Salaries and�PAYE

As a director of a limited company, you will be paid salary through the company's payroll system, net of PAYE income tax and Employee's National Insurance Contributions. The company will also pay Employer's National Insurance Contributions. You can reduce your total tax burden by�taking a higher proportion of your income in the form of dividends, which are not subject to National Insurance.

Drawings

If you are the owner of a sole proprietorship, a partner in a partnership or a member of a limited liability partnership, you are classified as self-employed and take money out of the business in the form of drawings. You are assessed for tax personally on your share of the business profits, calculated net of allowable business expenses, which exclude drawings.


Credit control

There is no point�in working for clients unless they pay. Cash flow is important, and every year businesses go broke, even profitable ones, because cash is needed to pay bills and loans on time.�The following resources provide useful guidance:

See also: PCG's Guide to Freelancing

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