Sole Traders & Drawings

[Ali McGowan]

Hi
I'm a Sole Trader and have been for almost 5 yrs. The sectors I previously worked in wasn't working as such, so about 18 months ago I switched to online sales and have seen an increase in business.
As I have submitted a loss every year I got a Tax investigation recently, but they found nothing so I assume I am keeping good books, this has encouraged me to change my methods to ensure more accurate account keeping.
As I start my tax year this week I am looking ahead financially, and will be in a position to take drawings out. I have previously taken small amounts but never shown these in the end of year figures.
If I start drawing more significant amounts will I need to show this in my accounts or not, and if so how will be the best?
As I see it if I show any drawings whilst the accounts are in a loss, this may then convert to profits which would need taxing, or have I looked so hard my head has scrambled?
TIA

 

[Newchodge]

As a sole trader you and your business are the same. If your business makes a taxable profit of £500 and you then draw out £400 your business has still made a taxable profit of £500. It is just that the physical money is not all in the same place. If your business makes a loss of £500 and you have already drawn out £400, your business has still made a loss of £500.

 

[Ali McGowan]

Thanks, do I need to be showing my drawings in the written figures each year or not?

 

[MyAccountantOnline]

Thanks, do I need to be showing my drawings in the written figures each year or not?

If you are preparing a full set of accounts with a profit and loss account and a balance sheet yes you must include drawings.