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Drawings

As a Sole Trader you will not be paying yourself a salary as such. Instead when you take money from your business account and transfer it to your personal, it is known as your Drawings, i.e. the money you have drawn from the business.

This money does not effect your business tax - it does not reduce it like a salary would if you were a director of a Limited Company (one of the advantages of incorporating).

Many Sole Traders set themselves up and use their personal bank account for all business and personal expenses and income. This is very bad practice as it is very difficult for your accountant to tell what expenses are personal and which are business. You therefore often end up paying too much tax as business expenses are mistaken for personal ones.

Even though it might seem a little strange to set up a business current account, pay your income into it and then transfer it straight across to your personal account - it will save you a great deal of time, hassle and money if you do it this way.

Disclaimer:

This information is for general information only. We take no responsibility for any action taken or refrained from in consequence of its contents. Always seek our professional advice specific to your circumstances before acting.