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Accounting for self assessment tax refund - sole trader

I have had a self assessment tax refund from HMRC that has been paid into my business bank account. Does anyone know how I account for this and where to tag it to please. Is it proprietor drawings?


If your a Ltd company and the refund relates to self assessment tax tag it to directors loan account.

If your not a Ltd company and its just a refund of tax then you can post it to proprietor drawings.

ok Many thanks

Im going to make a drawing on this so when gone out of the business account - what do I tag it as please ?

If I tag as a drawing it looks like ive have another amount - if that makes sense,

When the refund came in to the account in the first place you tagged it as a transfer from your drawings account - it’s effectively a case of you putting your own money into the business as the payment from HMRC belongs to you personally rather than being business income. When you draw it back out of the business account that is a transfer back the other way to your drawings account, as you’re now taking your money back out of the business again for personal use.

ok thanks - can you do me a walk through please as quite new and self taught.

  1. eg refund of 4000.00 from HRMC - do I enter on the business account as income of this amount and tag to proprietors drawings.

  2. taking 4000.00 to put in a personal account

I’m getting abit confused in tagging back an forth to accounts - sorry! Many thanks for your help if you can. can you list each step.

Do you have your personal account linked in quickfile also? The answer depends on what you tag it as.
Money in to business account is tagged as proprietor drawings account (if your self employed)

If your personal account is linked to quickfile and you transfer the money then it is just tagged as a transfer.

It would only be if the money moves from that point that it is again tagged as proprietor drawings.

If it isn’t linked at all then the money transfer is just tagged as proprietor drawings account.

No income tag is used at all.

ok self employed and not personal account linked in the business account.

So I’m guessing basically £4000.00 come into the business account as a 'tax rebate" then tag to proprietor drawings account. Then note in the notes box that its a tax refund for self assessment?

Thanks :wink:

The £4000 from HMRC is going to you as an individual, not to your business, so as far as your business books in QuickFile are concerned it’s your own personal money that has been deposited in your business bank account, and the way you represent that is as a bank transfer from proprietor drawings.

When you later take the £4000 back out of the business account that would be tagged as a transfer to proprietor drawings, returning it to the balance it had before the HMRC payment arrived (assuming no other drawings or personal payments in the meantime).

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Many thanks for all your help

much appreciated