← Glossary Business glossary
What is Drawings?
Money a sole trader takes out of the business for themselves.
As a sole trader the business’s money is already yours, so taking money out is not a salary and is not a business expense. It is drawings, and it does not reduce your taxable profit.
This trips people up in their first year: taking £20,000 out of a business that made £30,000 profit does not mean you are taxed on £10,000. You are taxed on the £30,000.
A limited company works differently: money comes out as salary or dividends, both with their own tax treatment, because the company’s money genuinely is not yours.
Run the numbers for real.
Start free tracks your money, margins and profit in one private app. Free to start.