Company Money and Personal Money

A single-director company presents its owner with a persistent illusion: the company's bank account looks like a personal account with a business name on it. In law the two are entirely separate, and almost every question in this module follows from that separation. This section covers separate legal personality, what limited liability does and does not protect, and the five recognised routes value can take from a company to its owner-manager. It closes with what actually happens in the accounts when a company card pays for something personal — and why doing nothing is not one of the available treatments.

Salary is deductible for the company but carries National Insurance on both sides. This section explains why the deduction arises, how employer National Insurance has changed since April 2025, and why the employment allowance is unavailable to most one-person companies. Rather than quoting a recommended salary figure, it derives one — showing the arithmetic that decides whether each additional pound of salary is worth taking, and working three candidate salary levels through in full. The gap between best and worst is smaller than most directors expect.

A dividend is a distribution of profit, not payment for work, and that distinction drives everything in this section. It covers the company law precondition — distributable profits, which are not the same thing as the bank balance — the consequences of paying a dividend unlawfully, the minutes and vouchers that evidence a payment was a dividend rather than a loan, and how dividends are taxed as the top slice of income. It also works through where salary stops beating dividends, and why.

The previous two sections dealt with decisions. This one deals with something that happens without any decision being taken, and it is where the largest avoidable numbers in an owner-managed company are usually found. It covers how an overdrawn balance comes into existence, the section 455 charge and its nine-month-and-one-day deadline, the separate beneficial loan charge, why reclaiming section 455 tax takes far longer than most directors expect, and why writing the loan off is rarely the cheap answer.

An owner-managed company lives with two calendars — the company's accounting year and the individual's tax year — and a great deal of avoidable difficulty comes from treating them as one. This section covers when a dividend counts as paid, how splitting extraction across two tax years uses two annual rate bands instead of one, the sharp change in effective marginal rate above £100,000, and the self-assessment payment that catches directors out in their first year.

Profit left in the company is not taxed again while it sits there, but it is not free of future tax either. This section covers what retained cash costs, how an accumulating cash balance can affect reliefs that depend on trading company status, and what happens on closure — where the difference between striking off and a members' voluntary liquidation can be substantial, subject to conditions that must be planned for rather than discovered.

Most of this module is only useful if the decision is recognised while there is still time to act on it. This section maps the whole module onto a company year: what is decided in April, what is checked quarterly, which deadlines change the answer by a full year if missed, and the four propositions worth carrying away if everything else fades.