We are often asked by self-employed clients to explain why their tax bills are high in proportion to the amount they withdraw from their business as “wages”.

In truth, the self-employed do not take a wage, this would imply that the cost of their “wages” is a deduction for tax purposes, and this is not the case. What happens is that self-employed traders draw down against the profits they have made, after any tax and NIC charges have been deducted.

On this basis, a thrifty self-employed person may find that their annual income tax bill is a significant amount if compared to their annual drawings from the business.

For example, if your profits are £75,000 this will create a tax and NIC bill of almost £23,000. Th