Learn Accounting for Amazon Sellers UK from Allison Walker as she discusses dividends and bookkeeping.
Amazon UK Accounting Resources mentioned in today’s episode:
These links are primarily for Accounting for Amazon Sellers UK. But you’ll find US version easily too:
- Xero – online accounting package preferred by Allison
- Quickbooks -alternative online accounting package
- LinkMyBooks – software to link Amazon to Xero or Quickbooks – for UK or USA based businesses
- Receipt Bank- software to let you upload photos of receipts etc to Xero or Quickbooks
Setting up your Amazon acounting as a sole trader
Rule #1: don’t use your personal bank account!
– It’s really painful for book-keeping
- HMRC VAT or inspection this means they would have to share own personal bank statements
- If you’re running a business, run it like a business!
- Have an ltd co
- business bank accounts
- 1 Credit card for business and one for personal
Touch on Amazon issue of swapping sole trader for ltd co!
Limited company directors taking out money they shouldn’t!
Owners see a healthy bank balance and take money out.
This is almost the opposite position to where you’ve tied all your cash up in stock (and not differentiating between profit and loss vs. Cashflow).
The cash in the bank is NOT the same as the profit in the company!
Careful with Dividends as payment
You’re only allowed to take out dividends out of profit.
You need to know what is LEFT (reserved profits) after all costs including accrued tax liability.
You need to deduct costs including corporation tax (19% of the profit) before you know what the post-tax net profit is.
If you take out more, you end up with an overdrawn director’s loan account – meaning you now owe the business some of the money you took out.
Taking out dividends vs. Salaries in the UK
The dividend tax rate in Feb 2020 is currently only 7%.
This is much lower than the tax on salary in the UK (20% basic rate, 40% higher rate, 45% top rate)
Most directors take a salary up to their personal allowance threshold (£12.5K a year in the UK in 2020) in salary, and dividends after that.
HMRC don’t necessarily like it, but it’s legal!
Solutions for separating out tax to one side
- Have at least 2 bank accounts – have a current account for income and suppliers, etc.
- Have a separate bank account for VAT and corporate tax! And don’t touch that! Also, make some savings for the business
- MINDSET: VAT does not belong to you. You’re just collecting it on behalf of HMRC
If you take out more than you should have, that has to be paid back
Or you have to go into the following year and declare profits and it gets messy
What is the difference between accounting vs. Book-keeping?
There is a big difference …
They are the ones running processes.
Allison’s preference is that book-keeping and reconciling bank accounts are done DAILY!
You can use Xero or Quickbooks – and then you can instantly see how you’re doing.
And you can link Amazon to either with “Link My Books” LInkmybooks.com
Above all, they can educate and advise you on what the numbers actually mean in your business.
They can help you set targets and goals; check your margins, and monitor trends.
Make sure you look for someone qualified!
Work that they do includes:
- Stock properly dealt with
- Personal or Corporation tax
They also submit tax returns etc. and interact with government bodies (in the UK, HMRC, or companies’ house), etc.
- Stock levels – can It be verified
- An idea of corporate tax liability as you are going on
- How you can take money out of the company
- Whether the company director’s account is overdrawn
- Whether you can declare dividends
How to get hold of Allison
How to get hold of Allison
Two standard packages
Package 1: Accounting only
- Starter license with Xero
- Payroll for two employees
Cost: £200 plus VAT/month
Package 2: Accounting plus Advisory
- Dividend review
- Monthly or quarterly
£400 plus VAT/month
Deal in place
Xero starter license is included
50% off premium license for 1st year (most Amazon sellers need this because have international transactions)
50% off Linkmybooks for 1st year
(save £600 a year)
Set those up free of charge (usual charge of £300)
Links to similar Podcasts
Amazon Accounting Mistakes – with Allison Walker
Amazon Accounting Basics with Penny Lowe
Scaling your Amazon Business with Penny Lowe