Current or Business Account for Self Employed Earnings?

Tinyshoes

My OH will be doing a few weekends work and has registered as Self Employed for this. He has a Full Time PAYE job and those wages get paid into out joint account. I phoned our bank about him opening his own current account to keep his Self Employed earnings seperate and they said this should be a Business Account but his earnings are so small, probably not going to be over £1000 a year and some will already have tax taken from source and some will be cash. He is going to spend the money on personal use except for tax owed and maybe the odd resource such as books and maybe save for a laptop.

Any one any ideas on the exact postition of this please? Most business accounts seem to have either transaction/standing charges or quite a big first deposit for no fees. The bank said if they picked up a personal account was being used for business use they would close it.

Any information would be gratefully received. Maybe someone is already in this position? Thanks in advance.

easy

Tinyshoes wrote: »

My OH will be doing a few weekends work and has registered as Self Employed for this. He has a Full Time PAYE job and those wages get paid into out joint account. I phoned our bank about him opening his own current account to keep his Self Employed earnings seperate and they said this should be a Business Account but his earnings are so small, probably not going to be over £1000 a year and some will already have tax taken from source and some will be cash. He is going to spend the money on personal use except for tax owed and maybe the odd resource such as books and maybe save for a laptop.

Any one any ideas on the exact postition of this please? Most business accounts seem to have either transaction/standing charges or quite a big first deposit for no fees. The bank said if they picked up a personal account was being used for business use they would close it.

Any information would be gratefully received. Maybe someone is already in this position? Thanks in advance.

OK, the bank will try to make you have a business account, as they will impose higher charges on it than on a personal account. However, there is no requirement IN LAW for you to have a business account, nor even a seperate account for your self-employed earnings, as long as you keep track of the money properly (and declare income for tax etc.). Personally I always advise my clients to keep a seperate account, but it can be any account. Perhaps open up a building society account specifically for that money, unless he needs lots of cheque transactions to pay people etc..

Alternatively he can open up a FREE business account here http://www.santander.co.uk/csgs/Satellite?canal=CABBEYCOM&cid=1210608670143&cidAgrup=845616358929450&empr=Abbeycom&leng=en_GB&pagename=Abbeycom%2FPage%2FWC_ACOM_TemplateU2&posSel=2, as long as the account stays in credit.

vaporate

I take it banks charge you for having a business account with them? Unlike free personal accounts. Maybe that is their reasoning?

Tinyshoes

easy wrote: »

OK, the bank will try to make you have a business account, as they will impose higher charges on it than on a personal account. However, there is no requirement IN LAW for you to have a business account, nor even a seperate account for your self-employed earnings, as long as you keep track of the money properly (and declare income for tax etc.). Personally I always advise my clients to keep a seperate account, but it can be any account. Perhaps open up a building society account specifically for that money, unless he needs lots of cheque transactions to pay people etc..

Alternatively he can open up a FREE business account here http://www.santander.co.uk/csgs/Satellite?canal=CABBEYCOM&cid=1210608670143&cidAgrup=845616358929450&empr=Abbeycom&leng=en_GB&pagename=Abbeycom%2FPage%2FWC_ACOM_TemplateU2&posSel=2, as long as the account stays in credit.

Thanks so much for the quick reply, he doesnt need to pay anyone regularly so do you think the building society account would be the best option? I assume he could make cash withdrawals for anything he needs to buy as long as he keeps the receipts?

What do you think about them stating they could close a personal account if found to be being used for business. I wasnt really sure what they meant as he is just earning part time money that occassionally people will not have the facility to pay his tax for him, which is why he has had to register as self employed. Previously he has just paid full tax on this part time work and it has gone into our joint account.

Im quite a stressful person and usually do all our household paperwork, paying the bills etc. so was just trying to make life easier by keeping things seperate and you say that is best so will definitely take your advice there. Thank you.

easy

Tinyshoes wrote: »

Thanks so much for the quick reply, he doesnt need to pay anyone regularly so do you think the building society account would be the best option? I assume he could make cash withdrawals for anything he needs to buy as long as he keeps the receipts?

Yes you are quite correct, as long as you have receipts, anything he spends "in the course of his self-employed work" can be counted against earnings for tax at the end of the tax year. Do remember that includes fares to get to where-ever this work is carried out, altho not usually lunches during the working day (as HMRC assumes you would have lunch anyway, even if you were not working).

Tinyshoes wrote: »

What do you think about them stating they could close a personal account if found to be being used for business.

Don't panic, it's largely an empty threat. Unless he will be paying 10s of thousands of pounds in every week, or suddenly starts issuing many more payments than usual, they won't even notice.
Anyway closing the account doesn't mean you would lose your money, you simply take your business elsewhere. Your bank would be the losers (altho moving a bank account is a bit of a nuisance).

Tinyshoes wrote: »

Im quite a stressful person and usually do all our household paperwork, paying the bills etc. so was just trying to make life easier by keeping things seperate and you say that is best so will definitely take your advice there. Thank you.

Don't stress about it. Enjoy the extra money/security this brings in, otherwise it isn't worth you hubby taking on the extra work.

Tinyshoes

easy wrote: »

Don't stress about it. Enjoy the extra money/security this brings in, otherwise it isn't worth you hubby taking on the extra work.

Thank you so much for taking the time to reply. He keeps telling me not to worry too, he is trying to make a real go of the part time work this year as full time he works for a charity and with the recession things not going to well there, already been some redundancies & those left have been asked to take pay cuts. He was only offered one weekends work to start with but now this has already increased to three with the offer of more on the horizon so things are looking quite bright. Maybe by next year I will be asking for help for the best Business account if it is really successful!

Thanks again, will show him your posts when he gets home.

cottager

vaporate wrote: »

I take it banks charge you for having a business account with them? Unlike free personal accounts.

Just a bit!
Well, you asked...

Each outward DD/Faster Payment/BACS: 40p
Each SO out: 45p
Each cheque out: 71p
Each automated credit inwards (BACS/FP): 22p
Each manual credit (paying-in slip over the counter): 76p
Each cheque banked: 33p
Cash banked: 66p per £100 (same for cash withdrawn unless ATM)
Quarterly maintenance charge: £6
Interest as applicable for business overdraft.
Annual O/D arrangement fee: £300.

I think the Big 4 do vary, but these are ours. It isn't an option for us to run a personal a/c: OH is a sole trader not a limited company, but the account's too busy, a lot 'goes on'. For the same reason, even though it costs a lot, we're not tempted by a free business a/c or one of the 'newer' banks, as in our view they don't offer an equivalent full banking service or the same online/branch/business manager backup/support. Yes it certainly costs us, which doesn't exactly thrill us to bits, but it's a good service.

Then card payments received are additional, handled by a different outfit:
Debit cards: 16p each transaction
Credit cards: 1.3% of monthly total
+ monthly terminal rental £15 + VAT
+ annual PCI compliance fee £36

Feel quite glad of that personal account now? :rotfl: