Sole trader bank account choice 24 April 2018 at 11:57AM edited 30 November -1 at 1:00AM in Small Biz & Charities' MoneySaving 8 replies 2.2K views

WRogers

Hi all.

My friend runs a limited company doing aerial filming and employs me as a photographer, perhaps once a month for a small amount between £100 and £200 a time.
I want to set up as a sole trader so that I can offset this cost against the cost of my equipment and therefore make 0 profit.

I will need a separate bank account to make it all easier, and I read that you can use a personal account, but there have been many warnings about them online.

As I will earn about £150 a month in 1 or 2 transactions I don't want £10 a month going to the bank for a business account if I can help it.

Essentially I will have maybe a maximum of 3 or 4 payments into the account and perhaps 2 payments out per month.

Is there a personal account I can use or a cheap business account?

daddy_bro

What are the warnings you've read? I'd have thought for such small amounts a personal account would be fine.

Savvy_Sue

You already are a sole trader so I suspect what you mean is that you need to register as self-employed with HMRC.

And yes keeping a separate bank account for these payments would probably make life simpler.

But unless you're planning to set up a limited company or run this as a full-time business then a separate personal account should be fine.

What are you worried about?

WRogers

Thanks,

I was worried as I had read that people had their accounts closed etc.

If it's separate from my personal banking it should make it easier. I have only done 2 jobs so far and not been paid yet, hence why I was asking. I will open an account tomorrow at HSBC and inform HMRC later that day to set it up.

Thanks for easing my kind over it. I think I was over thinking and panicked :undecided

livelaughlovedancesing

I don’t think you were overthinking Wrogers ! I’m investigating a similar thing myself .

Martin’s warning is in other words that not all personal banking accounts let you use them for business use. Eg I have looked through terms and conditions for too current accounts with Santander, TSB and Nationwide and all of them say in one way or another that the account should not be used for business use. TSB even mention sole traders specifically.
(I haven’t looked at HSBC yet because I don’t have any accounts with them)

Can anyone suggest a personal current account that is actually suitable for small sole traders to use as a business account where it doesn’t breach the terms and conditions?

tastyhog

Savvy_Sue wrote: »

You already are a sole trader so I suspect what you mean is that you need to register as self-employed with HMRC.

And yes keeping a separate bank account for these payments would probably make life simpler.

But unless you're planning to set up a limited company or run this as a full-time business then a separate personal account should be fine.

What are you worried about?

It will never be fine, because its against most banks terms to use a personal account for business purposes.

It will lead to accounts being closed

yasmup

WRogers wrote: »

Hi all.

My friend runs a limited company doing aerial filming and employs me as a photographer, perhaps once a month for a small amount between £100 and £200 a time.
I want to set up as a sole trader so that I can offset this cost against the cost of my equipment and therefore make 0 profit.

I will need a separate bank account to make it all easier, and I read that you can use a personal account, but there have been many warnings about them online.

As I will earn about £150 a month in 1 or 2 transactions I don't want £10 a month going to the bank for a business account if I can help it.

Essentially I will have maybe a maximum of 3 or 4 payments into the account and perhaps 2 payments out per month.

Is there a personal account I can use or a cheap business account?

Before doing anything else, I suggest you run your ideas past HMRC.

I'd be surprised if they accept your plans to be self employed, yet not make a profit, to be a bona fide business venture.

yasmup

tastyhog wrote: »

It will never be fine, because its against most banks terms to use a personal account for business purposes.

It will lead to accounts being closed

Not usually.

The usual course of action a bank takes where a personal bank account is being used for legitimate business purposes, against the terms and conditions of a personal bank account, is for the account to be re-classified as a business account.

That way, the bank still retains their customer ... and earns even more money from them.

Savvy_Sue

tastyhog wrote: »

It will never be fine, because its against most banks terms to use a personal account for business purposes.

It will lead to accounts being closed

If the OP was running a personal account like a business account then yes it might. By that I'm talking about multiple payments in from different customers, multiple payments out for purchases, suppliers, sub-contractors etc.

But please explain how payments in from ONE source will look like a business account?

yasmup wrote: »

Not usually.

The usual course of action a bank takes where a personal bank account is being used for legitimate business purposes, against the terms and conditions of a personal bank account, is for the account to be re-classified as a business account.

That way, the bank still retains their customer ... and earns even more money from them.

This is more likely.

However, there has to be a question: is the OP actually self-employed, or is this zero hours employment? If the latter, then the OP is perfectly at liberty to use a separate personal account for these payments.