Getting Money Out Of Your Business

Your company is a separate entity to you, so if you’re going to take money out you need to do it in a way that is recorded somewhere in the company’s accounts, and then pay the appropriate taxes if they are due. It’s a pity you can’t just go to the cashpoint and get some out and forget it, but you need to get into the habit of justifying each withdrawal you make.

There are a few ways to get money out:

• Taking a salary – subject to income tax and national insurance when you reach a threshold. You'll need to run a payroll.

• Paying a bonus – the same.

• Paying business related expenses – like travel and an overnight stay in a hotel when you are visiting a customer or supplier. Or a new computer because your old one has crapped out.

• Paying a dividend – subject to different tax rates and can be mixed with your salary and bonus. Dividends are paid after Corporation Tax is paid, so the business needs to be profitable in the period for which a dividend is paid - which could be monthly, quarterly or annually. If you're not making a profit you can't pay yourself a dividend.

• Taking a director’s loan, or repaying a loan that you've previously put into the business.

• Gaining interest from a loan you make to the company. But remember the interest is taxable and needs to be declared on your personal tax return.

• Selling some of your shares to an investor - as distinct from creating new shares where the money goes to the company. See New Shares and Old Shares.

• Contributing to a pension - both the company and you personally.

• Closing your business and taking the final cash out.

  
  

You'll probably take a mix of these, but ask your accountant to plan it with you so the tax you and your company pays is minimised.

Remember also that the timing of your year-end can be important too, especially as it relates to the personal tax year, which runs from April to March each year. The timing and value of bonuses, dividends and loans will impact the personal tax you pay. Read the butt on this.

If your business has come to the end of its life, is solvent and has cash that you want to get out, you can do this by way of a Members Voluntary Liquidation. Here you formally wind up the company and take all the cash. It’s a specialised task and you’ll need the services of a licensed Insolvency Practitioner to complete it. There may be capital gains tax to pay.

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