Hi, as I seem to always ask the most stupid and basic accounting questions, why buck the trend now.....
The scenario:
I understand that as a sole trader, I am the business, that all the money from the business is my money and whatever money I take from my business for personal use will go against drawings and is subject to tax. I understand that.
I have not really taken any money from the business this tax year as it is a side line but when completing my tax return, goods taken for personal use were added back in for tax purposes.
The tax return has been completed, the amount of tax calculated and the profits for the year transferred to retained earnings.
This is where I have got my head in a thousand knots and I know the answer will be glaringly obvious and make me feel thoroughly useless.......
Can I now withdraw against the retained earnings without subjecting myself to further tax? Theoretically, the tax has been calculated on that money (and my thinking was, I would withdraw against this to pay the tax bill) so surely, I can remove this money from the business without having to declare it as drawings on next years return?
I'm sorry to keep asking such silly questions, self assessment is not something I deal with for anyone but myself and I just need to get things straight in my head.
Thanks in advance for your help, I always find the people on this forum incredibly helpful.
Sorry, I realise I don't put my points across very clearly. The problem is, working for a limited company full time I've managed to confuse myself. I do bookkeeping as a side line. I have very few clients as I have just started out and hope to build the business up gradually. Throughout the year, because of my full time employment, I have only needed to take minimal amounts as drawings. Now year end has been finalised I need to withdraw some money from the business to cover the tax bill and a couple of other private expenses. Because the profits have already had the tax calculated on them, can I withdraw against them and not incur further tax or will it just be classed as new year, new drawings for personal use and therefore be taxed on these?
Sorry if this still isn't clear. I'm not quite sure how else to explain it.
Thank you, that's what I thought and was the answer I was hoping for. I'm not withdrawing all the profit, just enough to cover what I need. I keep a close eye on cashflow.
