18 May Business bank account
Do I need a business bank account?
What is a business bank account?
There is nothing unique about a business account when compared to a personal current account. It works exactly the same way in that you are able to withdraw and pay in money at your discretion. The only difference is that it should be used exclusively for business transactions.
How do business bank accounts work?
Not only will you be expected to pay monthly fees, but transactions such as paying in cash over the counter or cashing in cheques also incur certain account fees. These charges are normally wavered during a grace period as you start your relationship with the bank.
There are a number of free business bank accounts on the market but they do have their restrictions, so ensure you check they meet your business needs.
Can I use my personal account for my business?
If you are a sole trader, freelancer or contractor that does not operate through a limited company, you are not legally required to open a business account. I would however advise to use a separate personal account for your business transactions rather than your day to day personal account.
Some banks will specify within the small print if you are allowed to use your personal account for your business, so you should check the terms and conditions of your bank before beginning to use your personal account for business transactions.
If you have a limited company, you and your company are separate legal entities and the company will therefore require a separate business bank account.
Why should I open a business bank account?
1. Tracking your finances.
According to Barclays, UK freelancers and sole traders spend 15 days a year sorting business expenses from their personal accounts.
Keeping your personal and business finances separate can make your life a lot easier when it comes to tracking your business expenses or income. By having a separate business account, you will be able to see all of your business finances in one place.
If you need to submit tax returns or other important documents to HMRC and Companies House, this will become a much more straightforward task for you and me.
It’s also helpful if HMRC ever investigate your business finances. If they do, it’s all there, and separate, and won’t necessitate them looking into your personal finances too.
2. Building your credit rating.
3. Expert support.
4. Image.
Which bank account should I go for?
If you are looking at using accountancy software I would look at Mettle as you get a free subscription to FreeAgent if you bank with them.
If you are unsure on the best options for you or require further guidance on managing your finances while attempting to grow your business, I am here to help. I can provide advice and assistance to your start-up business to set you off on the right track.