Keeping personal and company money separate: why it matters

Salary through payroll with PAYE and National Insurance. Dividends from distributable profits, minuted and vouchered. Reimbursement of business expenses you paid personally. A loan, recorded in the director's loan account.

Any withdrawal that is not one of the first three defaults to the fourth, and the fourth is the expensive one.

A balance still outstanding nine months and one day after the year end triggers section 455 tax at 35.75%, refundable only long after repayment. A balance over £10,000 at any point in the tax year is a benefit in kind unless you pay the official rate of interest, reportable on a P11D with Class 1A National Insurance.

It also complicates mortgage applications, since lenders see the loan on the accounts, and it is the first thing a liquidator calls in.

One business bank account, one business card, and no personal spending on either. Where a personal card is used for a business cost, record it as an expense claim and reimburse it, rather than leaving the company holding a cost it never paid.

Set aside VAT and corporation tax as they arise, ideally in a second account. A large balance is usually somebody else's money.

Reconcile monthly. A mixed account reconstructed in month eleven is both expensive in fees and unreliable in an enquiry.

Limited liability depends on the company being treated as separate. Directors who treat the company account as personal weaken that in an insolvency and expose themselves to misfeasance and wrongful trading claims.

Clean records also make the company saleable, financeable and quick to audit. It costs nothing to do properly from day one.

Rates, thresholds and deadlines quoted here reflect the 2026/27 UK tax year. Check current GOV.UK guidance, or ask us, before relying on them for your own company.