sole trader - can they use a normal bank account?

nursingthepennies

hello - all advice welcome!
my daughter has been working part time as a sports massage therapist. she has told hmrc and finished her first year and done her tax accounts online etc. when she started she opened a new bank account - separate from her personal account - and all her business transactions have gone through this new account. it is an ordinanry bank account. is this ok? or does she need open a special "business" bank account? she is earning less than 5000 a year and it's a very small operation..
thanks

debbie42

If she's been ok with an ordinary account for this long, then I don't see there would be a problem. The bank may suggest that she needs a business account if the level of use warrants it.

I am a sole trader, and have a separate, non-business bank account, which I keep to make the book-keeping easier. It has far fewer transactions than my "normal" current account.

Mahmood_Reza

As long as she can identify/verify her business income & expenditure from the bank records no special a/c would be needed. An additional a/c would normally be used for either holding client money (normally for prefessional service firms) and/or saving money in a deposit a/c.

Premier_2

Personal bank accounts are not supposed to be used for business purposes. That's the rule of most(all?) banks and hence why they offer business bank accounts for such purposes.

Of course the bank will only act if they are aware the account is being used for business purposes, so many people who have a small sideline business may well just pass the business transactions through their personal account and the bank may be none the wiser.

The fact your daughter has a specific personal account which she uses for business transactions obviously would increase the risk of the bank uncovering the use of the account.

I would suggest she looks around for a business account now whilst she has the time. She could probably find one that suits her needs that may even offer free business banking with a bit of careful research.

martindow

I assume she is operating under her own name? If she trades under another name a business account would be essential as, for example, you can't pay cheques payable to Mary's Massage into Mary Smith's personal account.

jackomdj

when I started my small business I went to the bank to open a business account, when I told them the volumes I was expecting to go through they laughed & said just to use an ordinary account!

PlutoinCapricorn

I am a sole trader, and I use one personal account for everything. Payments are made out to me personally, and the intermittent payments for consultancy are similar to salary payments. I would not call what I do running a business, just working online as a researcher etc. on a freelance basis. The number and type of transactions is much the same as it would be if I were an employee. In fact, as I claim a proportion of household running costs as deductible expenses, it makes it easier to prepare the tax return as the electricity etc. direct debits are in the same statement as the payments from clients.

People who pay in a lot of cash, or have a high volume of transactions, or have payments made out to a business name would not be able to do this.

JAYk_2

Sole traders are not required to have a separate business bank account. But it is recommended they have one to separate personal from business transactions etc.

However, by law limited companies are required to have a business bank account.

Additionally Sole traders do not need to notify Companies House, nor deal with any administrative or accounting requirements which are required of limited companies.

Amatheya81

As has been said before a sole trader can handle their money any way they chose as long as they can provide a audit trail if asked. I've been a freelance illustratior for a couple of years but because my earnings are small I just keep comprehansive receipt logs and use my regulare bank account.
BTW if she's only earning about £5,000 has she opted out of paying self employment NI? I paid this for years until I found the details on the TAX office website!