{"id":163253,"date":"2021-05-27T08:39:30","date_gmt":"2021-05-27T07:39:30","guid":{"rendered":"http:\/\/chrisw92.sg-host.com\/?p=163253"},"modified":"2024-12-17T13:12:22","modified_gmt":"2024-12-17T13:12:22","slug":"do-i-need-business-bank-account","status":"publish","type":"post","link":"https:\/\/realbusiness.co.uk\/do-i-need-business-bank-account","title":{"rendered":"Is it a legal requirement to have a business bank account?"},"content":{"rendered":"<div class='booster-block booster-read-block'><\/div><p><strong>Is it a legal requirement to have a business bank account &#8211; Desptite many believing it is, it is not. There is no actual legal requirements on a specific bank account, though your accountant and financial advisors will usually say it is helpful. Whether you are operating as a sole trader or a limited company, having all of your overall financial transactions in one place is extremely sensible. Preparing a business annual set of accounts is a legal requirement for Companies House and a business bank account helps that process.<\/strong><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_74 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-684fc18ccd210\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-684fc18ccd210\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/realbusiness.co.uk\/do-i-need-business-bank-account\/#Can_you_use_your_personal_account_for_your_business\" >Can you use your personal account for your business?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/realbusiness.co.uk\/do-i-need-business-bank-account\/#What_is_a_business_bank_account\" >What is a business bank account?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/realbusiness.co.uk\/do-i-need-business-bank-account\/#What_does_the_law_say_about_business_bank_accounts\" >What does the law say about business bank accounts?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/realbusiness.co.uk\/do-i-need-business-bank-account\/#Does_a_sole_trader_need_a_business_bank_account\" >Does a sole trader need a business bank account?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/realbusiness.co.uk\/do-i-need-business-bank-account\/#Does_a_freelancer_need_a_business_bank_account\" >Does a freelancer need a business bank account?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/realbusiness.co.uk\/do-i-need-business-bank-account\/#Does_a_limited_company_need_a_business_bank_account\" >Does a limited company need a business bank account?<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/realbusiness.co.uk\/do-i-need-business-bank-account\/#How_do_business_bank_accounts_work\" >How do business bank accounts work?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/realbusiness.co.uk\/do-i-need-business-bank-account\/#Pros_and_cons_of_business_bank_accounts\" >Pros and cons of business bank accounts<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/realbusiness.co.uk\/do-i-need-business-bank-account\/#Benefits_of_having_a_business_bank_account\" >Benefits of having a business bank account<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/realbusiness.co.uk\/do-i-need-business-bank-account\/#Disadvantages_of_having_a_business_bank_account\" >Disadvantages of having a business bank account<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/realbusiness.co.uk\/do-i-need-business-bank-account\/#How_to_choose_the_right_business_bank_account\" >How to choose the right business bank account<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/realbusiness.co.uk\/do-i-need-business-bank-account\/#What_do_you_need_to_open_a_business_bank_account\" >What do you need to open a business bank account?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/realbusiness.co.uk\/do-i-need-business-bank-account\/#Should_you_open_a_business_bank_account\" >Should you open a business bank account?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/realbusiness.co.uk\/do-i-need-business-bank-account\/#Related_questions\" >Related questions<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/realbusiness.co.uk\/do-i-need-business-bank-account\/#Can_I_use_my_personal_bank_account_for_my_small_business\" >Can I use my personal bank account for my small business?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/realbusiness.co.uk\/do-i-need-business-bank-account\/#How_do_small_business_owners_pay_themselves\" >How do small business owners pay themselves?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/realbusiness.co.uk\/do-i-need-business-bank-account\/#Should_I_leave_money_in_my_business_bank_account\" >Should I leave money in my business bank account?<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/realbusiness.co.uk\/do-i-need-business-bank-account\/#Summary_-_Is_it_a_legal_requirement_to_open_a_business_bank_account\" >Summary - Is it a legal requirement to open a business bank account?<\/a><\/li><\/ul><\/nav><\/div>\n\n<p>In this article, we will explain the pros and cons of having a business bank account and explore the legal requirements when it comes to how you manage your business\u2019 finances.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Can_you_use_your_personal_account_for_your_business\"><\/span>Can you use your personal account for your business?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Whether or not you can legally use your personal bank account for your business will depend on the structure of your business. Whilst there is no legal requirement for a business operating as a sole trader to have a separate business account, it is highly recommended to do so.