How To Avoid Tax Shocks: Managing Personal Expenses Through Your Business
Running your own business is hard work. You deserve a reward for the long hours, late nights, and risks you take. But when it comes to finances, the Tax Office doesn’t share your sentiment. Personal expenses paid from your business account can lead to unexpected tax surprises if not handled correctly. Here’s how to keep your cash flow real and your tax bill predictable.
Why Staying “Cash Flow Real” Matters
Mixing personal and business finances can create confusion and lead to tax issues down the road. By keeping your personal expenses separate and consulting with us before big financial decisions, you can manage your cash flow responsibly and keep your business healthy. Remember: proactive planning now means less stress and more financial stability later.
What Does Your Life Really Cost?
If you are paying personal loans out of the business, two options:
- Tell your Bookkeeper to change these from Drawings to Wages, or
- Change the direct debits so they come out of your Personal bank account.
Either way, you are probably going to get quite a shock. But as least you’re keeping it cashflow real. And quite soon you’ll be having less and less nasty tax surprises.
Self-employed people need a break and you deserve a reward for the hours you do and risks you take.
We get that. But the Tax Office doesn’t. They don’t give tax credits for holidays.
Make sure to holiday from after-tax money.
If you pull money out of the business it can only be one of three things: a salary, a distribution, or a dividend.
All three are taxable. Talk to us before you renovate the kitchen to understand what it’s really costing you, to avoid a tax shock at year end.
