Sole Trader Private Withdrawals

A client pays €3,000 into the bank account you use for your sole trader business. Can you transfer €1,000 to your personal account and use it to pay your rent, groceries or other personal expenses?

Yes, you can. This is called a private withdrawal.

As a sole trader in Finland, you do not pay yourself a salary in the same way as the owner of a limited company. Instead, you can take money out of your business for personal use through private withdrawals.

But how do private withdrawals affect your taxes? And do you even need a separate business bank account as a sole trader?

What is a private withdrawal for a sole trader?

A private withdrawal means taking money or other assets from your sole trader business for your own personal use.

The most common situation is very simple:

Money used for your sole trader business → personal use = private withdrawal

For example, if you transfer €1,000 from the account you use for your business to your personal account, this is a private withdrawal.

According to the Finnish Tax Administration, a self-employed professional or sole trader cannot pay themselves a salary. Instead, they can make withdrawals from the business bank account for personal use.

Do you pay tax on private withdrawals?

There is no separate tax charged at the moment you make a private withdrawal.

However, this does not mean that the money is tax-free.

The taxation of a Finnish sole trader is based on the taxable profit of the business, not on how much money you withdraw for personal use.

For example:

• Business income: €40,000
• Deductible business expenses: €15,000
• Business profit: €25,000
• Private withdrawals during the year: €15,000

The €15,000 in private withdrawals does not reduce the business profit to €10,000.

The starting point for taxation is still the €25,000 business profit.

The same principle works the other way around. Even if you leave all the money in your business account and make no private withdrawals at all, the business profit is still taxable.

In Finland, the profits of a sole trader are treated as the entrepreneur's personal income, and income tax is generally paid through prepayments.

Does a sole trader need a separate business bank account?

Not necessarily.

A Finnish sole trader is generally not legally required to have a separate business bank account. However, you should always check your bank's terms and conditions if you plan to use a personal account for business transactions.

In practice, having a separate account is often a good idea.

It makes it much easier to keep:

• business income
• business expenses
• taxes
• private withdrawals
• personal spending

separate from each other.

Clear separation also makes your bookkeeping considerably easier.

What if I pay for personal purchases with business money?

Paying for something from the account you use for your business does not automatically make it a business expense.

For example, if you spend €80 on groceries for your personal use, it is a personal expense. You cannot deduct it from your business income for tax purposes.

What matters is whether the purchase is genuinely related to your business.

On the other hand, imagine you buy a €500 piece of equipment that you genuinely need for your business but pay for it using your personal bank account.

It may still be a deductible business expense. The important thing is that you can show that the purchase was made for business purposes.

Private withdrawals in practice

How much should you withdraw?

It is usually better not to think about private withdrawals in exactly the same way as a monthly salary.

A better question is:

How much can I take for personal use while still leaving enough money for taxes and upcoming business expenses?

The balance you see in your bank account may not all be freely available to spend.

You may need some of that money for:

• VAT
• prepayment taxes
• upcoming business expenses
• other business obligations

One practical approach is to transfer a certain amount to your personal account once a month and leave the rest as a buffer for the business.

In short: sole traders and private withdrawals

As a sole trader in Finland, you can take money from your business for your own personal use. This is called a private withdrawal.

Remember these three things:

1. A private withdrawal is not salary.
2. A private withdrawal is not a deductible business expense.
3. Your taxes are based on your business profit, not on the amount you withdraw.

You also do not necessarily need a separate business bank account as a sole trader, although having one often makes bookkeeping much clearer.

When your income, expenses and private withdrawals stay organised, managing your business finances becomes much easier.

Kletta is an accounting app built for sole traders, helping you keep your income, expenses, receipts, bookkeeping and tax returns organised in one place.

Explore Kletta →