How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Your Own Question, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4972
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
Type Your Tax Question Here... is online now

Self employed, keeping track of payments in and out of my personal

Resolved Question:

Self employed, keeping track of payments in and out of my personal account using Xero software. How do I pay myself back from money spent on the business at the start, now I'm making a profit and have money sitting there. I have made allowances for tax and NI
Submitted: 1 year ago.
Category: Tax
Expert: replied 1 year ago.
Thank you fo ryour question.You made payments out of your own account to fund the start up of the operation.Your payments would be treated as capital introduced. You can payback yourself at anytime if business finances allow it. This would be called drawings and would have on impact on taxation as it is the profits that are taxed and not drawings. I hope this is helpful and answers your question.If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.
Customer: replied 1 year ago.
Thank you for your response. Are you familiar with Xero? how do I go about showing the movement of money for the drawing of money out and back to me. If it helps, i have set up 2 savings accounts to hold the money that is profit and also another that holds money for Tax and NI
Expert: replied 1 year ago.
Thank you for your reply. Irrespective of accounting software used, you have a listing of nominal accounts split between revenue and capital.Any payment/receipt would have narrative and also would be allocated to a nominal account heading e.g. sales, purchases, office expenses, debtors, creditors, capital introduced, drawings etc.You have to put the correct narrative for audit trail to support entries.I have not used Xero myself.I would use the account that s holding profit and not the one that hold tax and NI. I hope this is helpful.
Customer: replied 1 year ago.
Im not 100% on all the terminology so excuse me for not understanding straight away. Do I need to create a sale or bill to show the money moving or would it be best for me to just create a spreadsheet and keep track until I do my tax return and get advice then?
Expert: replied 1 year ago.
Thank you for your reply.You do not have to create a sale of bill to showing this money moving.You should keep a spreadsheet and keep a track of all payments made out of your own funds and any monies repaid to you to cover those initial payments.If it is necessary to create a bill to cover payment to you then that bill will read something like payment for out of pocket/own funds.Keep it simple. I hope this is helpful. and other Tax Specialists are ready to help you
Customer: replied 1 year ago.
yeah thats good thanks for your help
Expert: replied 1 year ago.
I thank you for accepting my answer. best wishes

Related Tax Questions