Self Employment Expenses

Princess_x

Hi, just needed some questions answered as I'm new at this.

Ok, I registered as self employed about a week or so ago. I know when it comes to self assessment, its best to have another bank account showing expenses, income etc. I kind of messed up there, because I used my main bank account to buy the stuff that I sell on, also used my sisters account as I didn't have enough. In addition, I used my paypal account for a few transactions as well.

My question is, does this matter? If I have the invoices for the transactions, would this be enough? Also is a bank account necessary if you have an ebay business? It's all being done through paypal and although I made a few mistakes (using my paypal account for personal use after registering as a business), it's mainly used for business transactions. Therefore, would I need a new bank account? Would my paypal account be enough for the self assessment?

Also, in terms of buying stamps to post the items, do I need to keep the receipt? I mean normal first class or second class stamp booklets.

I'm planning on calling HMRC as soon as I can, but just wanted to know if anyone on here could help me.

Sorry if it all sounds confusing, hope you know what I mean though.

jimmo

The reasons for having a business bank account are, at least, twofold.
1)In terms of your business you need to be aware of how profitable or not your business is. It seems to be too easy for people in business to fool themselves that their business is in profit when they forget about expenses not processed through the business bank account
2) In the event of HMRC raising an Enquiry into your business affairs it is perfectly reasonable for the Enquiry Officer to ask to see statements for absolutely every bank account in which there is a business transaction.
When I was a taxman doing Enquiry/ Investigation work people very frequently complained that I was invading their privacy demanding to see their personal bank accounts. Actually, one way or another, I got to see them all but, technically, a single business transaction in a personal account makes it easy for the taxman.

chrismac1

Yes keep the receipts for 6 years, especially for cash items where there is no other evidence such as a bank statement. A business bank account is not strictly necessary, and I have clients who've been running quite substantial businesses - £50k plus sales - through personal accounts to save bank charges. However, I recommend a business account. It makes it easier to keep business and personal separate and in the event of an HMRC enquiry you are allowed to deny access to personal accounts - but obviously not if half of the business transactions are being run through one.

Princess_x

Sorry, I don't think I put my question across properly. My question was not whether a business bank account is a must, I know that it's best to have one, but HMRC already told me that if I'm a sole trader it doesn't matter and that I can just use a normal account if I wanted to as I'm not a limitted company.

My question is right now I have a current account with Barclays, can I just use that account to make business transactions with? Or do I have to have a totally separate account for self employment?

ceeforcat

Yes you can - it is just easier if you have a separate account for business as others have posted. The choice is yours however.

heretolearn_2

You can use what you like but it makes life 1000% easier for you and your accountant if you have a separate account. It doesn't need to be specifically a business account if you don't want (and the bank doesn't notice).