<\/p>\n<p>You\u2019ll also need to check whether using a personal account for your business complies with your bank\u2019s terms and conditions. If your bank discovers that you\u2019ve been using your personal account for your business without authorisation, your account could be shut down.<\/p>\n<p>Read on to discover everything you need to know about business bank accounts.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_is_a_business_bank_account\"><\/span>What is a business bank account?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Just like a personal current account, a business bank account allows you to pay in and withdraw money as and when you require. However, a business bank account is used solely for your business transactions. As described, &#8220;Is it a legal requirement to have a business bank account?&#8221; &#8211; No but it is usually very sensible and in many cases, accountants will almost insist upon it to support their role.<\/p>\n<p>There are business accounts available that allow additional functionality such as facilitating card payments, creating your invoices and running your payroll. You may also be able to have a business overdraft and credit card from your business bank account.<\/p>\n<p>Although many business bank accounts advertise themselves as being free, this is rarely the case. Most business accounts charge a monthly fee, although this may be waived for the first few months as a sign-up incentive.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_does_the_law_say_about_business_bank_accounts\"><\/span>What does the law say about business bank accounts?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>First of all, let\u2019s look at what the law says about business bank accounts. Is it a legal requirement to have a business bank account for your business in the UK?<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Does_a_sole_trader_need_a_business_bank_account\"><\/span>Does a sole trader need a business bank account?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>If you operate as a sole trader in the UK, there\u2019s no legal requirement to have a separate business bank account. HMRC state that you should record your business transactions separately to your personal transactions, but this doesn\u2019t mean that you need separate bank accounts to operate legally.<\/p>\n<p>However, having a separate bank account for your business will make filing your tax return far quicker and easier, as you\u2019ll be able to clearly see your business transactions. Although this doesn\u2019t need to be a specific business account, you\u2019ll need to check the terms and conditions attached to personal bank accounts as some may state that they cannot be used by businesses.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Does_a_freelancer_need_a_business_bank_account\"><\/span>Does a freelancer need a business bank account?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Freelancers are typically registered as a sole trader with HMRC. As long as you are trading as a sole trader, there is no legal requirement to keep a separate bank account, although it can help you to keep your business and personal transactions separate and make it easier to complete your tax return.<\/p>\n<p>If you decide to register as a limited company, you will be legally required to open a business bank account as your business will then be regarded as a separate legal entity. It\u2019s worth considering this when deciding whether to operate as a sole trader or a limited company.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Does_a_limited_company_need_a_business_bank_account\"><\/span>Does a limited company need a business bank account?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>A limited company is legally required to have a separate business bank account. This is because a limited company is a separate legal entity with its own legal obligations and finances. Profits are retained by the company and may be paid to shareholders as dividends.<\/p>\n<p>If you own a limited company that has been registered at Companies House, your business will need its own bank account. This is because your business is not linked to your personal finances so needs to remain completely separate.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"How_do_business_bank_accounts_work\"><\/span>How do business bank accounts work?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Business bank accounts are very similar to personal bank accounts. However, there are some fees that you need to be aware of.<\/p>\n<p>Firstly, most business bank accounts charge a monthly account fee, simply for having the account open. Monthly fees typically range from \u00a35 &#8211; \u00a315. You\u2019ll need to think about whether this fee is sustainable long-term for your business before signing up.<\/p>\n<p>You may also be charged transaction fees for card transactions, paying in cash over the counter or cashing in cheques, so it\u2019s important to read the terms and conditions carefully before choosing a business bank account.<\/p>\n<p>Many banks will offer free business accounts for the first few months, meaning that there are no fees to pay. However, this usually only lasts for 6-12 months so make sure you understand the future fees before making the commitment.