger: the whole £7,131.80 plus a first payment on account of half again, £10,697.70 in total on 31 January 2028.4 Drawing every pound of profit is the most common way new sole traders end up short at that point.
Work out the tax first and draw from what is left. A simple routine is to move a fixed percentage of every payment you receive into a separate tax savings account, then pay yourself a regular amount from the rest. At £40,000 of profit, about 18% of profit covers a normal year's bill; in the first year you need roughly 27%, because of the payment on account.
Leave a buffer for VAT if you are registered, for upcoming business costs, and for quiet months. The set-aside calculator shows the monthly reserve for your profit.
Drawings do not go in your profit and loss account. In bookkeeping software they are usually a transfer to an "owner's drawings" or "owner's equity" account, which sits on the balance sheet. Your tax return asks only for income and allowable expenses, so drawings never appear on it.
Keep personal spending out of the expense categories. If you pay a personal bill from the business account, record it as a drawing. If a cost is part business and part personal, such as a phone, claim only the business share.1
Because you are not on a payroll, you pay no Class 1 NI. Instead you pay Class 4 NI through Self Assessment on profit above £12,570: 6% up to £50,270 and 2% above.3 Compulsory Class 2 has ended; if your profit is £7,105 or more, Class 2 is treated as paid, so the year still counts for your State Pension.3
Yes. A company director can be paid a salary through PAYE and take dividends from the company's post-tax profit, taxed at 10.75%, 35.75% and 39.35% in 2026/27 after the £500 dividend allowance. Money a director takes beyond salary and dividends is a director's loan, which has its own rules. Whether that saves tax depends on your profit; compare both routes before switching.
No. A sole trader is not an employee of their own business, so there is no payroll or PAYE. You take money out as drawings, and you are taxed on the business's profit through Self Assessment.
Not separately. Drawings are not an allowable expense and are not income in their own right. Income Tax and Class 4 NI are charged on your profit, however much of it you take out.
Not PAYE. Sole traders pay Income Tax and Class 4 National Insurance on profit through Self Assessment. For 2026/27, Class 4 is 6% on profit between £12,570 and £50,270 and 2% above. If you also have a job, PAYE still applies to that salary.
No. Tax is worked out on profit, not on what is left after drawings. With £20,000 of turnover and £2,000 of expenses, profit is £18,000. In 2026/27 that means £1,086 of Income Tax and £325.80 of Class 4 NI, £1,411.80 in total, if you have no other income.
No. You cannot deduct a wage for yourself. Your reward is the profit, and that is what is taxed. You can claim wages you pay to genuine employees or subcontractors.
No. Income Tax and Class 4 NI are your personal liabilities. If you pay them from the business account, record the payment as a drawing.
The rates, thresholds and rules in this guide are drawn from the official HMRC and GOV.UK sources below, using the confirmed 2026/27 figures. Each link opens the relevant official page in a new tab.
The sole trader tax calculator turns this guidance into a concrete monthly take-home and tax reserve estimate, based on 2026/27 HMRC rates. Enter taxable profit — not turnover.