Paying yourself as a freelancer.
Discussion
Hi All,
Looking for a little advice.
I'm self employed and wondering if I'm paying myself correctly.
I've got two bank accounts, the 1st one is my 'normal' account, which has all of my direct debits, mortgage etc coming out of it.
The 2nd one is my 'business' account, where all of my invoices get paid into, and which I use for fuel,business equipment etc.
At the moment, I use the normal account and when funds get low, transfer x amount from my business account into it, to cover the DD's.
So I don't actually pay myself a wage, I just transfer money as and when I need it.
I've got an inkling that I'm doing this wrong, but would like some advice on perhaps a better way to do things.
Anybody got experience of this, and can advise whether there is better way to do this?
Looking for a little advice.
I'm self employed and wondering if I'm paying myself correctly.
I've got two bank accounts, the 1st one is my 'normal' account, which has all of my direct debits, mortgage etc coming out of it.
The 2nd one is my 'business' account, where all of my invoices get paid into, and which I use for fuel,business equipment etc.
At the moment, I use the normal account and when funds get low, transfer x amount from my business account into it, to cover the DD's.
So I don't actually pay myself a wage, I just transfer money as and when I need it.
I've got an inkling that I'm doing this wrong, but would like some advice on perhaps a better way to do things.
Anybody got experience of this, and can advise whether there is better way to do this?
Thanks for the replies, really appreciate it.
I suppose I was just wondering if I should have a more formal way of keeping track of how much and when I move money from one account to another, but it appears that there's nothing wrong with doing it the way I have been.
Thanks again for the help and advice.
I suppose I was just wondering if I should have a more formal way of keeping track of how much and when I move money from one account to another, but it appears that there's nothing wrong with doing it the way I have been.
Thanks again for the help and advice.
I would suggest that what you are doing is pretty good practice for a sole trader.
Bank all the business related income into the business account.
Pay all of the business costs out of the business bank account.
Bank non-business related income into your non-business bank account.
Pay non-business related costs out of your non-business bank account.
Transfer funds from the business bank account to the private bank account as and when you need funds topped up in your private business bank account.
Such transfers would be categorised as "Personal Drawings" in your sole trader accounts and are absolutely normal and expected.
In your private bank account, there may be some costs which have a dual "business/private" element - telephone, motoring costs, domestic utility bills etc.
These need to be gone through when preparing your annual sole trader accounts/personal self assessment tax return and the business element of these costs allocated to the business accounts.
It is matters such as this where using an accountant might benefit you.
Bank all the business related income into the business account.
Pay all of the business costs out of the business bank account.
Bank non-business related income into your non-business bank account.
Pay non-business related costs out of your non-business bank account.
Transfer funds from the business bank account to the private bank account as and when you need funds topped up in your private business bank account.
Such transfers would be categorised as "Personal Drawings" in your sole trader accounts and are absolutely normal and expected.
In your private bank account, there may be some costs which have a dual "business/private" element - telephone, motoring costs, domestic utility bills etc.
These need to be gone through when preparing your annual sole trader accounts/personal self assessment tax return and the business element of these costs allocated to the business accounts.
It is matters such as this where using an accountant might benefit you.
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