Hi, I've looked at a couple of related previous posts but i'm still unsure on this....
I'm not sure how to record and categorise the monthly salary payments I make to my current account from my business account?
My business account is linked to Quick books so the transactions show up automatically, however it wants to add these salary payments an expense and I'm not sure how or what to change them to.
Any help would be much appreciated.
Hi there, JoeGilson,
Let me clarify things out for you.
You're taking funds from your business. Thus, you can categorize the salary payment paid to yourself under the Owner's Equity account.
Upon sharing this solution, I still suggest consulting your accountant first for proper guidance. He/She might have additional instructions on how to categorize payments to yourself.
I've got an article for more details: Salary or Draw: How to Pay Yourself as a Business Owner. This link provides tips to determine how you should pay yourself as a business owner.
Keep me posted if you have follow-up questions and I'll get back to you.
Thank you so much for your response!
I've added this payment I made to myself as 'Owners Equity' as you've described below, however it still goes into my 'Expenses' category. Is this correct?
I would have thought it should go somewhere else, as the rest of my expenses are reducing my taxable income, whereas this is a taxable sum which i'll need to separate out when doing my tax return...
When you withdraw money in relation to wages you are paying yourself it will not be included in the taxes section as this is in relation to VAT and it would be classed as an expense to your business.
Hi John C,
Thanks for your reply.
im sorry, this still doesn’t really make sense or answer my questions though. it may be the fact that I am UK based and a sole trader which is causing the confusion?
Is there anyone specific I could speak to to help me get an answer to this?
We are based in the UK. If you are not using one of the payroll systems you will have to create the expenses manually or add them from the banking screen after categorising them to the expense account you have set up in relation to your wages/owners withdrawal.
I've recently joined QBO and I am in the same position as you were in. I am registered as self employed, but I can see the problem you encountered.
I want to withdraw some money to pay myself, but from what I can see, it looks as though I have to add it as an Expense, which would mean that it wouldn't be included in my profit at the end of the year, whereas it should be, so that I can pay Income Tax and NI on it.
How did you fix this in the end?
Hi there, thetrew.
Yes, you'll record this as a business expense in the Self Employed product when adding the transaction in if you select owner withdrawal.
If you want to categorize this to others, I recommend consulting an accountant. They can help you assist to choose the correct posting account so it will be included to pay yourIncome Tax and NI on it.
Please know that you're always welcome to post if you have any other concerns. Wishing you and your business continued success.