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I opened a self-employed business (in the UK). As a starting budget I sent £100 from my taxed salary to my business account to have something on it. Can I send it back from my business account to my personal account without having to pay any tax on it, or any explanation why I sent it?

3 Answers 3

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You won’t have to pay tax on it, but if HMRC asks about it (unlikely but possible) you will have to explain it. But saying “I was repaying myself the money I put in to start the business”, together with the bank statement showing that transaction, should be a sufficient explanation.

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    Just make sure its clearly a loan in the books.
    – Jonast92
    Commented May 27, 2021 at 13:52
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When you give the loan, print a sheet of paper recording it: "I, Gergö Horvath, give a loan of £100 to "Gergö's Children's Entertainment Company". And keep it. And when you return the loan, you print another sheet of paper recording it: "We, Gergö's Children's Entertainment Company, repay a loan of £100 to Gergö Horvath".

That's enough explanation. Having nothing at all is not enough. No interest payment or tax on interest payment is needed, because the interest payment on a £100 loan would be minimal and not worth the effort.

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Technically, you need to ask yourself if it was it a loan, or an equity investment.

If you treat it as a loan, then you should pay it back with interest, and the interest would be income.

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  • If equity investment, what would it mean in a tax POV? Because the amount is so low, my priority is to have the least amount of work with it as possible. Commented May 26, 2021 at 12:53
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    @GergőHorváth practically, the Mike Smith answer is correct, since all that effort for £5 or £10 is a waste of time.
    – RonJohn
    Commented May 26, 2021 at 13:01
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    There’s no need to pay interest as far as the taxman is concerned. You have to pay tax on the benefit if your business gives you a loan on preferential terms, but not if it’s the other way around. And of course if you’re a sole trader rather than having a limited company, it doesn’t matter at all. It’s all your money, and having separate bank accounts is just an administrative convenience. Transferring money from one account to the other isn’t really a loan at all.
    – Mike Scott
    Commented May 26, 2021 at 13:50
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    @MikeScott The other way around is simply illegal in many places.
    – Jonast92
    Commented May 27, 2021 at 13:52

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