Using a second personal account for freelancing

cococarter

Hi, I am a freelance tutor and have been using my HSBC savings account only for payments received. I then pay for my expenses out of my personal account.

I know this isn't a good solution so have been looking at opening a separate business account. My question is - do I need a business account or can I open a current account with another bank and use that solely for my business?

The only payments I receive are cash or paid directly into my account (no cheques or card payments).

Thanks in advance.

grumbler

Generally, banks don't like when personal accounts are used for business.

tiger_eyes

I'm a sole trader. I have a separate personal account in which I receive Paypal transfers and pay in the occasional cheque. It's been four years and the bank either hasn't noticed or hasn't cared. I don't plan to get a business account unless the bank really forces me to.

edit: Some further reading for you. The writer asked various banks about sole traders using personal accounts. Interestingly, Nationwide were the only bank to say it would be fine, and my lenient bank is indeed Nationwide.

catwoman73

Generally, banks don't like when personal accounts are used for business.

No, because if you had a business account they would charge you a monthly fee and a fee for every transaction. That suits them much better.

My partner is self employed and does work for several different clients. He also does some employed work. All his earnings from everything goes into our joint account and it's not a problem.

He doesn't need to make many purchases and these are just paid straight out of the joint account, or more likely by credit card. He tracks everything for tax etc using a spreadsheet and a diary. If he ever got audited, I am sure they would be happy with it all.

If I were you I would keep a paper diary of appointments and fees, perhaps also using a simple spreadsheet to add them up etc and list any expenses like mileage.

You will then have the information needed to complete your tax return and pay any tax due.

How the money comes in and goes out is less of an issue really. I think it only needs to be kept separate if you have lots of purchases and need money available for that, eg a shop or cafe, where it would be hard to know whether you had bought a case of baked beans for personal or business use.

agrinnall

catwoman73 wrote: »

All his earnings from everything goes into our joint account and it's not a problem.

I hope you have another account elsewhere for the day when the bank realises what's been going on and closes the joint account.

bigadaj

agrinnall wrote: »

I hope you have another account elsewhere for the day when the bank realises what's been going on and closes the joint account.

Well many of the regulars on here are well into double figures for current accounts.

It's a little ironic in that whilst they aren't supposed to be used for business then if you're a sole trader then it's not distinct.

Also the cases highlighted of people accounts being closed because they are just using them as savings accounts, primarily noticed due to the lack of transactions on those accounts.

jimjames

agrinnall wrote: »

I hope you have another account elsewhere for the day when the bank realises what's been going on and closes the joint account.

I struggle to understand how a bank would know whether an account was being used for business or just multiple transfers. I have masses of incoming and outgoing payments but it's not business, I can't see how anyone could tell where a payment has come from - the same person or not.

I'd definitely advise a second account though, not just in this possibility but in case of any IT issue so you can still access money.

agrinnall

jimjames wrote: »

I struggle to understand how a bank would know whether an account was being used for business or just multiple transfers. I have masses of incoming and outgoing payments but it's not business, I can't see how anyone could tell where a payment has come from - the same person or not.

I'd definitely advise a second account though, not just in this possibility but in case of any IT issue so you can still access money.

They probably won't bother in most cases but I don't see any great difficulty in a bank finding out where one or multiple payments have come from if they really want to.

CLAPTON

cococarter wrote: »

Hi, I am a freelance tutor and have been using my HSBC savings account only for payments received. I then pay for my expenses out of my personal account.

I know this isn't a good solution so have been looking at opening a separate business account. My question is - do I need a business account or can I open a current account with another bank and use that solely for my business?

The only payments I receive are cash or paid directly into my account (no cheques or card payments).

Thanks in advance.

how many transaction per month are you talking about?

cococarter

It would unlikely be above 10 payments per month.