Do I need a separate Business Bank Account?
Starting a new business can be tricky, especially if it is all new to you. There are enterprises to help guide you through the process, and your bank may have resources to help.
Having a separate bank account from your personal account may make your accounting easier.
Do I need a separate business bank account if I’m self-employed?
If you are self-employed, you could use your account, but there are advantages in keeping finances apart. It is recommended to open a business account if you are self-employed. If you are a Limited company, you will need a separate bank account, as a Limited company is a distinct legal entity.
Opening a separate business bank account has several advantages, including:
Business Bank Account benefits
- Keeping track of finances – It is easier to see all your business transactions in one place. You will also know from the balance how much is your finance and how much belongs to the business.
- Online Accounting Software – Modern cloud accounting packages include online bank feeds if you choose the right software. It can save lots of time, as the bank transactions are imported directly into your software and if set up correctly, you may only have to click one link to post the transaction to the accounts. Some of the best accounting packages on the market are Xero, Quickbooks and Sage.
- Claiming Expenses – It is important to claim all your business expenses. By putting all your costs through the business bank account will ensure that it is all included. There may also be additional expenses to claim, e.g. mileage and other sundry expenses. Further information is available on the business expenses section.
- Bank Charges – Most banks offer free banking for new businesses for either 12 or 18 months. If you have a separate business bank account, you can claim bank charges through the business. But you can’t claim if it is a personal account.
- Makes it easier for HMRC inspection – HMRC do inspect for VAT and taxation. If you are unlucky enough that they choose you for an inspection, it is easier to prove transactions if they are all in one account. Mixing your transactions with those of the business will make it much harder.
- Save money on Bookkeeping and accountants – If you employ the services of a bookkeeper or accountant, it may take them longer to plough through your paperwork, trying to confirm if a transaction belongs to the business or not.
- Access to business finance – If you only have a personal account, it may make it very hard to get finance approved. Having a business account will allow credit history to build up, making it easier for banks to approve loans and overdrafts.
- To look professional – Having a dedicated accounts means that clients may make payments to your business name. If you are making a payment to a supplier, it is also easier for them to confirm who the payment is from.
- Banks terms and conditions – In your banks’ terms and conditions, there may be a clause that states it is for personal transactions only.
- Accepting Credit and Debit card payments – As a business, you may need to accept debit and credit card payments. There are a few apps that allow this, but most will need a business bank account.
How to Choose a Business Bank Account
There are several options in choosing the best bank for your needs. Some people prefer to use the same bank for both personal and business needs. It may not be the cheapest and best option.
A great website to see the best options in a bank account is money saving expert. They list all the best banks and options available. Many will have no banking charges for a set period for a new startup.
Other perks worth considering when choosing a bank is: do they offer a personal advisor, overdraft, foreign transactions and banking app.
If you are an existing business looking into moving banks or opening a new bank, it is worth taking time to compare charges. An account which is right for one business may not be the cheapest option for another.
How to Open a Business Bank Account
With most banks, the process can start online, completing an application form. In many cases, the bank may require you to make an appointment. It allows the business manager to get to know your business and needs.
The following information will be required to open an account:
Proof of ID (passport, photo driving license or national ID card) for all named company directors
Proof of address (utility bill, council tax statement, recent bank statement).
Full business address
Companies House registration number (for limited companies and partnerships)
Estimated annual turnover
A cash flow forecast is useful but not essential.
The bank may have other information they require, so when making an appointment it is worth checking.
For further details about a separate business bank account read about business banking.