Take money out of the business
How to do it and the implications
How you will extract money will depend on the business structure:
Limited Company
Sole Trader
There are three ways you will take money out of the business.

Repayment of director loans

If you have lent money to the business, you can repay yourself at any time, simply by returning cash to your own account.
When making the transfer, give it a reference like "Director Loan Payment" to make it easy to identify when handling your bookkeeping.

Payment of dividends

You can declare and pay a dividend at any time. Legally it must be paid to all shareholder in proportion to their shareholdings, and can only be paid from the retained earnings of the business.
When making the transfer, give it a reference like "Dividend payment {{Name}}" to make it easy to identify when handling your bookkeeping.

Salary

If you are UK tax resident you will have the option of paying yourself a salary. Before you can pay a salary you must register for PAYE with HMRC and make monthly submissions to HMRC.
These submissions can be handled DIY using software like Xero, or your accountant can handle it for you.

How much should I pay myself?

It depends on your personal circumstances. As a Limited Company owner/director you have complete control over how much to pay yourself both in dividends and in salary.
The correct level and mix will depend on how much other income you have had in the personal tax year. You can get a rough idea of how taxation will work by downloading our tax calculator, but this conversation is best had with an accountant.
If you are not UK tax resident, you will only have the option of taking dividends, which will be taxed based on your local tax rules.
Whatever money in your business is yours to use as you please. You will not have a choice in when you pay it out, however.
As a Sole Trade whatever profit you make each personal tax year will be taxed as income, so remember to set aside cash to cover this bill. As a rule of thumb set aside 25% or up to 55% for high earners.
Last modified 1yr ago
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