Moving Earnings From Business Account To Savings Account

mkeeley

Hello

I've recently started business and am using Abbey as for business banking. Like all current accounts interest is a pittance so I was thinking of periodically transferring my money to my personal First Direct eSavings account. Is that OK to do or does that count as mixing business with personal banking which isn't a good idea. Or would I be better off opening an Abbey savings account so that all business money is with the same bank?

Thanks

Marc

Lawbag_2

It should be possible, just has to be shown in the accounts, plus you need to make declarations/allowances for the interest earned

mkeeley

Thanks for that. How does the declaration of the interest effect things? Is it just that they tax the interest and so I'd still be better off moving the money to a high interest account, although I thought the bank took the tax off the interest by default.

WHA

Just to check, you are trading as a sole trader aren't you? If so, no problem with transferring money out - it's just classed as drawings and doesn't affect your business tax at all. Yes, the bank will take off 20% tax from your interest which should have no effect unless you become a 40% higher rate taxpayer or earn so little you're in the 10% or nil tax band when there are adjustments to make via your tax return.

If you are trading as a limited company, ignore all the above. Any money taken from the company account and put into a private account would need to be covered by wages and/or dividend which does have tax implications.

mkeeley

Thanks. Yes I'm trading as a sole-trader (sorry, should have mentioned that!). So drawings can be as much or as little as I choose and I can then do whatever I want with that money. So if I chose to I could transfer my whole balance business account balance to a high interest savings account each month and it doesn't matter which one, so my FD eSavings Account would be fine.