Don't pay your personal tax bill out of your company bank account

Don't be tempted to settle your personal tax self assessment bill due to HMRC from your own company's bank account.

Don't pay your personal tax bill out of your company bank account
Photo by The New York Public Library / Unsplash

It's that time of year when personal tax bills need to be settled with HMRC...

There's a temptation as a company director / shareholder to get the company to foot the bill. After all, the tax is typically primarily made up of tax on dividends that you received from the company, right...?

Unfortunately, that's not how it works.

The tax due under self assessment is YOUR personal tax liability to be settled out of personal funds.

Any payments made out of the company will need to be paid back or debited to your director loan account as it is not a valid expense of the company.

And in this case, you end up in the never-ending spiral of then having to declare a bonus or dividend to clear your overdrawn loan account (made up of the personal tax payment that was wrongly paid out of the company account). Oh, and there will likely be personal tax to settle on this dividend next year too. Possibly also benefit in kind issues if the amount (wrongly) paid was big enough and sat around in your DLA long enough...

So you end up kicking the can down the road!

Best to budget 'in year' for the personal tax that is to come on dividends. We can model this together. So you know where you stand. And then you can actually enjoy the end of January (rather than dreading it!).

P.S. Here's the link to pay your personal tax bill by 31 January:

P.P.S You are not allowed to settle your personal tax bill with a personal credit card.

Not that I'd recommend paying your taxes with a credit card, but if you needed a little extra time, you can use a (clever) card called 'Curve'. This card has a lot of good uses (it basically brings together all your business and personal credit cards into one), but one particular use-case allows you to 'secretly' pay HMRC with your credit card. Use wisely.