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Pros_and_cons_of_business_bank_accounts\"><\/span>Pros and cons of business bank accounts<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Although business and personal current accounts have many similarities, there are a few differences that translate into either pros or cons.<\/p>\n<p>When you\u2019re trying to decide whether to open a business bank account, it\u2019s important to weigh up these advantages and disadvantages. This will give you the information that you need to be sure that you\u2019re making an informed decision that is right for your business.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Benefits_of_having_a_business_bank_account\"><\/span>Benefits of having a business bank account<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The benefits of opening a separate business account for your business finances include:<\/p>\n<p><strong>Separation: <\/strong>A business bank account enables you to keep your business transactions completely separate to your personal finances. This can make it easier to see how much money you have both personally and in your business, as well as saving you valuable time when it comes to filing your tax return.<\/p>\n<p><strong>Build a credit rating: <\/strong>Opening a bank account in your company name can help to build the credit rating of your business. This can come in useful later down the line when it comes to applying for a business loan or taking out a credit card.<\/p>\n<p><strong>Professional appearance: <\/strong>A business account can give you a more professional appearance, with your business name appearing on cheques and your debit card. This can help to give customers more trust in your business.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Disadvantages_of_having_a_business_bank_account\"><\/span>Disadvantages of having a business bank account<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The disadvantages of opening a separate business account include:<\/p>\n<p><strong>Fees: <\/strong>Most business accounts will incur a monthly fee. This fee usually sits between \u00a35 and \u00a35 per month but fees vary between banks. You may also be charged a transaction fee, depending on the account. Many banks attract businesses with the promise of 6-12 months fee-free, but the fees apply after this time, so be sure to check the terms and conditions before opening an account.<\/p>\n<p><strong>Separation: <\/strong>Although separation from your personal finances is an advantage, it can also be a disadvantage. Having a separate business account means that you\u2019ve got another bank account to manage, meaning that you\u2019ve got twice the number of statements, passwords and debit cards.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"How_to_choose_the_right_business_bank_account\"><\/span>How to choose the right business bank account<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Most high-street banks offer business bank accounts, along with many online-only banks, but how do you know which to choose The most important thing is to fully research the options available so that you can choose the right option for your business.<\/p>\n<p>It can be tempting to look for the cheapest business bank account, or the business bank account with the lowest fees, but there are other factors that you will also need to take into consideration.<\/p>\n<p>For example, think about how you\u2019ll access the bank. Do you plan to regularly deposit cash in person&#8221; If so, you\u2019ll want to choose a bank that has a branch located near to your home or business address.<\/p>\n<p>You might also want to think about whether the bank has an app that can be accessed from your mobile phone. Some apps will allow you to deposit cheques on the go, whilst others may allow you to take card payments from customers.<\/p>\n<p>It\u2019s also important to read customer reviews to make sure the bank you choose is known for its great customer service. Customers are usually quick to leave a review if their experience isn\u2019t up to scratch, so put this to good use by checking Google, Trustpilot and Facebook for reviews.<\/p>\n<p>Weighing up all of these factors can help you to choose the business bank account that is best suited to your business\u2019 needs.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_do_you_need_to_open_a_business_bank_account\"><\/span>What do you need to open a business bank account?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>You might be wondering what you\u2019ll need to be able to open a business bank account. If you are a sole trader, you\u2019ll need photo ID such as a driving licence or a passport, as well as proof of your current address. This could be a utility bill or a bank statement.<\/p>\n<p>If you want to open a business bank account as a limited company, there are a few more things that you\u2019ll need. As a limited company, you\u2019ll need to provide details of your company\u2019s registration at Companies House, along with your VAT registration details.<\/p>\n<p>It\u2019s best to check with the bank you\u2019re opening an account with so that you can make sure you\u2019ve got the right documents ready to open your business account.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Should_you_open_a_business_bank_account\"><\/span>Should you open a business bank account?