Paying for business banking - am I being a tight wad?!

eludlow

I run my all small IT consultancy business, a limited company with my my wife and I as Directors.  My current account is with Starling, and I am super impressed with them and the service they give.  For various reasons, I like to have a separate account that I transfer some cash to each month to cover the tax bill.  Ideally I'd have a second Starling account, but they only let you have one per business.  I could create a "pot" as they call it, but it would all show as the same account in Xero (super impressed with that, too!).  I opened an HBSC business account at the back end of last year, taking advantage of their "free for a year" business banking.  That trial period is coming to an end soon, and I don't really want to pay them £5.50 per month hold my money that earns next to nothing!

I've looked at other accounts (great comparison from MSE, thanks!) and the Aldermore looks like it's paying the best interest rate.  It won't however link to Xero, which isn't a deal breaker, but would be nice.  There are other free business accounts, and also a few that are offering a year's free (or similar).  I'd be quite happy to just move around between these, transferring the funds the at the end of the trial period.  But a bit of me thinks this is somehow...wrong?  Am I being silly?  Would be interested in the views of others.

Grumpy_chap

To answer the thread title.

Yes

Rather than spend time over a few pounds, do another hour of fee paying work and that is a whole year of bank charges covered.

oldbikebloke

learn to manage your cashflow and finances better so you do not need to physically segregate "the tax money" 
a pot does all you need to do 

eludlow

Grumpy_chap said:

To answer the thread title.

Yes

Rather than spend time over a few pounds, do another hour of fee paying work and that is a whole year of bank charges covered.

That's totally fair.

oldbikebloke said:

learn to manage your cashflow and finances better so you do not need to physically segregate "the tax money" 
a pot does all you need to do 

Whereas this I don't agree with.  Separating money into different accounts is no way indicative of poor cashflow / financial management - I'm pretty most would say it's actually the opposite.  But thanks for replying.

oldbikebloke

eludlow said:

oldbikebloke said:

learn to manage your cashflow and finances better so you do not need to physically segregate "the tax money" 
a pot does all you need to do 

Whereas this I don't agree with.  Separating money into different accounts is no way indicative of poor cashflow / financial management - I'm pretty most would say it's actually the opposite.  But thanks for replying.

we will agree to disagree. A "pot" is simply a number with a label.
As your system is capable of showing you how much is in each pot at the press of a button, that exactly meets your requirements.
Therefore, the only thing stopping you is apparent financial indiscipline in that you cannot trust yourself not to spend what is in the bank, rather than what is in the pot labelled "general use" and not spend what is in the pot labelled "tax"

you are over-paying for Xero if you are unable/unwilling to utilise its relatively sophisticated aspects. You may as well switch to a cheaper product  

eludlow

Agreeing to disagree is fine! But I think your assessment of what Xero can do is wrong, FWIW. As I understand it it won’t show Starling pots. And you don’t give consideration to why I might want to isolate tax funds - just assume it’s so I don’t spend it?!  Quite an assumption to make for one who has no idea how I run my business, or indeed my personal finances, or how I utilise the features Xero provides. 

Anyway, thanks for the reply - genuinely. Life would be dull if we all agreed with each other the whole time 🙂

oldbikebloke

eludlow said:

Agreeing to disagree is fine! But I think your assessment of what Xero can do is wrong, FWIW. As I understand it it won’t show Starling pots. And you don’t give consideration to why I might want to isolate tax funds - just assume it’s so I don’t spend it?!  Quite an assumption to make for one who has no idea how I run my business, or indeed my personal finances, or how I utilise the features Xero provides. 

Anyway, thanks for the reply - genuinely. Life would be dull if we all agreed with each other the whole time 🙂

your failure to explain why you are fixated on "needing" a physically separate bank account is why I made assumptions as to how you manage your finances.
I am well aware of Xero, using it across multiple clients is my job, I also use other systems more applicable to lesser needs of different clients .

J_B

Just open a personal account with Starling - you can call it Director's Loan Account

eludlow

oldbikebloke said:

eludlow said:

Agreeing to disagree is fine! But I think your assessment of what Xero can do is wrong, FWIW. As I understand it it won’t show Starling pots. And you don’t give consideration to why I might want to isolate tax funds - just assume it’s so I don’t spend it?!  Quite an assumption to make for one who has no idea how I run my business, or indeed my personal finances, or how I utilise the features Xero provides. 

Anyway, thanks for the reply - genuinely. Life would be dull if we all agreed with each other the whole time 🙂

your failure to explain why you are fixated on "needing" a physically separate bank account is why I made assumptions as to how you manage your finances.
I am well aware of Xero, using it across multiple clients is my job, I also use other systems more applicable to lesser needs of different clients .

I’m “fixated”?! You should see me when I really DO get fixated with something!

As to why I’d like a separate account? Well I’d prefer to have my company’s funds spread around anyway, and if there’s the chance (unlikely at the mo) that a decent deposit can earn some interest with a different bank, I’d like that too. Personally I don’t consider this “financial indiscipline”. 

You clearly know Xero well, so if you can explain how a Starling pot can show as a separate bank account in Xero, please do tell - I’d love to know how to set that up 👍

jonesMUFCforever

J_B said:

Just open a personal account with Starling - you can call it Director's Loan Account

IMO the OP has a limited company - you cannot open a personal account for limited company funds.

warby68

If financial discipline is not an issue, with interest rates so very low, you would most probably be better spending the time on generating fee income than on the hunt for a 'free' commercial account which pays interest.
Its also why its quite difficult to find what you're after. Few financial institutions are chasing deposits.
If you're in business of course you can see why chasing repeated new customer offers is a bit wrong - it also does not seem worth the effort at the moment for the reasons above.
A second bank however as a general principle may not be a bad thing - protects you in the event of technical problems, investigations or just like many have found during the pandemic, the challenger banks have not been able to provide the BBLs for example as they don't have the capital or approval for the full range of possible facilities.
You may be able to set up a director's loan which you repay before the tax implications kick in and when the company tax bill is due which would allow you to access personal accounts but very complicated for what's likely to be a few quid and cost more in accountancy work.