self employed, do I have to have a business bank account?

cannon303 · 9 October 2012 at 9:44AM

Hi, hope you can help with a basic question. I'm a self employed, work from home graphic designer. As you can imagine I work all hours, do my own finances, everything really and only make a very basic living and it's difficult to make ends meet sometimes. I had a sales call recently from HSBC asking me if I needed a business bank account. I didn't have one but thought that I should go along to see the business account manager there. When I got there he told me that the Governement are clamping down on businesses without a business bank account, putting them through tax and account audits, which did worry me a bit, but I didn't take up the account in the end.

I don't want to pay business rate charges on my account as not a lot of money and cheques go through it. I know there are some accounts which are free for a set period and then you get charged after that but I just don't think it's fair that I should have to pay charges at any time as long as I am such a low earner. There are other reasons as well such as I'm not bad but not brilliant with money so having both business and personal accounts would complicate things and I just haven't got the time to keep an eye on two accounts.

So basically the question is should I get a business account, am I legally obliged to do it and are the govt clamping down on this?

Thanks

lolavix · 9 October 2012 at 11:23AM

It is against most banks terms and conditions to use a personal account for business funds, so they may give you notice to close the personal account you have if you do not start using a business account.

Nothing to do with the government afaik, but I may be wrong

warwicktiger · 9 October 2012 at 11:27AM

In a word, no

I set up 6 years ago and raised this with my accountant at the time. I pay in only 8-10 cheques a week and up to around £400 in cash. I use my personal account. I obviously record what is paid in in my accounts and so far, fingers crossed, no problems.

dalesrider · 9 October 2012 at 1:55PM

cannon303 wrote: »

So basically the question is should I get a business account, am I legally obliged to do it and are the govt clamping down on this?

Thanks

No idea on the legality. But given that HSBC have clocked that you are running a business through a personal acc. Will mean they could pull the rug on your personal account.

I would be setting up another account (any bank) and running any business expenditure/income through that.
At least that way it will make any accounting a lot easier. And give you a good idea of how well you are doing.

Yes the Gov are cracking down on people running a business and not declaring it or stretching the truth.

cannon303 · 9 October 2012 at 2:29PM

dalesrider wrote: »

No idea on the legality. But given that HSBC have clocked that you are running a business through a personal acc. Will mean they could pull the rug on your personal account.

I would be setting up another account (any bank) and running any business expenditure/income through that.
At least that way it will make any accounting a lot easier. And give you a good idea of how well you are doing.

Yes the Gov are cracking down on people running a business and not declaring it or stretching the truth.

Thanks for your replies, yes I'm declaring my business and paying all tax, just didn't know if I was supposed to have a business account. HSBC didn't spot that I didn't have a business account as I don't bank with them and my personal account is with another bank who seem happy with me as I am. HSBC were just cold calling.

I would try a free for two years account and see how it goes. I just don't like the idea of having two accounts. I do have an overdraft facility with my personal account which is very useful and a business equivalent would probably cost me more money, plus if my personal account starts to receive less income then they may shut my overdraft down and maybe shut the personal account down as well.

I just hate the idea of having to move money from a business account into my personal account so that I've got some money to spend only to find that I need to make a business purchase and then find I have to put the money back into my business account in order to cover it. With little money to slush around, it just seems a real complicated way to go about managing my finances, which I'm sure would ultimately incur bank penalty charges when I make mistakes.

jjlandlord · 9 October 2012 at 2:39PM

What HMRC says about this: http://www.hmrc.gov.uk/sa/rec-keep-self-emp.htm

"You'll need to keep your business records separate from and for longer than your personal records. Most businesses find that it helps to have a separate business bank account."

I interpret that as: they don't care as long as you keep records and pay tax correctly.

This article may be of some help as well (assuming it is accurate):
http://www.guardian.co.uk/money/2011/jul/08/self-employment-financial-services

Overall, it seems to me that the HSBC guy was using FUD as his sales pitch.

InsideInsurance · 9 October 2012 at 3:22PM

As a sole trader there legally is only you, there is no "business" and as such there is no legal requirement for you to have separate back accounts for your personal and business activities, in fact there is no legal requirement for you to have any accounts at all.

That said, and as others have pointed out, many banks stipulate in their T&Cs that you cannot use your personal account for business activities. Likewise HMRC requires you to keep records for 6 years and can demand you provide them bank statements etc. If you have a single account then you have to give all your personal and business info some wouldnt want HMRC seeing their frequent purchases from Anne Summers etc.

If you were to incorporate and become an Ltd then things changes because it is a legal entity in its own right and "business" money is its not your and therefore you cannot just mix up your money with its etc

cannon303 · 11 October 2012 at 7:25AM

InsideInsurance wrote: »

As a sole trader there legally is only you, there is no "business" and as such there is no legal requirement for you to have separate back accounts for your personal and business activities, in fact there is no legal requirement for you to have any accounts at all.

That said, and as others have pointed out, many banks stipulate in their T&Cs that you cannot use your personal account for business activities. Likewise HMRC requires you to keep records for 6 years and can demand you provide them bank statements etc. If you have a single account then you have to give all your personal and business info some wouldnt want HMRC seeing their frequent purchases from Anne Summers etc.

If you were to incorporate and become an Ltd then things changes because it is a legal entity in its own right and "business" money is its not your and therefore you cannot just mix up your money with its etc

well by the sounds of it I might as well carry on the way I am, or at least until my bank changes it's mind about me using my personal account. Thanks very much for everybody's replies.

PlutoinCapricorn · 11 October 2012 at 7:40AM

This is similar to the rules about running a business from home: it depends on what sort of business you are running.

I am self employed, I do not use a "trading as" name, and have always used the same personal bank account for everything. I do consultancy, so do not pay in large amounts of cash or have huge numbers of transactions, which is taking advantage of your bank. A web designer with a few, serial clients is very different from someone with a burger van or an online shop.

My account looks much the same as it would if I had two jobs: I just happen to be paid gross. The Direct Debits for my running costs are on the same statement, which is convenient.

Shellshocker · 12 October 2012 at 10:46PM

The banks are regulated to know there customers, so they can send you notice to close but I would hope they gave you the option to open a business account with them first. There's free banking available with most banks and it may make your accountants life easier.

If you also want to expand in the future or require funding assistance then having a business banking history would make it easier

CKhalvashi · 12 October 2012 at 10:50PM

lolavix wrote: »

It is against most banks terms and conditions to use a personal account for business funds, so they may give you notice to close the personal account you have if you do not start using a business account.

I've put about £15k in cash through yearly for the last 5 years, and noone's batted an eyelid yet.

CK

self employed, do I have to have a business bank account?

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