This is one of the most frequently asked questions we are asked every year, and here are the facts:
If you have a limited company a bank account in the business name is a legal requirement as the business is a different entity to its owners. Therefore if you are a limited company you MUST have a separate bank account for your business.
If you're a sole trader a business bank account in the name of the business is not a legal requirement. However, it is best practice to at least have a separate bank account for all business income and expenses as it makes it easier to track and prepare accounts for self-assessment.
Traditionally sole traders often avoided business accounts as they didn't want to pay hefty bank fees, now however, a lot of the newer banks provide free business banking so it's worth looking into.
What are the benefits of having a separate bank account for your business?
It may make funding more accessible. For instance, during COVID, funding was more readily accessed by those sole traders who used business banking.Â
It can also help you in the future by building a relationship with the bank in case you need access to finance for your business.
It is also worth noting that some personal bank accounts have terms in small print that do not permit any business income to be deposited into your personal account.
We use Starling bank as it is great for profit first - i.e. you can set up various pots within your account to put money aside for things like tax. We are official partners for Starling and you can use our QR code to apply for an account if this is something that could help get you more organised in your business.