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>For limited companies, you are required to open a business bank account to comply with the legal duties of running a limited company. However, for sole traders, the choice of whether to open a business account is completely personal.<\/p>\n<p>Keeping your business and personal finances completely separate can help you to keep track of how much money is in your business and save you valuable time when it comes to filing your tax return. However, business bank accounts typically incur a monthly fee, increasing the costs of running your business.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Related_questions\"><\/span>Related questions<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3><span class=\"ez-toc-section\" id=\"Can_I_use_my_personal_bank_account_for_my_small_business\"><\/span>Can I use my personal bank account for my small business?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>If you\u2019re operating as a sole trader, you don\u2019t legally need to have a separate business bank account. However, having a separate account can help to keep your business and personal finances separate, as well as making it easier to file your tax return at the end of the year. You\u2019ll also need to check that you aren\u2019t breaking the terms and conditions of your bank account by using it for your business, or you could run the risk of your account being shut down.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"How_do_small_business_owners_pay_themselves\"><\/span>How do small business owners pay themselves?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>If you\u2019re a sole trader, the profit that your business earns is legally your own as you are the same legal entity. Sole traders typically pay themselves through an owner\u2019s draw. This is simply transferring money from your business bank account to your personal bank account. You can choose how much to pay yourself \u2013 it\u2019s one of the perks of being self-employed. However, you\u2019ll also need to make sure that your business is financially stable as you\u2019ll be personally responsible for any debts.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Should_I_leave_money_in_my_business_bank_account\"><\/span>Should I leave money in my business bank account?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>It\u2019s always a good idea to have a small amount of money in your business account to cover future expenses. If you\u2019re a sole trader, the money in your business account is legally your own so it\u2019s worth considering whether to transfer any excess money into a savings account or whether to invest it. Remember that as a sole trader, you will be personally liable for any debts that your business occurs, so you\u2019ll need to make sure that you leave enough money in your business account for any business expenses.<\/p>\n<h2>Summary &#8211; Is it a legal requirement to open a business bank account?<\/h2>\n<p>Whilst generally there is no legal requirement to open a business bank account, you often should do it anyway. Sole traders are under no legal obligation to open a business bank account, whereas limited companies must have a separate bank account.<\/p>\n<p>Having a separate business bank account can help you to manage your personal and business finances more easily, seeing exactly how much money is going in and out of your business each month. It can also help to speed up the process of completing your tax return \u2013 something that every business owner wants!<\/p>\n<p>If you do decide to open a business bank account, make sure that you weigh up your options and read the terms and conditions carefully. There\u2019s nothing worse than jumping into a decision that you later regret.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Is it a legal requirement to have a business bank account &#8211; Desptite many believing it is, it is not. There is no actual legal requirements on a specific bank account, though your accountant and financial advisors will usually say it is helpful. Whether you are operating as a sole trader or a limited company, [&hellip;]<\/p>\n","protected":false},"author":26234,"featured_media":163254,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"footnotes":""},"categories":[2046],"tags":[3507,7733,11925,11880],"class_list":["post-163253","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-managing-your-cash-flow","tag-bank-account","tag-bank-for-business","tag-may-p","tag-p-2021"],"views":7315,"_links":{"self":[{"href":"https:\/\/realbusiness.co.uk\/wp-json\/wp\/v2\/posts\/163253","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/realbusiness.co.uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/realbusiness.co.uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/realbusiness.co.uk\/wp-json\/wp\/v2\/users\/26234"}],"replies":[{"embeddable":true,"href":"https:\/\/realbusiness.co.uk\/wp-json\/wp\/v2\/comments?post=163253"}],"version-history":[{"count":0,"href":"https:\/\/realbusiness.co.uk\/wp-json\/wp\/v2\/posts\/163253\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/realbusiness.co.uk\/wp-json\/wp\/v2\/media\/163254"}],"wp:attachment":[{"href":"https:\/\/realbusiness.co.uk\/wp-json\/wp\/v2\/media?parent=163253"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/realbusiness.co.uk\/wp-json\/wp\/v2\/categories?post=163253"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/realbusiness.co.uk\/wp-json\/wp\/v2\/tags?post=163253"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}