Do I need a business account?

[LB_EnterprisesUK]

My business will only make £500 ish per month and with bank charges this will be less so would a normal account be ok?

 

[kathymac73]

Try cash plus. £50 set up . No fees. No overdraft with prepay MasterCard
I use this account myself very happy with the service


Sent from my iPhone using Tapatalk

 

[Vectis]

Are you a Limited company or self employed?

 

[LB_EnterprisesUK]

At the moment self employed/sole trader but if my business grows then might change to limited company but this wont be anytime soon

 

[Paul Norman]

Banks prefer you to have a seperate business account for your business transactions. Personally, I would always do so, even at modest volumes, as it can make the paperwork easier keeping business and personal transactions seperate.

Most banks offer a free business bank account for at least the first year or so whilst you get established. Provided, of course, that you stay in credit.

 

[MyAccountantOnline]

At the moment self employed/sole trader but if my business grows then might change to limited company but this wont be anytime soon

My advice is to at least use a separate bank account for your business although you may find using a private bank account for business purposes breaches your bank account terms and conditions.

Using a separate account for business may well save you a lot of time when it comes to maintaining your accounting records and completing your accounts and tax returns. It can also help you control your business finances.

 

[Twinkle Toes]

If you are providing a service with little to no business outgoings (i.e paying suppliers, rent, business rates, staff, utilities etc), then there is no need for a bank business account, and with your stated turnover I would imagine this is the case. A personal account will suffice as all you will be basically doing is paying in your earnings.

Open a business account, and after any free period, your will be paying to:- pay in cash, write a cheque, receive a cheque, annual account charges and even change a £10 note into £1 coins etc etc....

Also, as a sole trader, it's much easier to differentiate, when doing your SA, between income/outgoings/allowable expenses and personal expenses with a single account, both for you and HMRC, rather than two separate accounts. Remember as a sole trader ALL your income and outgoings are taken into account as one, so do not need to be accounted for separately.

I would suggest ignoring the accountants that are only interested in making things more complicated than need be, for obvious reasons.

Obviously if you are a Ltd, in bricks and mortar retail/service/leisure, or have a lot of overheads then the above doesn't apply. What is it you are doing? Telling us might help members offer more relevant advice.

 

[kingblinguk]

Business account is always preferable, the utility is more eminent when year ending comes and you need to file returns.

 

[Scalloway]

I would suggest ignoring the accountants that are only interested in making things more complicated than need be, for obvious reasons.

What's more complicated about having a separate business bank account and keeping your business finances separate from your personal ones?

 

[MyAccountantOnline]

I would suggest ignoring the accountants that are only interested in making things more complicated than need be, for obvious reasons.

Exactly the opposite actually

My suggestion was to reduce the admin for the OP and importantly save hassle should the OP be selected for an HMRC Enquiry.

As an accountant I have seen at first hand how very messy an HMRC investigation can get when a soletrader puts business and personal transactions through one bank account.

Not sure why as an accountant I would ever have any desire to make things more complicated??

 

[Twinkle Toes]

What's more complicated about having a separate business bank account and keeping your business finances separate from your personal ones?

For a start you will have the additional bank charges to account for, I thought accountants claim they save you money? And if/when it comes to Tax Investigation time they'll be looking at both accounts anyway.

Providing the business paperwork is all present and correct there is no benefit to having a separate business account.

I think maybe Scalloway and the above accountant are forgetting the op is running a sideline business turning over very little per month, and was asking if he "needed" a business account as he understandably wants to avoid extra expense. Therefore the answer to his questions is surely "yes a normal account will suffice, providing you have very little in the way of business outgoings".

 

[Paul Norman]

If you are providing a service with little to no business outgoings (i.e paying suppliers, rent, business rates, staff, utilities etc), then there is no need for a bank business account, and with your stated turnover I would imagine this is the case. A personal account will suffice as all you will be basically doing is paying in your earnings.

Open a business account, and after any free period, your will be paying to:- pay in cash, write a cheque, receive a cheque, annual account charges and even change a £10 note into £1 coins etc etc....

Also, as a sole trader, it's much easier to differentiate, when doing your SA, between income/outgoings/allowable expenses and personal expenses with a single account, both for you and HMRC, rather than two separate accounts. Remember as a sole trader ALL your income and outgoings are taken into account as one, so do not need to be accounted for separately.

I would suggest ignoring the accountants that are only interested in making things more complicated than need be, for obvious reasons.

Obviously if you are a Ltd, in bricks and mortar retail/service/leisure, or have a lot of overheads then the above doesn't apply. What is it you are doing? Telling us might help members offer more relevant advice.

This is exactly the kind of advice that makes business forums a dangerous place.

Ignoring an accountant? I am not an accountant, but the advice I receive from my accountants probably saves me thousands of pounds.

Muddling up your business and personal stuff? Even at low turnover levels that has the potential to get significantly more complicated than just simply having a seperate bank account. And the charges, after the initial free period, are likely to be less than £15 a month for a small business.

And, of course, you wont always just do £500 a month. Unless this is just a hobby, in which case no business advice really counts .

 

[MyAccountantOnline]

For a start you will have the additional bank charges to account for, I thought accountants claim they save you money? And if/when it comes to Tax Investigation time they'll be looking at both accounts anyway.

Providing the business paperwork is all present and correct there is no benefit to having a separate business account.

I think maybe Scalloway and the above accountant are forgetting the op is running a sideline business turning over very little per month, and was asking if he "needed" a business account as he understandably wants to avoid extra expense. Therefore the answer to his questions is surely "yes a normal account will suffice, providing you have very little in the way of business outgoings".

I said ''My advice is to at least use a separate bank account for your business although you may find using a private bank account for business purposes breaches your bank account terms and conditions.''

I suspect Scalloway and myself as practising accountants see at first hand how messy it can get for people mixing business and personal transactions into one account.

Personally I do my utmost to ensure peoples tax affairs are dealt with as efficiently as possible and a big part of this means keeping good accurate records; keeping a separate bank account for business purposes goes a very long way in doing so.

I have absolutely no desire in the slightest to waste my time wading through peoples personal bank accounts when working on accounts and tax returns - I hate to see clients paying me for unnecessary work. I also see no reason for clients to waste time entering private transactions when dealing with the bookkeeping.

 

[MyAccountantOnline]

.... And if/when it comes to Tax Investigation time they'll be looking at both accounts anyway.

....

Can you explain that please?

 

[Karimbo]

i have ltd company as well as a sole proprietor business. I have a proper business account and a personal business account for the self employed business.

technically banks require you to have a business account for anything business related - but honestly they would not know and I don't want to pay £7 a month for a small side business that doesn't require or benefit from a dedicated business bank account.

All you need for accounting purposes is an account that you keep just for business use - where you day to day personal transactions are kept apart.

 

[MyAccountantOnline]

...
All you need for accounting purposes is an account that you keep just for business use - where you day to day personal transactions are kept apart.

I have several clients who do just that.

 

[Krprop]

I have a business which makes £500 a month, i have a business account for that only because its looks a bit more genuine asking a customer to pay into a bank account with a company name instead of a normal current account.

 

[Twinkle Toes]

I said ''My advice is to at least use a separate bank account for your business although you may find using a private bank account for business purposes breaches your bank account terms and conditions.''

I suspect Scalloway and myself as practising accountants see at first hand how messy it can get for people mixing business and personal transactions into one account.

Personally I do my utmost to ensure peoples tax affairs are dealt with as efficiently as possible and a big part of this means keeping good accurate records; keeping a separate bank account for business purposes goes a very long way in doing so.

I have absolutely no desire in the slightest to waste my time wading through peoples personal bank accounts when working on accounts and tax returns - I hate to see clients paying me for unnecessary work. I also see no reason for clients to waste time entering private transactions when dealing with the bookkeeping.

Sole trader, turnover £40k, no other income or business. Business expenses less than £200 per annum plus petrol which is claimed for via mileage allowance. Clients pay by cash or cheque. Why do I need a business account, and what benefit would I get that would out weigh the £400 or so of bank charges?

 

[MyAccountantOnline]

Sole trader, turnover £40k, no other income or business. Business expenses less than £100 per annum plus petrol which is claimed for via mileage allowance. Clients pay by cash or cheque. Why do I need a business account, and what benefit would I get that would out weigh the £400 or so of bank charges?

£400 of bank charges for a basic sole trader bank account Wow what bank are you looking at?

I run a limited company bank account which has some 300 transactions + per month going through the account which costs me £6.50 per month with Barclays, and could shop around and get free banking.

To answer your question the benefits of using a SEPARATE bank account for business are -

1. The OP wouldnt need to enter all of his/her private payments and receipts in the business accounting records. Potentially a big time saving.

2. The OP will at a glance be able to see how much cash the sole trade is generating.

3. If the OP is selected for an HMRC Enquiry it will make dealing with the Enquiry considerably quicker and easier if they are only looking at business transactions.

4. Completing the financial accounts will take must less time and hence be cheaper if using an accountant.

In addition if the OP does have a separate business account he/she will be able to bank cheques into the account made out in the business name - if not cheques will need to be made out to his/her own name.

 

[Twinkle Toes]

You are not aware of what bank charges are payable? Shocking!

I'll educate you, 1% or so to pay in cash, £1 or so pay in a cheque.

Not sure why you think it would be quicker with a separate account, providing all paperwork is in order it'll make precious little difference.

I'm not entirely sure, from you post, you understand how a one-man-band sole trader is taxed.

 

[Karimbo]

£500 a month, i have a business account for that only because its looks a bit more genuine asking a customer to pay into a bank account with a company name instead of a normal current account.

You are not aware of what bank charges are payable? Shocking!

I'll educate you, 1% or so to pay in cash, £1 or so pay in a cheque.

Not sure why you think it would be quicker with a separate account, providing all paperwork is in order it'll make precious little difference.

I'm not entirely sure, from you post, you understand how a one-man-band sole trader is taxed.

you are in the wrong plan.

I am with barclays e-payment account. I get no charges for reciving money from merchant. BACS payment etc (or sending these payments). But I do get charged for paying in cheques and cash into account.

it's an either/or you can choose for free cash & cheque banking but fees on e-payments.

Not sure if it's against their terms, But I'm sure it would be beneficual to have two accounts if you have a lot of payments & receipts. under both methods.

My banking fees is just £7 a month.

Myaccountantonline has covered most of the benefits of sperating the accounts already, but I'll give you a practical example. I buy a lot of postage for my self employed business. Usually it's from the post office but there are times during Mondays where the post office is chuck full of people so I just buy stamps from sainsburys which is a short walk away and there are hardly any quees at their kiosks.

At year end when I do my full years book keeping I'll have entries on the bank statements. There will be entries marked clearly for Post office which is entirely business use. But there will also by entries for Sainsburys.. Now as a self employed person I have no requirement to keep all receipts - I can simply use the bank account entries to ascertain expenses to draw up the p&l.

So when I come across this entry from Sainsburys 7 months down the line in my business bank statement. How can I know whether this is for postage or personal shopping or a mix of both?

 

[MyAccountantOnline]

Sole trader, turnover £40k, no other income or business. Business expenses less than £200 per annum plus petrol which is claimed for via mileage allowance. Clients pay by cash or cheque. Why do I need a business account, and what benefit would I get that would out weigh the £400 or so of bank charges?

I think in reality it would be very rare indeed for a soletrader to have business expenses of less than £200.

You are not aware of what bank charges are payable? Shocking!

I'll educate you, 1% or so to pay in cash, £1 or so pay in a cheque.

Not sure why you think it would be quicker with a separate account, providing all paperwork is in order it'll make precious little difference.

I'm not entirely sure, from you post, you understand how a one man band sole trader is taxed.

I expressed my surprise at £400 in bank charges for a soletrader as I've not seen any of my clients paying that level of charges, and you'll certainly find if you do some research that their are lots of much cheaper business bank accounts.

A separate personal bank account is of course free and is how many soletraders will operate.

I have been an accountant for 25 years plus and I do have a considerable amount of experience in dealing with the accounts and tax affairs of quite a few soletraders.

I have given my reasons as to why, in my professional opinion, I believe it's beneficial to a soletrader to use a separate bank account for business purposes and am sure this is of help/interest to the OP and other users here on the forum.

 

[Karimbo]

is richard head trolling? His name is funny. What is the shortform name for Richard?? Anyone?

 

[MyAccountantOnline]

is richard head trolling? His name is funny. What is the shortform name for Richard?? Anyone?

I have a sneeky feeling that could be the case - he's trying well. I'm too old for that game though

and yes I realised that one too

 

[AllUpHere]

is richard head trolling? His name is funny. What is the shortform name for Richard?? Anyone?

As I said in another thread only the other day, it amazes me how many regulars fall for trolling.

 

[Karimbo]

Sole trader, turnover £40k, no other income or business. Business expenses less than £200 per annum plus petrol which is claimed for via mileage allowance. Clients pay by cash or cheque. Why do I need a business account, and what benefit would I get that would out weigh the £400 or so of bank charges?

£40K is a reasonable amount of money. The banks software has detection systems in place for anti-laundering and other analysis.

if the money is coming in haphazardly and not like a salaried person it might trigger something where the bank asks the source of money. Someone got into a lot of bother after using their person account to withdraw a large amount of bitcoin proceeds (into sterling).

 

[Scalloway]

Not sure why you think it would be quicker with a separate account, providing all paperwork is in order it'll make precious little difference.

I'm not entirely sure, from you post, you understand how a one-man-band sole trader is taxed.

I deal almost entirely with one man band sole traders. They come with their business bank account statements which I analyse without having to spend time checking if transactions are business or personal. Quick and easy.

 

[Paul Norman]

I have a business which makes £500 a month, i have a business account for that only because its looks a bit more genuine asking a customer to pay into a bank account with a company name instead of a normal current account.

Good point. I agree

 

[Twinkle Toes]

Why is a difference of opinion trolling? I've given a real life example to back up my comments. There are very many sole traders who have little to no overheads on turnovers similar to, or greater than, mine. My biggest expense is petrol, £200 a month, doesn't go through the bank though. Apart from that I keep the few receipts the business generates and the rest is my taxable income. I can't see why there is a need for a separate business account for £200 expenses a year. I also can't see why some people think it's an accounting nightmare.

I would agree to disagree, but won't as I know I'm right for the example I have given.

 

[Twinkle Toes]

Scalloway, I agree with you IF they have a lot of expenses. I was talking about a business with £200 off expenses spread over a dozen or so payments.

 

[japancool]

Even if he's not a troll, why are you guys wasting your time arguing with someone infantile enough to call themselves "Richard Head" on a business forum?

 

[MyAccountantOnline]

Why is a difference of opinion trolling? I've given a real life example to back up my comments. There are very many sole traders who have little to no overheads on turnovers similar to, or greater than, mine. My biggest expense is petrol, £200 a month, doesn't go through the bank though. Apart from that I keep the few receipts the business generates and the rest is my taxable income. I can't see why there is a need for a separate business account for £200 expenses a year. I also can't see why some people think it's an accounting nightmare.

I would agree to disagree, but won't as I know I'm right for the example I have given.

It's very rare I see a soletrader who cant claim more than £200 a year in expenses plus business mileage. Sounds like you need a good accountant Richard

Anyway glad you are happy using a bank account as you do, I'm sure the OP has had some helpful comments from us all.

 

[AllUpHere]

Even if he's not a troll, why are you guys wasting your time arguing with someone infantile enough to call themselves "Richard Head" on a business forum?

Maybe his parents really didn't like him and that's actually his name.

 

[Davek0974]

I must be the only sole-trader with a free bank account judging by some of the posts in this thread

Santander, had it for three years now, sensible limits for free banking - paying in and drawing out etc.

I started out with my accounts mixed in my personal bank and it rapidly got messy, you can't easily reconcile your accounts when they are mixed.

 

[Twinkle Toes]

Even if he's not a troll, why are you guys wasting your time arguing with someone infantile enough to call themselves "Richard Head" on a business forum?

Parents emigrated to South Africa when I was very young, never had a problem out there with my name. It wasn't until I returned to the UK in the early 80's that childish remarks were made. That is why I always go by Richard.

It's very rare I see a soletrader who cant claim more than £200 a year in expenses plus business mileage

Well you wouldn't, would you!

Don't think just because I have a modest turnover and very few expenses I don't know what I'm doing. In the past I've been a sole trader with 21 employees, and a far far higher turnover, then I obviously did have a business account, couldn't have run the business without one. I've also been the director of a Ltd, so know how that works as well. Now, being the wrong side of 50 I consider myself semi-retired and I'm sure there are many people out there who would love a business with so little overheads.

I must be the only sole-trader with a free bank account judging by some of the posts in this thread

Santander, had it for three years now, sensible limits for free banking - paying in and drawing out etc.

I started out with my accounts mixed in my personal bank and it rapidly got messy, you can't easily reconcile your accounts when they are mixed.

I live in a very small town with only two banks to choose from. Because of the way I'm paid I need use the bank that opens the longest hours, one shuts at 3.30pm and is closed Saturday, the other is open until 5.30pm and open on Saturday. Hobson's choice I'm afraid. And as mentioned many times before, I have no issue with accounts due to my low overheads.

Now if the OP could come back and say what he is doing then we can see who's advice is applicable.

 

[Karimbo]

next you'll be telling us you had a ltd company where accountant does your annual accounts for £80 p.a

 

[japancool]

I must be the only sole-trader with a free bank account judging by some of the posts in this thread

Santander, had it for three years now, sensible limits for free banking - paying in and drawing out etc.

I started out with my accounts mixed in my personal bank and it rapidly got messy, you can't easily reconcile your accounts when they are mixed.

Is it a business or a personal account though?

 

[HazelC]

I'm a sole trader and just have two accounts, one personal and one work - but neither are 'business accounts' - my accountant said that's fine until I grow!

 

[Davek0974]

Is it a business or a personal account though?

They call it a small business account i think, but its in the business name so not a personal a/c