Do I need a business bank account?

MSE_Chris_D

Hi!

This is the discussion thread for the Do I need a business bank account? guide.

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Thanks!

eskbanker

Bizarre!

The article casually claims that:

You don't NEED a business bank account if...

• You're a sole trader or freelancer, or contracting (but not through a limited company), eg, hairdresser, research interviewer, journalist, TV producer, gardener, eg designer, developer

• You're doing gig work, like Uber, TaskRabbit or Deliveroo

but then later, in passing, correctly identifies a benefit of doing so:

PRO: You don't break your bank's terms and conditions. The reams of small print that comes with your personal bank account will usually say that you're not allowed to use it as a business account. This is especially relevant if you're a sole trader who'll have lot of cash and cheque transactions. If you're doing this through your personal account, it's likely your bank will close your account, or ask you to set up a business account with it. 

Seems a very mixed message to me - what's the point of prominently making a blanket assertion that there's no need to use a business account and then hiding a more realistic and accurate assessment within what MSE would claim to be 'small print'?

fiendishlyclever

Nationwide told me it was fine to accept payments as a sole trader/contractor as long as I wasn't paying any employees or using my account to pay any business rates. Different providers will have different rules but it's worth asking based on your circumstances...

eskbanker

fiendishlyclever said:

Nationwide told me it was fine to accept payments as a sole trader/contractor as long as I wasn't paying any employees or using my account to pay any business rates. Different providers will have different rules but it's worth asking based on your circumstances...

Did they put this in writing?  Their Ts & Cs seem pretty unambiguous, make no differentiation between types of businesses, and would presumably take precedence over any less formal assurances:

Business Use
14. The account is for personal use and it cannot be used for business purposes. 

jonesMUFCforever

A business account used properly is run for free - how you ask when they charge after x months?
Well bank charges and interest is a legitimate business expense which you can offset against your tax liability - you can't do that with a personal account.

J_B

jonesMUFCforever said:

A business account used properly is run for free - how you ask when they charge after x months?
Well bank charges and interest is a legitimate business expense which you can offset against your tax liability - you can't do that with a personal account.

1) Just because you can offset the charges doesn't make it 'free'

2) If you were to use a personal account, there probably wouldn't be any charges.

TracyATR

There is no legal requirement for a Ltd company to have a business bank account so I don't think you should be telling people they 'must' have one as it's simply not the case. It may be advisable if you have specific business expenses for say stock, materials or wages but if most of your expenses are 'grey' then just identify them as you go along on a spreadsheet (separating capital expenses from general expenses as you normally would for ease of reference later on) and charge the lot as expenses to the Ltd company at year end. I've had a client operating as a Ltd company being told they'll be reported for not having one by a bank clerk, I simply asked 'who to?' They couldn't tell me, because there is no legislation to say you must have one. Also, to save on bank charges if you want a separate account, you can have more than one personal current account so just open another for business use if you want to, taking note of t&c's of course. The only thing to monitor is that funds equal to those shown in the accounts are available. A Ltd company is a separate legal entity after all and where less funds are available you'll need to account for it. You can't spend company monies personally without having shown it drawn as wages, dividends or expenses repaid, so this option isn't for those who see it and spend it!

Zanderman

TracyATR said:

There is no legal requirement for a Ltd company to have a business bank account so I don't think you should be telling people they 'must' have one as it's simply not the case. It may be advisable if you have specific business expenses for say stock, materials or wages but if most of your expenses are 'grey' then just identify them as you go along on a spreadsheet (separating capital expenses from general expenses as you normally would for ease of reference later on) and charge the lot as expenses to the Ltd company at year end. I've had a client operating as a Ltd company being told they'll be reported for not having one by a bank clerk, I simply asked 'who to?' They couldn't tell me, because there is no legislation to say you must have one. Also, to save on bank charges if you want a separate account, you can have more than one personal current account so just open another for business use if you want to, taking note of t&c's of course. The only thing to monitor is that funds equal to those shown in the accounts are available. A Ltd company is a separate legal entity after all and where less funds are available you'll need to account for it. You can't spend company monies personally without having shown it drawn as wages, dividends or expenses repaid, so this option isn't for those who see it and spend it!

As you point out a limited company's assets are owned by the company, not an individual, so those assets and income must be in the company's account.  and a company can't have a personal account.  So a limited company must have a business account. No choice.
As for legality - that's missing the point.  It's the bank's rules you need to follow, not legal rules. It's not about legislation, it's about the bank's terms and conditions. Not the same thing at all.

KiwiCoop

I've always wondered where BIG companies put their cash, given the £85k protection limit per institution?  

sal_III

jonesMUFCforever said:

A business account used properly is run for free - how you ask when they charge after x months?
Well bank charges and interest is a legitimate business expense which you can offset against your tax liability - you can't do that with a personal account.

Jesus I hope you don't run a business. The bank fees are expense, which will lower your pre-tax profit so you will pay less corporation tax, but that's "saving" your 20%, not offsetting the whole amount against tax.

All moot point, since Starling offers free business bank account to begin with. And if you keep £5k+ balance Metro bank is free as well.

Even if there is no legal requirement for a business bank account and some banks might allow sole traders to use a personal bank account, if you are running a business you should really get one and keep the company and personal finances separate.

nixh255

I am very interested in this series of articles as my full time work is freelance and I have already had to research the best business bank account with lowest fees myself, so it will be a great help to other people like me. I am a freelance web designer and I have clients in Europe, UK and USA, so in the end I went for a Transferwise business borderless account. This has worked well so far as I can give different bank details to people in each country and get paid in their currency. Being able to take payments in other currencies and then convert them cheaply is a great option to have. They also offer a debit card. I don't keep  a lot of money in the account, so the fact that it comes under the e-banking rules isn't a worry for me. I wonder if anyone else has any experience of this area.