Monthly budget planner question

bpk101

Hi,

I’m trying to create a monthly budget planner in excel that calculates disposable income left over after all my fixed bills and expenses are deducted. As a sole trader with relatively low overheads I just use one current account for everything coming in and out, so these fixed bills and expenses cover both household expenses (mortgage, utility bills etc.), personal expenses (gym membership etc.) as well as business expenses (software licensing, website hosting etc.). 

I’m unsure how to organise the budget planner in terms of… 

1. Whether i should start with my gross monthly income and then include tax and Ni as line items under business expenses (so similar to how the MSE Budget Planner works), or whether i should calculate and deduct the Tax and NI first and start with my net monthly income? I suppose there’s not much in it but just curious as to whether one is better practice than the other. 
2. Whether i should be listing business expenses at all given these are already claimed as allowable expenses during self assessment. Am i somehow doubling up by itemising them again? I mean i still have to pay for them very month and make sure i have the money reserved to do so. 

Thanks.

eskbanker

If you're looking for better practice, you'd probably be best to open a business account for your business activities, as the Ts & Cs of most personal accounts prohibit their use for business purposes, despite what some guides suggest.

This would then allow you to keep your business and personal income and expense management completely separate, resolving the above issues....

blue.peter

It's not quite the same thing, but it does sound as if you might find this thread of some use to you.

bpk101

eskbanker said:

If you're looking for better practice, you'd probably be best to open a business account for your business activities, as the Ts & Cs of most personal accounts prohibit their use for business purposes, despite what some guides suggest.

This would then allow you to keep your business and personal income and expense management completely separate, resolving the above issues....

Interesting, I wasn’t aware that I couldn’t use my current account for business purposes but checking the T’s & C’s you’re right.

I’ve been doing this for 8+ years without issue, my bank has never mentioned anything. Do I really need to switch to a small business account that are subject to monthly fees and other additional charges? It could cost me £50+ a month whilst now I’m paying nothing. 

eskbanker

bpk101 said:

eskbanker said:

If you're looking for better practice, you'd probably be best to open a business account for your business activities, as the Ts & Cs of most personal accounts prohibit their use for business purposes, despite what some guides suggest.

This would then allow you to keep your business and personal income and expense management completely separate, resolving the above issues....

Interesting, I wasn’t aware that I couldn’t use my current account for business purposes but checking the T’s & C’s you’re right.

I’ve been doing this for 8+ years without issue, my bank has never mentioned anything. Do I really need to switch to a small business account that are subject to monthly fees and other additional charges? It could cost me £50+ a month whilst now I’m paying nothing. 

The fact that it's cheaper to use a personal current account for business purposes isn't really relevant!

Up to you whether or not you continue to breach the Ts & Cs - you won't be alone in doing it, and as you've said you've got away with it thus far, but it's not without risk, as there have been plenty of posters who've had accounts closed for doing this, so ensure that you have a plan B in case your bank does that....

bpk101

eskbanker said:

bpk101 said:

eskbanker said:

If you're looking for better practice, you'd probably be best to open a business account for your business activities, as the Ts & Cs of most personal accounts prohibit their use for business purposes, despite what some guides suggest.

This would then allow you to keep your business and personal income and expense management completely separate, resolving the above issues....

Interesting, I wasn’t aware that I couldn’t use my current account for business purposes but checking the T’s & C’s you’re right.

I’ve been doing this for 8+ years without issue, my bank has never mentioned anything. Do I really need to switch to a small business account that are subject to monthly fees and other additional charges? It could cost me £50+ a month whilst now I’m paying nothing. 

The fact that it's cheaper to use a personal current account for business purposes isn't really relevant!

Up to you whether or not you continue to breach the Ts & Cs - you won't be alone in doing it, and as you've said you've got away with it thus far, but it's not without risk, as there have been plenty of posters who've had accounts closed for doing this, so ensure that you have a plan B in case your bank does that....

I’m a sole trader / freelancer and according to this article I don’t need a business account as ‘my self-employment isn’t legally separate from me.’

https://www.moneysavingexpert.com/banking/business-bank-account/

But I appreciate this doesn’t change the T’s & C’s of the personal account I’m using currently. 

eskbanker

bpk101 said:

I’m a sole trader / freelancer and according to this article I don’t need a business account as ‘my self-employment isn’t legally separate from me.’

https://www.moneysavingexpert.com/banking/business-bank-account/

But I appreciate this doesn’t change the T’s & C’s of the personal account I’m using currently. 

Yes, that was exactly what I was referring to by 'despite what some guides suggest'!  That article has always seemed irresponsible to me by failing to make a clear distinction between the lack of legislation requiring separate accounts and the fact that banks effectively require this in their terms, although it does loosely refer to this when outlining pros of keeping a separate business account:

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. You're unlikely to trigger this if you're, say, a freelance writer getting earnings transferred into the account. But, if – for example – you own a food truck and you'll make a lot of cash transactions, then your bank will likely close your personal account, or ask you to open one of its business accounts. 

bpk101

So if i did open a dedicated business account (which i think i'm inclined to do now), what would be best practice in terms of managing cashflow between this account and other accounts?

Obviously i'd have clients pay my invoices directly into the business account, put tax and NI savings aside in a 'pot' within the business account and set up DD's to pay for the few business expenses i do have (software licensing, website hosting etc.) from the business account too, but what about personal stuff...

Would i set up all of my different monthly SO's (e.g. an SO into joint account to cover mortgage and household bills, an SO into personal account to cover personal expenses, an SO into my pension, my different savings etc.) to come directly from the business account as well, or should i send all of this as a single lump sum payment into my personal current account first (as if i was paying myself a net wage) and then distribute them from the personal account instead?

It feels like a bit of an unnecessary additional step to do the latter but i can understand if it's required to keep business and personal lives separate. 

eskbanker

There's no right or wrong answer but the latter option seems much cleaner to me in making a clear differentiation between business and personal money, and simplifying budget management and monitoring, which was where you started....

dingling68

bpk101 said:

So if i did open a dedicated business account (which i think i'm inclined to do now), what would be best practice in terms of managing cashflow between this account and other accounts?

Obviously i'd have clients pay my invoices directly into the business account, put tax and NI savings aside in a 'pot' within the business account and set up DD's to pay for the few business expenses i do have (software licensing, website hosting etc.) from the business account too, but what about personal stuff...

Would i set up all of my different monthly SO's (e.g. an SO into joint account to cover mortgage and household bills, an SO into personal account to cover personal expenses, an SO into my pension, my different savings etc.) to come directly from the business account as well, or should i send all of this as a single lump sum payment into my personal current account first (as if i was paying myself a net wage) and then distribute them from the personal account instead?

It feels like a bit of an unnecessary additional step to do the latter but i can understand if it's required to keep business and personal lives separate. 

As you mention in your new thread, having one transfer to your personal account for your total monthly personal expenditure would be easiest when coming to compile your year end accounts, as there are less transactions to analyse