Business bank account compulsory for Sole Trader?

Maggie_C

Hi, sorry if this has already been covered in a previous post.

I'm just about to set up as a Sole Trader and have been told that I need to have a business bank account as opposed to an ordinary separate current account that I would use purely for business transactions. Does anyone know if this is true? I'd obviously like to keep costs as low as possible and avoid paying bank charges on my transactions if possible.

Thanks a lot.

pinkdalek

It is advisable to operate a separate account for your business.

Strictly you are supposed to operate a business account mainly because you would not get the same facilities if you used a personal account. You would not be able to open a personal account and have the name of your business on it eg Mr A Smith (T/A Smith Business) so if you received cheques payable to your business then you would not be able to pay them in. From an accountancy/tax point of view how can you then verify payments from a personal account to be that of your business?

There are many banks out there who offer free business banking, tend to be introductory offers, however there is nothing stopping you switching your accounts at the end of the offers.

thenudeone

The banks are entitled to put conditions on their accounts and it's common to see "not for business use" conditions.

There is a lot more competition for personal accounts than business accounts and they are entitled to say that if you are a business, you don't qualify for the better offers that are available to personal customers.

lolavix

Most banks to a free period for new customers - Natwest is 2 years.

Most personal accounts state in the terms that they cannot be used for business purposes.

samwsmith1

HSBC do the Business Direct Account which is free providing you stay within it's transaction limits, and is best for electronic transactions.
https://www.business.hsbc.co.uk/1/2/business-banking/business-bank-accounts/business-direct-account

Maggie_C

Thanks, all, for your advice. Much appreciated.

WhiteHorse

Maggie_C wrote: »

I'm just about to set up as a Sole Trader and have been told that I need to have a business bank account as opposed to an ordinary separate current account that I would use purely for business transactions.

No, it's not compulsory, but it is a good idea. Many sole traders get into serious trouble because they confuse personal and business expenditure.

Your accountant will thank you for it too - something which is liable to be reflected in his bill.

GlamGirlie

WhiteHorse wrote: »

No, it's not compulsory, but it is a good idea.

It is generally compulsory under the banks' terms & conditions, as they will often not permit business trading via a personal account, as previous posts have already mentioned.

okudaisi

thanks for the info!!!

InsideInsurance

Legally there is no requirement for it however given the fees charged on business banking you'll find that most personal accounts prohibit its use for business purposes and so practice may drive you to having a business account even if the law doesnt.

Of cause the benefit of a business account is you can accept payments (aka cheques) in your trading name rather than just your personal name.

[Deleted User]

Whatever you do, just don't open one with Scamtander