Have you ever felt that payday excitement vanish as quickly as it came? One moment, you’re on cloud nine; the next, you’re wondering where it all went. Sound familiar? Don’t worry—you’re not alone!
What if I told you that a simple payday routine could change everything? Imagine feeling totally in control of your finances: paying your team on time, setting aside for taxes, and still having enough left to celebrate your hard work—without any guilt.
Hi, I’m Lucy Johnson, an accountant with eight years of experience helping people like you take charge of their finances. Today, I’m sharing my ultimate payday checklist—practical steps to keep your business organised, your team happy, and your future bright.
1. Set Aside Taxes Every Payday
Taxes might not be the most exciting part of payday, but trust me, future you will thank you. No one likes scrambling for cash when tax deadlines hit, so why not make it easy on yourself?
Each time you get paid, put a portion of your earnings into a tax pot. It’s like saving for a dream holiday—except this one avoids nasty surprises.
Here’s a quick breakdown for the 2024/25 tax year:
- Income Tax: Around 20%
- National Insurance: 12% (Class 1) or 9% (Class 4, self-employed)
- VAT (if applicable): 20%
- Corporation Tax: 19-25% of profits for limited companies
By setting aside taxes on payday, you’ll avoid the last-minute panic when tax deadlines roll around. Think of it as future-proofing your finances!
Want to make tax planning even easier? Check out our blog on Tax Planning for Limited Companies for expert tips to save money and stay compliant.
2. Pay Your Team on Time
If you have employees, payday isn’t just about the money—it’s about showing your team you value them. A smooth payroll process keeps everyone happy, engaged, and productive.
Here’s what to keep in mind:
- Deduct the right amounts for PAYE and National Insurance.
- Allocate about 20-40% for PAYE and 12% for employee NI (plus 13.8% for employer NI).
When you prioritise your team’s needs, you’re not just running a business; you’re building trust and loyalty. And rewards don’t have to stop at payday! Learn how to thank your team in meaningful ways with our guide on Tax-Efficient Ways to Reward Your Team.
3. Plan for Pensions
Pensions might sound like a “later” problem, but starting now is one of the best decisions you can make. For your employees, contributing at least 3% of their qualifying earnings (with them adding 5%) is a legal requirement—but it’s also a smart way to show you care about their future.
Don’t forget your own pension! Investing in your retirement now means saving on taxes today and securing your future. Learn more about how to handle pensions effectively with our blog on Payroll and Pensions – Benefits for Limited Companies.
4. Pay Yourself Smartly
Payday isn’t just for your team—you deserve your reward too! But instead of diving into spending, plan your payment wisely.
- Self-employed? Take drawings.
- Run a limited company? A mix of salary and dividends can be a tax-efficient way to pay yourself.
Strategically managing your payday payout ensures you keep more of your hard-earned money while staying on top of tax obligations. Avoid costly mistakes by checking out our blog on Illegal Dividends for Limited Companies.
5. Reinvest in Your Business
Think of your business like a growing plant—it needs care and resources to thrive. Set aside 5-10% of your income to reinvest.
Whether it’s upgrading equipment, funding marketing campaigns, or upskilling your team, these investments can help your business flourish. And it sends a clear message to your team that you’re committed to success.
6. Review Your Cash Flow
Cash flow is the lifeblood of your business, and keeping tabs on it is crucial.
Take a few minutes to:
- Check that invoices are paid.
- Ensure you’ve got enough to cover upcoming expenses.
A quick review helps you stay proactive and avoid nasty surprises down the line. Need guidance? Don’t miss our expert tips in How to Manage Your Finances and Cash Flow.
Simplify Your Invoicing with Our Free Guide!
Streamline your invoicing process and get paid faster with our easy-to-follow guide. From creating professional invoices to managing late payments, you’ll find all the tools you need to stay organised and compliant. Download your free guide today!
7. Build Your Emergency Fund
Life happens. Having a financial safety net means you’re prepared for the unexpected.
Aim to save 3-6 months’ worth of business operating costs. It might take time, but every little bit adds up. This fund ensures you’re prepared for unexpected challenges, turning potential crises into manageable bumps in the road.
8. Celebrate Your Wins on Payday
Don’t let payday pass without celebrating your hard work! Recognising your progress keeps you motivated and reminds you of why you’re working so hard.
Whether it’s a special coffee or a treat you’ve been eyeing, use payday to reward yourself—you’ve earned it.
Why a Payday Routine Matters
By following these eight steps, you’ll transform payday from a source of stress to a day of empowerment. You’ll stay organised, keep your team happy, and invest in your future—all while building financial stability.
So next payday, grab your favourite drink, follow this checklist, and watch the chaos turn into clarity. Your future self (and your bank balance) will thank you. Cheers to your success!
Comments are closed