Personal bank account for business – here’s what you must do
Is It Ok To Use A Personal Account For Business?The type of business structure that you have will determine if you are legally obliged to set up and use a business bank account. For example, sole traders and gig workers can use their personal bank account for business transactions but many choose not to. This is in contrast to limited company owners who have a legal requirement to ensure that they manage their company finances via a dedicated business bank account. Find out more: Limited company or sole trader – which is best for me? Although it’s perfectly acceptable for a sole trader to merge their business transactions with their personal ones, there are still certain records that must be kept. Full and proper record keeping will enable sole traders to accurately report their business turnover, profits and expenses to HMRC at the time their annual self assessment is due. This will ensure that they don’t underpay or overpay the amount of tax owed each tax year.
What Must I Do When Using a Personal Account For Business?
Check Your Bank’s Terms And Conditions
Keep Track Of Allowable Expenses
Tip: If you decide to run your business accounts through a personal account as a sole trader, you could always open a new personal account that is used solely for business transactions. There are also specialist sole trader business accounts available that come with lower monthly fees and tailored services to suit sole traders over traditional business accounts. Either of these options will help you to ensure that your business and personal finances are easier to keep track of when it comes to reconciling your accounts.
What’s The Difference Between A Personal And Business Bank Account?Personal and business bank accounts offer the same basic features such as direct debits, overdrafts, cheque handling and debit cards etc but business accounts will usually come with a monthly fee of between £5 to £10. Some business accounts may also charge for certain transactions on top of this fee such as depositing a cheque. Just like personal accounts though, you can shop around for accounts with no fees or free trial periods. An important factor to be aware of with business accounts is that they also enable you to take card payments from customers and business loans. Some business owners may find this particularly helpful as their business starts to grow.
SummaryUsing your personal bank account for business is perfectly acceptable when operating your business as a sole trader but a dedicated business account is required when running a limited company. Sole traders that chose to merge their business transactions with their current accounts must ensure they can meet the following requirements:
- Your bank doesn’t mind you using a personal account for business
- That you can keep track of, and separate business income and allowable expenses from your day to day spending
- They are going to incorporate their business as a limited company
- If the business is processing a lot of transactions
- If juggling business income and personal expenses in one account is getting complicated to manage
- If a business loan or business credit card is required
- If the facility to take card payments from customers is required