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 eight ways to get money out:
Taking a salary – subject to income tax and national insurance when you reach a threshold.
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.
Taking a director’s loan.
Selling shares.
Contributing to a pension
Closing your business.
You'll probably take a mix of the first 5 ways, but ask your accountant to plan this 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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