Hobby Biz Bank Account

ToffeeQueen

Hello, I'm about to set up my own little business from home (sole trader). I'm not expecting to make a huge amount - it's more of a hobby really and definitely don't expect to make more than £1,000 per tax year (I already have a full time job).
Do I still need to set up a business account? I want to keep everything separate from my current account and make it easy for people to pay me so I'm happy to set up a business account if I need to but I just don't know where to start.
Thank you!
TQ

Flobberchops

Legally, no. As a sole trader you wouldn't necessarily need a business account even if your income was over £1000, although your bank may disagree, as they are entitled to. It's a good idea to keep this cottage industry money separate from your own, but to start off you should be able to simply open an additional current account or savings account with your existing provider for this. It would be a good idea to start comparing business accounts in case your enterprise is successful enough to start sounding alarms with your bank.

ToffeeQueen

Thank you Flobberchops ! I currently bank with Nationwide and have just tried to set up a separate account in my sole name but when I got to the end of the application I was asked a specific question "will this be for personal or business?" so I clicked business and it would not let me go any further. Do I just click "personal use" and open it for now and see how it goes?

jonesMUFCforever

ToffeeQueen wrote: »

Thank you Flobberchops ! I currently bank with Nationwide and have just tried to set up a separate account in my sole name but when I got to the end of the application I was asked a specific question "will this be for personal or business?" so I clicked business and it would not let me go any further. Do I just click "personal use" and open it for now and see how it goes?

I would open a new account with a different provider - I'm sure that Nationwide will have a system in place to check any new applications from you.:D

eskbanker

Flobberchops wrote: »

Legally, no. As a sole trader you wouldn't necessarily need a business account even if your income was over £1000, although your bank may disagree, as they are entitled to.

As perhaps suggested, I'm not sure that this is solely a matter of legality - if anyone knows of a personal current account that doesn't specify an exclusion of use for business purposes within the Ts & Cs then it would be worth sharing, but to the best of my knowledge they all do, which renders the legal situation moot....

mgdavid

for a paying hobby with the figure you mentioned I'd just open another current personal account with a different bank. If you expect to have a lot of small payments coming in, you could always open a Paypal account, take some payments into that and then transfer a single larger sum to the bank every now and then.

18cc

Since the amounts are so small you could probably get away with a personal account.

I would strongly suggest you open your second account with a different provider that your existing account so that if they do get upset for any reason they can't freeze/close your existing account as well as the business one.

Also, do you expect to get any cheques payable to the business account name? If so, obviously the new account will need to be in the name of ';Fred Bloggs T/A <business name>' in which case it will need to be a business account.

You could also open a Paypal account and try and get as many payments as possible into there.

Zanderman

Why do you not want to open a business account? Doing so would mean you were in line with T&C and so there would be no risk (which is real) of the bank detecting business use on a personal account and closing it down.

The main reason people give for not opening a business account is cost and long-winded opening process - but there are now business accounts from some of the app-based banks - Starling, Tide etc - that are cost free. And easy to open.

Those accounts may be limited in their functions though - paying in cheques may be difficult or impossible (though I think they all say this will come soon).

But you have nothing to lose by opening one of these types of business account.

trailingspouse

If a thing's worth doing, it's worth doing properly. Business bank accounts are generally free for the first year, and some are free for 18 months. It keeps things separate, so you can see if your hobby business is making any money, avoids the very real danger of your bank closing your current account if they suspect business activity, and it also means you can have a trading name, which might be an advantage (eg 'ToffeeQueen t/a HobbyBiz').


It also means that, should things take off and you find that your business is a winner, you're all set up.


When choosing a business bank account, think about how payments to you will be made (cash, cheques, PayPal, or will people want to use plastic - if the latter, look at Merchant Services), and about how you will be paying your suppliers.

falcieri

ToffeeQueen wrote: »

Hello, I'm about to set up my own little business from home (sole trader). I'm not expecting to make a huge amount - it's more of a hobby really and definitely don't expect to make more than £1,000 per tax year (I already have a full time job).
Do I still need to set up a business account? I want to keep everything separate from my current account and make it easy for people to pay me so I'm happy to set up a business account if I need to but I just don't know where to start.
Thank you!
TQ

I have been running my business officially for 6 years and I've never had a business account. They cost money. As long as your accounts are in order and it's clear what money belongs to what, you don't need to waste money on a business account unless you really want it in a business name.

trailingspouse

Please don't listen to anyone who thinks it's OK to run a business from a personal bank account.


As to costs - our limited company pays £5.50 per month in bank charges. If your business isn't able to afford that, you really should be thinking about doing something else.