Small self employed business. Do I really need a separate bank account?

[laurakate]

I'm just starting out self employed and want to do everything correctly when it comes to paying taxes.

I have heard of people saying that they have a separate bank account for their outgoings and takings and then they take a wage out of it to put into their personal bank account. I can see the logic in this but I'm going to be such a small business that I think it will just be a massive inconvenience to compartmentalise such a small amount of information into a separate bank account that could otherwise be made easily visible simply by highlighting outgoings and income that relate to my mobile work on a statement from a personal bank account.

I'm going to be a small business to the extent that this is probably going to be a pocket money type operation where I'll be amazed if I make that much into a 3 figure amount each month! Surely I don't need a separate bank account for that?!

Help please

 

[lisa.sharrock]

No you don't need a separate bank acount if you're a sole trader, you can use your normal bank account.

Do I need a business account?

If you are a sole trader you might find you have nothing to gain from opening a business bank account. Many freelance workers pay cheques or have Bacs payments made into their personal current account. This is generally more convenient and cheaper than opening a separate business account. However, it is still important to make a note of business income and outgoings for your accounts and tax return.

But if you run a business which involves handling a lot of cash and cheques, your bank might insist on a business account. And if you set up a limited company or partnership that keeps your business finances separate from your personal finances you will definitely need one.

 

[Elaine Armani]

You won't need one if you're a small business, it's a bit expensive to have a business account some banks charge you for transactions and etc. I just use my personal account and I have two account under my personal account one is cheque and one is savings I keep my savings in the savings account and my wage for the week in the cheque account so it works well

 

[Zooks]

I actually queried this with my bank, Lloyds, and was told that I had ti have a business account. I am a small sole trader business. They ask you what the account is for and if you say personal as opposed to business and they find out it's untrue they can close it down instantly and you could have to oay back charges you have avoided. So I was told.

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[lynn amber]

I have been using a personal account for about 6 years I did have a business account and it was pointless, I have been questioned once, I pay in every week (TSB) my local branch I have used all my life, I was asked by one teller if the cheques where business related I said yes but as I am a sole trader by law im not require to have a business account and if it was a problem im sure another back would like to take all my accounts on, there's no problem

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[persianista]

I think it depends on whether or not you wish to take card payments, which can't be arranged on a personal account.

 

[lynn amber]

I think it depends on whether or not you wish to take card payments, which can't be arranged on a personal account.

I have to disagree, because they defiantly can that depends on the card company, my partner is a self employed taxi driver and his card payments go straight into his personal account, I don't know a taxi driver that has a business account and I know quite a fue

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[laurakate]

Is it legal to use a personal bank account for business? | Money | theguardian.com

This is an old source and I'm still not sure what to make of it.

I really hope it isn't compulsory to have a business bank account to cover my backside because at this rate I'm scared that I'm going to be paying to work!

I am hoping to have a meeting with an accountant soon so I can get some facts.

It's so worrying setting up the formalities of self employment, I hope this doesn't sound passive aggressive but it's starting to feel like the government *want* me to be a under the depressing thumb of working for employers who don't treat me well (my main reason for wanting to go self employed is good mental and physical health)

 

[persianista]

Is it legal to use a personal bank account for business? | Money | theguardian.com

This is an old source and I'm still not sure what to make of it.

I really hope it isn't compulsory to have a business bank account to cover my backside because at this rate I'm scared that I'm going to be paying to work!

I am hoping to have a meeting with an accountant soon so I can get some facts.

It's so worrying setting up the formalities of self employment, I hope this doesn't sound passive aggressive but it's starting to feel like the government *want* me to be a under the depressing thumb of working for employers who don't treat me well (my main reason for wanting to go self employed is good mental and physical health)

A good accountant will hold your hand through the whole process. It's not all that hard.

 

[laurakate]

Does a sole trader have to have a separate business bank account?

Thanks Persianista if I can get my head round this it could be very empowering to be fair.

