I've been using a personal current account for business for years. Now what do I do?f

Notnow

I've been a sole trader for 10 years and I've always used my personal current account for taking payments from customers. I have been thinking of switching banks but when I read the T's+C's of the bank I was going to switch to I was surprised to see that it said their personal account can't be used for business. After checking with my current bank it also says in their terms that I shouldn't be using this account for business either.

I've never hidden the fact I use my personal current account for business. I have regularly paid cash in over the counter and struck up a conversation about my business, nobody in the bank has ever said I shouldn't be doing it. My bank statements show "Payment for (service I provide)" alongside customer payments so the bank could easily see what I'm doing. I've had a reputable chartered accountant do my books for 10 years and they've never said anything. I've had a mortgage since the strict new mortgage laws came in and shown my personal current account statements as proof of income. I've even had a tax inspection from HMRC and nobody has ever said anything!

I always thought business accounts were for big business with huge turnover, limited companies etc. Not for small sole traders with a small turnover. It sounds silly now, of course I should have a business account for business but I've been doing this for years without it ever being mentioned.

My dilemma is what to do now.

I want to open a business account but the bank with the best deal by far is the one I currently bank with. While it's not illegal to run a business from a personal account, I have visions of going into my bank to open a business account and something bad happens when I say I've been running it through my personal account for years. Maybe I'm worried about nothing and they'll just help me sort things out by opening a business account.

To avoid that potentially awkward moment I could open a business account with another bank (the one I was going to switch to anyway) and just keep the current account I have now for personal use or switch it to a new current account.

Another option is that I could also just do nothing and stay as I am because despite what it says in the T's+C's nobody seems to mind and it's not illegal. I know that lots of people doing something doesn't make it right but there must be thousands of people using current accounts for business reasons who just don't know it's against the terms.

What is it best to do?

colsten

In your shoes, I would probably open a current account with a different bank straight away, and put some money into it. Don't use that one for business purposes.

Then, as you have determined that their product is the best, go to your bank and open a business account with them. They should be keen to have you as a business account holder, and to retain you as a current account holder, but if for some unfathomable reason they are not, you can express your disappointment and tell them you are taking your business elsewhere. You shouldn't be worried about having used your personal account for business purposes - you are not meant to, but the worst they can do is close the account. I wouldn't talk about that current account at all, and certainly not give them the impression that you feel guilty.

I'd keep the second current account at the other bank - - it's always a good idea to have a second source of liquid funds as we have seen, any bank could run into trouble and you could be left high and dry without money for a period of time.

Notnow

Thanks for your help. Does anyone know if a bank closing your account would be bad for your credit rating? I would like to do something about this before it comes to that but seeing as it's been 10 years already I doubt I have to rush.

[Deleted User]

No since you don’t have a credit rating to be affected.

However a 10 year old account closure could have a knock on for your credit history in terms of longest open accounts

DCFC79

Notnow wrote: »

Thanks for your help. Does anyone know if a bank closing your account would be bad for your credit rating? I would like to do something about this before it comes to that but seeing as it's been 10 years already I doubt I have to rush.

Is that the credit rating lenders dont even see ? Lenders see your history.

No a bank account being closed isnt bad for your credit history.
Id still get an account sorted for the business as soon as since the bank can decide to close the account when they like.

Notnow

!!! wrote: »

No since you don’t have a credit rating to be affected.

However a 10 year old account closure could have a knock on for your credit history in terms of longest open accounts

Thanks. I closed lots of accounts in the last 2 years when I was preparing to apply for my mortgage and it only ever seemed to help my credit rating. I understand the thing about how long an account has been open for but it doesn't seem to be a huge factor.

EachPenny

Colsten's advice is spot on. Get a second personal account opened as soon as possible, but make sure it is with an entirely separate banking group rather than an alternate brand of the one you are currently with.

Anthorn

Notnow wrote: »

I've been a sole trader for 10 years and I've always used my personal current account for taking payments from customers. I have been thinking of switching banks but when I read the T's+C's of the bank I was going to switch to I was surprised to see that it said their personal account can't be used for business. After checking with my current bank it also says in their terms that I shouldn't be using this account for business either.

I've never hidden the fact I use my personal current account for business. I have regularly paid cash in over the counter and struck up a conversation about my business, nobody in the bank has ever said I shouldn't be doing it. My bank statements show "Payment for (service I provide)" alongside customer payments so the bank could easily see what I'm doing. I've had a reputable chartered accountant do my books for 10 years and they've never said anything. I've had a mortgage since the strict new mortgage laws came in and shown my personal current account statements as proof of income. I've even had a tax inspection from HMRC and nobody has ever said anything!

I always thought business accounts were for big business with huge turnover, limited companies etc. Not for small sole traders with a small turnover. It sounds silly now, of course I should have a business account for business but I've been doing this for years without it ever being mentioned.

My dilemma is what to do now.

I want to open a business account but the bank with the best deal by far is the one I currently bank with. While it's not illegal to run a business from a personal account, I have visions of going into my bank to open a business account and something bad happens when I say I've been running it through my personal account for years. Maybe I'm worried about nothing and they'll just help me sort things out by opening a business account.

To avoid that potentially awkward moment I could open a business account with another bank (the one I was going to switch to anyway) and just keep the current account I have now for personal use or switch it to a new current account.

Another option is that I could also just do nothing and stay as I am because despite what it says in the T's+C's nobody seems to mind and it's not illegal. I know that lots of people doing something doesn't make it right but there must be thousands of people using current accounts for business reasons who just don't know it's against the terms.

What is it best to do?

My advice would be the same as colsten's but additionally consider a current account and business account with Starling Bank. The business account is free specifically for small businesses with less than 10 employees and less than £1.7m annual turnover.
https://www.starlingbank.com/business-account/

Chappers27

Open a business bank account and use that for business. Keep the one you have, as presumably it has direct debits etc?

Notnow

Chappers27 wrote: »

Open a business bank account and use that for business. Keep the one you have, as presumably it has direct debits etc?

My plan is to open a business account and a current account with a new bank and switch the current I have now to keep the direct debits. The new current account pays back cash each month which is enough to pay for the business account charge, the current account charge and even any fees for paying in cash :j

colsten

Notnow wrote: »

My plan is to open a business account and a current account with a new bank and switch the current I have now to keep the direct debits. The new current account pays back cash each month which is enough to pay for the business account charge, the current account charge and even any fees for paying in cash :j

If you switch you existing account, you will lose all record of that account in your credit file. So no lender can see that you held an account in good stead for donkey's years. Long-term risk is a factor lenders will consider in their assessment of applications.

This may or may not matter to you but if it does, or may, matter, you can easily handle it:

1. keep your existing current account
2. set up a second current account with the same bank
3. add any DDs (that might be required for the switch bonus) to the second account
4. switch that second account as soon as you have a debit card for it and it has requisite DDs etc