Wages

[tracey2756]

Do any of you actually bother to pay yourself?

I have my business bank account and tend to keep the money in there but am now thinking should I be drawing X amount per week as wages?

[Arianna]

Hi Tracey,

Are you a sole trader? If so, then the profit/loss the business makes is your income. If you take money from the business then it becomes Drawings and not a wage as you're already taxed on the profit/loss the business makes.

If you're a limited company then you would be able to draw a salary. You would need to register with inland revenue as an employer and file all the necessary paperwork with them for payroll etc.

I hope that helps!!

Arianna

[Al1x]

I don't ... but thats mainly because I still have a regular job!

[Tanya]

I don't ... but thats mainly because I still have a regular job!

same here

[tracey2756]

Hi Tracey,

Are you a sole trader? If so, then the profit/loss the business makes is your income. If you take money from the business then it becomes Drawings and not a wage as you're already taxed on the profit/loss the business makes.

If you're a limited company then you would be able to draw a salary. You would need to register with inland revenue as an employer and file all the necessary paperwork with them for payroll etc.

I hope that helps!!

Arianna



I am a sole trader, so I think I will draw some and transfer to my bank, at least then I get the interest rather than my checkout account

[NikiJ]

That is really helpful Arianna thank you.

So is the profit not including materials costs?
For example say I sell a cushion at £12.50
The material costs to make the cushion are: £4.00
The profit would be £8.50 so that would be my wage?

Is that right or am I wrong?
Thanks, great topic!
Niki
xxx

[Arianna]

Hi Nikki,

Well yes you are right in a way, as that is the Gross Profit but the Net Profit of the business is all the sales minus the cost of sales minus the other expenses.

You can take out £8.50 as drawings, as that doesn't affect the profit/loss of a company.

The Profit/Loss of a business doesn't actually show what's in the bank account of a business because you might receive/make payments from paypal/nochex/via cash and you might be owed/or even owe money to others but it still shows on the profit and loss statement.

I hope that makes sense.

Arianna

[Chutney]

Wages? Am I supposed to be making money - ha ha!
I knew I was going wrong somewhere!
X

[NikiJ]

Hmm this is quite confusing lol!

Niki
xxx

[petchy]

Wages? Am I supposed to be making money - ha ha!
I knew I was going wrong somewhere!
X

:iagree: lol

[sadierhianne]

I haven't taken any money yet - i don't like working for free.

I understand the way tax works BUT i invested 4K in my business at the start - how do i get that money out again without being taxed for it?

It's really bad, not only do i have all that money tied up i'm not able to take a wage - as soon as money has come in i'm spending it again on new orders and playing it very close to the £0 mark in the business account :-(

I might treat myself to a bar of soap or a tube of toothpaste next week, just to make myself feel some benefits of being a workaholic.

Anne

[Arianna]

Hi Anne,

It's considered Capital so doesn't touch the profit and loss statement. You just take it back out as Drawings which don't touch the profit and loss statement either.

HTH!

Arianna

[trogette]

Anne, next time I place an order, talk to dh when he calls cos he'll probably be picking it up, lol

[Bunny]

that is very well worded Arianna, don't think I could have explained it as simply as you have

[Arianna]

that is very well worded Arianna, don't think I could have explained it as simply as you have

Thank you. :-)

I'm always afraid that I've not worded things very well and will end up confusing people anymore. So I think about how I would have liked it explained to me when I first started my accounting courses in Canada. :-)

Arianna