Sole trader drawings question

JRH · 12-09-2019 4:09pm #1

If you are a sole trader ... And after tax each year for a few year there is extra money( after tax) building up on your account ..... If you withdraw a large amount of as drawings ...what is the implication for the tax year it's withdrawn in ...I.e the drawings that year would be greater than the years income .? Thanks .

is_that_so · 12-09-2019 4:12pm

Here's a useful link on it.

https://www.thinkbusiness.ie/articles/sole-trader-pay-and-taxes/

TheShow · 12-09-2019 4:13pm

As a sole trader you pay tax on net profit, which is adjusted for non cash items, capital allowances etc, not drawings.
By taking drawings you are just taking cash out of the business.

If you take more drawings that net profit, are you leaving sufficient cash for the business to be able to operate?

JRH · 12-09-2019 5:24pm

Thanks , business should not be effected . Is the cash you take from the business taxed ...I know you would pay tax for the year it's removed in ...but tax has already being payed for any money removed from previous years ? Sorry really bad at this stuff . Thanks again .

TheShow · 12-09-2019 5:25pm

drawings are not taxed.
Net Profit is taxed.

JRH · 13-09-2019 9:40pm

would the drawings be included in taxable net profit for that year though ?

TheShow · 16-09-2019 9:21am

JRH wrote: »

would the drawings be included in taxable net profit for that year though ?

no, drawings are not included.
you can take drawings tax free essentially.

Sole trader drawings question

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