Hi Guys,

I've found a few threads about this already but they failed to clear up a point for me. Basically I understand that all the money in the business is seen as mine already, therefore I dont have to pay myself a wage. However, I do keep books and I need to put something on there when I draw money for my own use, I dont want to pay personal bills from my business account. So what do I put on my books in order to withdraw it?

Since the taxman see's all this as my money, I am guessing that drawing it out to my personal account wont make the slightest bit of difference to my tax. Does this mean that I can't put my "wage" as an expense on my tax return?

Thanks,

Matt
=============
It's just a personal withdraw or owners drawings (normally coming from the owner's equity - the amount of money you have personally put in the business.)

Although all the money is yours, you would have to be carefull when it comes to tax as it could be looked as being Tax fraud, depending on the turnover of the business and wether or not you are being investigated by the Taxman already.

Best not to squaner the whole lot on yourself, looks far better on the balance books if it looks like the business is profitable and has bankable assets.

So, on the books, either 'personal drawings' or 'owners draw'. So say you take ?00 personal drawing and spend ?0 of it, you can invest the other ?0 back into the business as 'owners equity'. Not as simple as that in all cases but that's the gist.
=============
Ok, so how am I expected to pay my mortgage, my phone bill, and for my food?

Basically I make £XXXX a month, and I need £XXXX to pay my personal bills. So I need to pay a wage to myself, I dont understand how to do that at the moment. It sounds like what you are saying to me is all the money I make belongs to my business and I'm not allowed it! That sounds ludicrous!

Thanks for the advice though, I'm fairly new to business and struggling to get my head round this.

Matt
=============
Assuming you are a sole trader then all profit is yours - just record anything you take from the business as drawings.

As a sole trader you are personally liable for your tax bill so if you take everything out of the business account it makes no difference - you will still be liable for the bill anyway :rolleyes:
=============
Although all the money is yours, you would have to be carefull when it comes to tax as it could be looked as being Tax fraud, depending on the turnover of the business and wether or not you are being investigated by the Taxman already.



I think this is a little misleading :rolleyes:
=============
So basically I can take whatever I want and the taxman isnt going to tell me off, since whatever I take I will have to pay tax on anyway, is that right?

Thanks
=============
Yes, but you don't run your business for the tax man's sake. There are sound business reasons why you should keep the business finances and personal finances seperate.

Paying yourself a wage is different than making an owners draw. If the business does not make enough for you personally to live then you need more sales or another Job.

Not paying yourself a wage and just making owner draw's allows you to only take money as and when you really need it.

All the money the business brings in is the business' money. It's up to you, the owner, how the money is distributed to tghe different parts of the business expenses, including stock, wages, bills, etc.

Try not to think of the business' money being your money. You have to take money out of the business for it to be your money.
=============
So basically I can take whatever I want and the taxman isnt going to tell me off, since whatever I take I will have to pay tax on anyway, is that right?

Thanks

As I said assuming you are a sole trader (and not a limited company) then yep - you have unlimited liability so if you don't pay your tax bill HMRC will come after your personal assets e.g. car etc :rolleyes:
=============
Paying yourself a wage is different than making an owners draw. If the business does not make enough for you personally to live then you need more sales or another Job.

Not paying yourself a wage and just making owner draw's allows you to only take money as and when you really need it.

All the money the business brings in is the business' money. It's up to you, the owner, how the money is distributed to tghe different parts of the business expenses, including stock, wages, bills, etc.

Try not to think of the business' money being your money. You have to take money out of the business for it to be your money.

I do think you are getting muddled here. If the OP is a sole trader then he / she will NOT pay a wage but will take drawings.

If he / she has a limited company then they may seek to pay a salary and / or dividends.

Your post seems to mix the two up.
=============
I'll give you a scenario:

My personal living expenses are ?000 a month, and I want ?00 a month for treating myself :).

My business makes ?800 in january, and I withdraw ?300 leaving ?00 in the business account.

In feb, sales brings in only ?50, plus the ?00 left over, so I withdraw my ?300 and I am left with ?0 in the business account. That's fine right?

Obviously, if the business account had less money in it than I wanted, then I would withdraw less, but there's nothing wrong with leaving no money in the account at the end of every month is there? I still pay tax on what I've earnt and the money I withdraw isnt tax deductable, so it's not like it'll look like I've made no money and therefore not have to pay tax.
=============
I'll give you a scenario:

My personal living expenses are ?000 a month, and I want ?00 a month for treating myself :).

My business makes ?800 in january, and I withdraw ?300 leaving ?00 in the business account.

In feb, sales brings in only ?50, plus the ?00 left over, so I withdraw my ?300 and I am left with ?0 in the business account. That's fine right?

Obviously, if the business account had less money in it than I wanted, then I would withdraw less, but there's nothing wrong with leaving no money in the account at the end of every month is there? I still pay tax on what I've earnt and the money I withdraw isnt tax deductable, so it's not like it'll look like I've made no profit.

Yep that is all fine.

Just remember that you will have to pay tax at some point - so don't spent it all. :p

The money you withdraw isn't taxable but your profit (income - costs) is.
=============
Legally, yes!

Although I'm sure your account (if you had one) might give you some advice about "treating" yourself too much. lol, isn't that right, elaine?
=============
Wow - what some long winded answers to some simple questions.

Simple answers -

1. No transfering/putting money you draw out of the business to your private account has no effect on your tax.

2. No you cant claim or put your 'wages' as an expense on your tax return.
=============
Wow - what some long winded answers to some simple questions.



Thank you for your comment and welcome to the forum. I am sure you will find it a friendly place :rolleyes:
=============
I'll give you a scenario:

My personal living expenses are ?000 a month, and I want ?00 a month for treating myself :).

My business makes ?800 in january, and I withdraw ?300 leaving ?00 in the business account.

In feb, sales brings in only ?50, plus the ?00 left over, so I withdraw my ?300 and I am left with ?0 in the business account. That's fine right?

Obviously, if the business account had less money in it than I wanted, then I would withdraw less, but there's nothing wrong with leaving no money in the account at the end of every month is there? I still pay tax on what I've earnt and the money I withdraw isnt tax deductable, so it's not like it'll look like I've made no money and therefore not have to pay tax.

Yes, it's fine. As long as the taxman gets his cut he's not too bothered. You do have to look at the health of your business too, and not take too much out if the business will suffer - but then that's just common sense and in an ideal world. If the money is in your business account and you need it in your personal account then just move it. Just make sure you can also pay your suppliers and your tax bill :)

Edit: oops didn't see page 2 :p
=============
sorry to highjack someone elses thread, but does the same stand true for a partnership??

Me and my other half are 50/50 partners in a business so just take out a even split of the profits as and when we need it. We just mark it down as 'owners draw' and dont claim it as an expense on our tax return. Is that all ok??
=============
sorry to highjack someone elses thread, but does the same stand true for a partnership??

Me and my other half are 50/50 partners in a business so just take out a even split of the profits as and when we need it. We just mark it down as 'owners draw' and dont claim it as an expense on our tax return. Is that all ok??
Just fine :)
=============
Thanks for the help guys :)
=============