sole trader dividend

[completecas]

I started my own business six months ago as a sole trader using £6000 of my savings , 90% of my company's income is generated as a sub contractor. on average i invoice out £4000 per month and pay myself £1500,Company overheads are £300.
To be able to pay back my "start up" costs, do i need to pay myself more per month or can i take dividends and pay less tax on them.
I have been informed that sole traders cannot take dividends.

[hashman]

You have been informed correctly - only companies pay dividends. Sole traders have 'drawings'. If you want (and the business can afford it) you can withdraw your start-up capital in the future but this has no effect on yout taxable profits. Basically though. you and the business are one and the same. You can do pretty much what you want with the money in thebank account. However, take advice before withdrawing money from the business in either form as it could have an impact on the allowability of interest payments (if you borrow money for the business).

[deanshepherd]

Remember that as a sole-trader you are taxed on your profits, regardless of how much you 'pay' yourself.


Dean Shepherd
dean.shepherd@mmi-online.co.uk
MMI Accountancy
www.mmi-online.co.uk