You’ve had a good month. Your business account is looking healthy. So how much can you actually take out?
It’s a question we hear a lot — and there isn’t one magic number that works for every business.
Taking money out of your business needs to be balanced with what the business needs to keep running, your upcoming tax bills and, importantly, what the business can genuinely afford.
First things first: a healthy bank balance doesn't mean it's all yours
Seeing £20,000 sitting in your business bank account can be reassuring.
But that £20,000 might need to cover:
VAT or other tax due
PAYE and payroll costs
Corporation Tax
Supplier bills
Rent and other overheads
Upcoming expenses
Your business's working cash
Money you've already earned but still need to set aside for tax
This is why simply looking at your bank balance and thinking "I've got £20,000, so I can take £10,000" can be risky.
The amount sitting in the bank isn't necessarily the same as the amount you can safely take out.
So, how much should you take?
The answer depends on your business structure, how much it is making and what it needs to keep operating.
For a sole trader, the money you take from the business is generally treated as drawings. You don't pay yourself a salary in the same way an employee does. Instead, your tax is based on your business profits.
For a limited company, things work differently. You are separate from the company, so you need to be more careful about how money is taken out. This could include salary, dividends or other payments, depending on your circumstances.
This is one reason it's important not to simply transfer money whenever the business bank account looks healthy.
Think about profit, not just what's in the bank
One of the biggest mistakes business owners make is confusing cash in the bank with profit.
Imagine your business has £30,000 in the bank.
It might sound like a fantastic position to be in. But if you have £8,000 of bills due, £5,000 set aside for tax and £7,000 needed to cover your normal running costs over the next few months, the amount that's genuinely available to take out is much smaller.
Understanding your profit and cash flow gives you a much clearer picture.
Don't forget about tax
Before taking money out, you need to think about the tax that's coming.
Depending on your business, this could include:
Self Assessment tax
Payments on account
Corporation Tax
VAT
PAYE and National Insurance
Putting money aside regularly can make a huge difference.
Instead of treating the money in your account as available to spend, think of some of it as money that already has a job.
What about paying yourself more?
If your business is growing and consistently generating healthy profits, it may be worth reviewing how much you're taking out.
But rather than simply asking:
"Can I afford to pay myself more?"
ask:
"Can my business afford to pay me more while still remaining financially healthy?"
That's a much better question.
You want to be able to pay yourself properly without leaving the business struggling to cover its bills, tax and future costs.
A simple monthly check
Before taking money out of your business, look at these five things:
1. What's actually in the bank?
Not just the balance today, but what money is already committed.
2. What bills are coming up?
Include regular expenses and anything you've got coming up.
3. How much tax needs to be set aside?
Don't let a future tax bill catch you by surprise.
4. How much profit is the business actually making?
Your bank balance doesn't tell the whole story.
5. What does the business need to keep operating comfortably?
Having a cash buffer gives you breathing room when things don't go to plan.
Your business should support you — but it needs to support itself too
One of the best things about owning a business is that, ultimately, you want it to provide you with an income.
But taking too much out too soon can leave a business under pressure, while taking too little can mean you're working hard without actually benefiting from the business you've built.
The goal is to find a balance.
You should be able to take money from your business — you just need to know what you can safely afford to take.
If you're unsure whether you're taking out the right amount, or you don't have a clear picture of your business's profit and cash flow, it's worth talking to your accountant.
At Soldi Partners, we can help you understand what's happening with your numbers, so you can make decisions with confidence — without the jargon.
Need help understanding what your business can actually afford? Get in touch with Soldi Partners Accounting.
Share this post: