Once you’ve started up a new venture, you’ll need to ensure that you have banking facilities in place before you can start trading. So, do you need to set up a separate bank account for your business, or can you use your own personal bank account?
This depends completely on the type of business structure you have chosen to trade under. Are you working as a sole trader, or via your own limited company?
Sole Traders / Self Employed
If you’re working as a sole trader, then your personal and business affairs are treated as one for tax purposes. You are your business. So, in theory, you can use your personal bank account for business transactions, as long as your bank allows this.
In reality, most banks will insist that you open a separate account for your business, especially if you process a large number of transactions each month. Inevitably, you can expect to pay a monthly fee for the privilege.
On the positive side, having a separate account will enable you to easily separate your business and personal expenses, which will help you reconcile your accounts when it’s time to complete your annual self-assessment return.
Having a dedicated bank account will also make your business appear more professional – you can use a ‘trading as’ (t/a) name, so that all payments are made to a business name rather than your personal name.
Unlike the sole trader business structure, limited companies are separate legal entities from their shareholders and directors. The personal finances of company owners are distinct from those of the companies they run.
Whereas a ‘self employed’ individual can legally use his/her personal account for business purposes, this is not possible if you follow the limited company route, so you are legally obliged to open a dedicated account for the company.
Choosing a company bank account
When you are searching the market for a suitable bank account, we recommend that you do not automatically use your personal bankers, as they may well not offer the best deal for business customers.
Many of the main high street banks offer up to 2 years’ free banking for new business accounts, although they are less generous to established businesses if you decide to switch. Make sure you also find out what standing and transaction charges apply to business accounts after any initial ‘free’ periods are over.
Here are a selection of the business accounts available and their features which benefit small businesses:
- 12 months free banking
- A personal service with your own local Barclays Business Manager
- Manage your account online, by phone, via the Barclays Mobile Banking app or in branch.
- Free Text Alerts to keep track of money in and out of your account as well as when your
- balance gets close to your limits
- Barclays Cloud It – a secure online document storage and management service
- Get paid instantly using just your mobile number with Barclays Pingit
Our partner website ContractorUK works with Barclays to provide Business Bank Accounts. Click here for more information, terms and conditions, and to apply for an account.
- Online application and instant approval process; able to provide an account number in 5 minutes
- Do not require a credit check to open the account
- Free to receive bank transfers and to set up direct debits and standing orders
- Low cost – no monthly or online account management fees
- Access your account 24/7 via the phone, online or mobile app
- Online application and most accounts opened within 3 hours
- No credit check required
- No bounced payment or overdraft fees
- Access your account 24/7 with text, phone and online
- Free text alerts each time money is paid in and confirming bills are paid
Click here for more information and to apply for an account.
Try our guide to choosing a company bank account for a further tips on choosing the right banking provider for your business.