The source above says there's no right or wrong and it comes down to the ts and cs of your personal bank account. I hope I can ask my bank without them trying to pressure sell something to me!

 

[AmberExt]

For a small self employed business a good book keeper maybe better & certainly cheaper then an accountant, its bookkeepers that do the day to day work and can have better working knowledge of small self employed accounts.

Try to find a local recommendation if you can.

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[Zooks]

I know Lloyds wouldn't let me have a card machine attached to my personal account.

Believe me I tried. I slso spoke to Barclays who declined.

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[Cholo]

I am hoping to have a meeting with an accountant soon so I can get some facts.

It's so worrying setting up the formalities of self employment, I hope this doesn't sound passive aggressive but it's starting to feel like the government *want* me to be a under the depressing thumb of working for employers who don't treat me well (my main reason for wanting to go self employed is good mental and physical health)

Take a look at this -

http://www.hmrc.gov.uk/startingup/help-support.htm

Doing something new is always scary and if you didn't care or worry then there'd be something wrong. You can do this! It's actually very easy but as with anything, you don't know what you don't know. However there is a lot of free help & support available to small businesses (see if there is a 'Making Business Work' programme near you). Also consider a business mentor (again free, try IOEE) they should challenge your assumptions ( not tell you what to do) and support you to succeed.

The HMRC workshops are excellent & free. You don't necessarily need an accountant, as a sole trader it's very straightforward. However, if it takes the pressure off & is one less thing to worry about then go for it.

Good luck & enjoy it. It can be scary & an emotional roller coaster at times but you WILL be the best boss you've ever had

 

[nails.donna]

I was with the business bank manager this Tuesday I have had to open a business account with santander got 18 months free banking with them after that it's 7-50 per month but cash deposits are free so as long as I'm paid in cash I won't pay a penny.

 

[laurakate]

I just want to accept cash only payments which I will then bank. My business strategy is to have necessary outgoings only in the early days and the expense of a card machine doesn't fall in line with that for me.

So hopefully if I'm just putting in cash it should be ok?

On the one hand I should hope an accountant should take some of the stress out of it but on the other hand I'm stressing about the fees because I suspect they will be quite substantial against the small amount of money I anticipate making.

 

[Pinkbunny28]

I queried my bank who said I 'should' and I said yes but legally I dont have to do I? And they just beat around the bush keeping telling me I should and then I told them I was not prepared to pay for a business account when it wasn't legally necessary and they left me alone if it becomes the law im sure there will be an uprawr of small business owners at downing street telling them they are stealing money again...x

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[laurakate]

I queried my bank who said I 'should' and I said yes but legally I dont have to do I? And they just beat around the bush keeping telling me I should and then I told them I was not prepared to pay for a business account when it wasn't legally necessary and they left me alone if it becomes the law im sure there will be an uprawr of small business owners at downing street telling them they are stealing money again...x

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This made me smile

On the one hand I don't want to be all grumpy and paranoid but on the other I just feel that banks want to sell you stuff that you don't need. I guess from what you're saying it would be disproportionate for a bank to charge you money and chase after you for banking your hard earned cash as a sole trader into your personal account.

 

[Cholo]

I've got a better rate of interest on my business savings account than my personal one! I just put 30% of everything I earn in to that & at least I can earn a bit more

 

[Kaznal]

A few years ago I had a partime job and I was self employed as a pearl re-stringer. I used my own personal account, I kept a cash book of expenses and in comings and once a year the tax office sent me A self assessment form to put those 2 figures in to see if I needed to pay tax. Needless to say I never earnt enough on my self employed to pay tax. I kept all receipts and it was quite simple. This was about 9 years ago however!

 

[squidgernetball]

I am a sole trader and I chose to have a business account, but it is absolutely free. I used to pay £12.50 a month, but managed to switch to a free one some years ago. I like the distinction between work and personal, and transfer an amount to my personal account weekly. When I had it all in one account, I would just think I was loaded and spend, spend, spend, then complain about my tax bill lol!!!

Vicki x