Lloyds bank second current account

VivRajkumar

Hi,

new to this forum. Apologies if this is not the correct section for this query.

I'm trying to open a second current account to manage self employed(sole trader) bills with a bit of ease for taxes. I currently have a current account with Lloyds Bank. I'm aware of the 85k protection limit per banking organisation. However to get a second account setup with ease online, I assumed Lloyds would be easiest for now and then later switch one of my accounts to a different org to have a larger protection limit.

However when trying to open my second account with Lloyds account, I see this message

Does this mean the second account would have no protection if the bank collapses? If so which bank would you suggest that offers a full online signup right now(saw firstdirect had closed new accounts due to the virus). I'm not interested in a switch account or account benefits(cash-back/interest) just now. Just looking for a decent bank with good customer service that's reliable.

Thanks,

Viv

colsten

You are not supposed to use personal current accounts, such as the Club Lloyds account, for business purposes. You need a business account. Having all your eggs in one basket is not a good idea as you may be left with no access to your accounts if something goes wrong - and something can always go wrong.

Your total deposits in any financial institution (defined by their banking licence, not necessarily by the name of the bank) will have FSCS cover up to £85K. For small business FSCS cover, see https://www.fscs.org.uk/how-we-work/small-business-charity/

Tildaplum

You cannot, as you have found out, open a second CLUB account.
You can, however, open a second current account eg a Classic current account. Do it online by logging onto your internet banking.

However, as above, you are not really allowed to use a personal account for business and they might get a bit shirty if they find out.

You could therefore open a business account with Lloyds (not sure of the charges etc) or open eg a Starling business account - I believe you do this on your smartphone by downloading the app but check.

colsten

Tildaplum said:

However, as above, you are not really allowed to use a personal account for business and they might get a bit shirty if they find out.

A bit shirty - as in, they lock all your accounts, or they tell you that they will be closed in 4-6 weeks time.......

Tildaplum

Yep - that definitely fulfils the definition of shirty!

coachman12

Tildaplum said:

Yep - that definitely fulfils the definition of shirty!

I agree. I do not think that is the line taken by NatWest who seem far more accomodating. You may wish to show displeasure at Lloyds by changing Banks by way of protest. All the best.

VivRajkumar

colsten said:

You are not supposed to use personal current accounts, such as the Club Lloyds account, for business purposes. You need a business account.

oh ok. didnt know even as a Sole Trader you must use a business account. So sites like startuploans.co.uk/business-advice/sole-trader-bank-accounts/ that mention "As a sole trader, you’re not legally required to have a business bank account. You can use your personal bank account for all business transactions. This is because as a sole trader, your personal and business income is treated as one and the same by HMRC for tax purposes." are invalid?

Tildaplum said:

You can, however, open a second current account eg a Classic current account. Do it online by logging onto your internet banking.

Yeah I see an option to open a new current account. I was just not sure if that would also be covered by FSCS since their message mentioned "You can only have one account with insurance benefits".

Overall I guess I might just go with a different FSCS listed org than all with Lloyds anyways, but was just wondering what that message meant in relation to FSCS.

Zanderman

In answer to your question about FSCS protection, yes, you are protected up to £85k total in any one bank regardless of how many accounts you have with it.  Don't confuse the bank's 'insurance benefits' (whatever they are) with the Government system.  They have nothing to do with each other.

Re having a business account or not.  HMRC may not require you to have one, but that's not the point.  The bank DO require you to have one.  All banks have a clause in their T&C for personal accounts that they should not be used for business.  

You may choose to use one for business anyway - but be aware you will be breaking the bank's rules (which are nothing to do with HMRC's rules) and this may be a problem at some point.

eskbanker

Zanderman said:

Don't confuse the bank's 'insurance benefits' (whatever they are) with the Government system.  They have nothing to do with each other.

Likewise, don't confuse "the Government system" (whatever that is) with FSCS, the industry-funded deposit guarantee scheme.  They have nothing to do with each other.

colsten

VivRajkumar said:

 So sites like startuploans.co.uk/business-advice/sole-trader-bank-accounts/ that mention "As a sole trader, you’re not legally required to have a business bank account. You can use your personal bank account for all business transactions. This is because as a sole trader, your personal and business income is treated as one and the same by HMRC for tax purposes." are invalid?

This sounds like the personal opinion of whoever runs startuploans. The reason given is, frankly, hilarious. The T&Cs of personal bank accounts exclude the use of the account for business purposes. If you choose to ignore the T&Cs, you shouldn't be surprised if you join the people who have their accounts closed by the bank.

HMRC doesn't come into it. Your tax liability isn't determined by the bank account, or bank accounts, you have. 

Below are a couple of snippets from the Lloyds T&Cs. You will find similar wording in the T&Cs for personal bank accounts of all other banks.

DCFC79

Starling do a business account.