Personal Bank Account also used for business

HUK

Hello, We have set up a new business (partnership) but we don't have a business bank account yet so we use a personal bank account.

We are unsure what to do in relation to tax records purposes. Should we print out a statement each year of this account and itemize each item that was for business use and then save this as a PDF? I'm also wondering how this would work out with a balance sheet for the business?
Thank you for any advise you can give,

Savvy_Sue

Best advice would be to open a separate business account for the partnership / business. Reason being that you are almost certainly in breach of the bank's terms and conditions for holding a personal account. If / when they notice, they could charge you business rates, backdated, and that would be expensive.

With a balance sheet for the business, it doesn't really matter where the money came in or went out: if it was business related, it needs to be in the business 'books', which might be an Excel spreadsheet, or a cash book, or the back of an envelope (not recommended!)

Annotating a bank statement is a start, but really what you need to be keeping is receipts, eg if you bought a massive box of biros for £5, then a receipt saying 'biros £5' is better than a £5 debit on a bank statement which can only be tracked to a supplier, not an item.

bengalknights

Best to create a seperate account for business needs otherwise do as you currently do by highlighting business

HUK

Hi, Many thanks for your replies. We didn't start a business account at first because of the charges for the business account and we didn't know if the business would succeed or grow. Many thanks, we'll certainly look into this.x

Savvy_Sue

Well, many banks offer free banking on business accounts initially, plus by now you must have a handle on what you actually need, because all biz accounts charge differently. Some are stupidly expensive if you make a lot of payments in, others are OK but charge for every single debit. If you need to pay in or withdraw cash you need one where you can conveniently do that.

I'd start by NOT looking at the bank where the account is currently held, and see what you can find.

Another reason for keeping biz and personal accounts in separate places is that if you run into trouble with one, the bank can't use the other account, because they don't have access to it. Whereas if you have both biz and personal accounts with the same bank, they can - and do under certain circumstances - use credit in one to offset an overdraft on the other ...

Aquamania

HUK wrote: »

Hello, We have set up a new business (partnership) but we don't have a business bank account yet so we use a personal bank account.

We are unsure what to do in relation to tax records purposes. Should we print out a statement each year of this account and itemize each item that was for business use and then save this as a PDF? I'm also wondering how this would work out with a balance sheet for the business?
Thank you for any advise you can give,

For tax purposes, you should keep copies of all invoices etc issued & received.
HMRC will not usually accept bank records as proof of expenditure or income (especially when it's all muddled up with your own personal income & expenditure)

As regards your accounts, you need to know how much money the business has. Another good reason to hold the business money in a separate business account.