advice on bank accounts for self employed purpose

suestarrs

Hi


I need to set up a separate account for self employed work and I am not sure if I really need a business account or not or whether I can simply have another current account in my self employed name. It is not a limited company and its purely freelance tutoring alongside day to day paid employment so we are not talking massive monies being earnt. I have been reading up and some advice states a business account is needed and plus banks I have spoken to are immediately saying this too. HMRC purposes I know I need a separate account and talking to people who are in a similar position they are saying all I really need is a current account that shows and tracks expenditure and income separately from other earnings. So can someone put me straight. I will be keeping all receipts etc and logging everything on a spreadsheet/paper like telephone calls made, distance travelled each day to assignments, hours and clients worked with, any purchases made for work and any payments received including keeping a receipt book to acknowledge payments received from clients. I don't really want a business account with all the charges for each banked payment as my payments will be relatively low so charges will soon stack up leaving me with little profit, I will end up paying more in bank charges! But I also need to know if I go down route of a current account will this suffice what are the actual requirements as a pose to advisory? I kind of feel banks will push business accounts because of all the charges and I do appreciate why but as a freelancer doing it for extra earnings rather than main earnings it does not seem right for me. Any help appreciated
Sue

colsten

T&Cs of all current accounts state that they are for personal, not for business use. If you choose to break those T&Cs, the bank is entitled to close your account. There have been numerous reports that they do enforce these T&Cs.

eskbanker

The MSE page on banking for small businesses dangles a carrot by suggesting that

If you are a sole trader (not a limited company), then you may be able to use your normal bank account for your business, with all the better terms that involves (though check your terms & conditions - some banks won't allow this)

but, perhaps unsurprisingly, doesn't actually offer any concrete suggestions as to which banks do allow this!

countingstars

I have very recently decided to open an additional current account for my freelance work related income. I have read a lot around this area and it's a blurry line. Some jump right into it and open a business account. Others use an additional current account to 'test the waters' when they start their freelancing/new business.

I have three freelancer/business owner friends who all started with a current account rather than a business one. Two of them ended up applying for a business account six months in. The third waited a year but for him business was very slow and it took a while for him to take off.

Personally, I don't see the point of opening a business account and paying fees at the start when I don't have much work. I would of course switch to a business one if I started generating more income or more work.

The following link (you may need to scroll down a little) explains the options and the pros/cons of each choice. I found it really helpful. The entire site is actually quite helpful and may be worth bookmarking for later. It's got tons of information related to HMRC and what they expect.

http://onemanbandaccounting.co.uk/can-i-use-my-personal-bank-account-for-business/

Good luck!

colsten

countingstars wrote: »

I have read a lot around this area and it's a blurry line.

The blurry thing is how a bank would determine what 'business use' is. As no T&Cs actually define that, it is relatively easy for a bank to declare that an account is used for business purposes.

It's relatively easy to spot a business account when incoming and outgoing transactions look like business transactions. If you try to evade being found out by using cash deposits and withdrawals only, you'll before long hit the kind of problems people hit who report that they were unable to withdraw cash from their accounts, or who had their accounts blocked "for no reason".

Just add a couple of pennies to all your prices and have your business banking fees covered. Or take a couple of pennies off the profit for each transaction.

Futuristic

Considering the fact there are some 18-24month "start up" accounts with no fees I don't see the point of "testing waters" with personal account.

http://www.moneysupermarket.com/current-accounts/business-bank-accounts/

suestarrs

Thanks everyone this sounds great advice and the links will really help too! Think I will go ahead and get a business account but will take a bit of time to see which is best for me, this will take time as don't understand all aspects of what you get with each and benefits and pros and cons as a pose to what is really important for me starting out. There seems to be lists upon lists of whats included but what do I really need? what can I live without? what would I use? what I would not use? Yes I want facility to bank online as well as over the counter to accept bacs payments and cheques or even cash to pay in different ways too. I want a bank that are there to help with other advice and information too rather than just rushing me through application and then shoving me out of the door but I dont want them trying to sell me other products or over complicating things. Need to keep it simple and don't want to be blinded by science I am not an idiot but sometimes they can be on a mission to get commission and that is a total put me off. Anyone had any positive experiences or can recommend a good business account and why?