Having a business bank account can help solve a number of problems if you are a freelancer or are self-employed. As of early 2022, there are believed to be more than four million workers in the UK who fall under a self-employed status.
Some people even have a side job where they require a business bank account to differentiate between their traditional job’s wage and what they earn through their ‘side hustle’.
By having a separate business bank account, you can therefore help ensure you fully understand your finances. Here is what you need to know before you open your brand-new business bank account.
What is a business bank account?
The first thing you need to know is that a business bank account is much like a personal bank account. Just like a normal personal bank account, it keeps an eye on the income that goes into it, as well as any expenditures.
The main purpose behind a business bank account is to help keep your normal funds separate from anything you make through self-employed work. That way, you can better keep an eye on your invoices, keep up with your payroll, and manage your accounting and tax returns.
A business bank account can therefore be a solution well worth considering if you are eager to keep on top of your personal business.
Should I open a business bank account?
Whether you need the best business advice Suffolk has to offer, or you want to do your own research, it is crucial that you consider your personal situation before you open your account. In some cases, it may not be appropriate to open a business bank account.
It is appropriate to open a business bank account if:
- You own a registered UK limited business
- Your business is separate from your business expenses (so you cannot take money out of your business account for personal transactions)
However, in some instances it may not be right for you to open a business bank account. Situations in which you should not open a bank account may include if:
- Your additional work classifies as a gig. This includes work done through Deliveroo, Uber and TaskRabbit
- You are not a limited company and simply work as a freelancer, contracting worker or sole trader. This can include work as a hairdresser, designer, gardener, journalist, or interviewer
If you fall under one of these categories, you and your business are classified as the same. Therefore, you do not need to actually open a business bank account. The main reason you should open a business bank account is to offset your expenses against your standard income. So, be sure to take a look at your personal situation and decide the best thing for you and your job.
What are the benefits of having a business bank account?
There is a wide range of benefits that can come with opening a business bank account. These include being able to:
- Fill out your HMRC tax return more easily
- Increase your credit rating for your business
- Retain your bank’s terms and conditions
Just keep in mind that you may have to pay fees to open a specific type of account and if you have more than one account, you may be required to do more admin work.
So, you should make sure you take a look at your personal circumstances before you decide whether or not a business bank account will be worth it.
How do I create a business bank account?
The best way to open your business bank account is to speak to your bank about the type of accounts that are available for you. Some banks will offer very specific bank accounts that are tailored towards business ventures.
You may have to pay a certain fee to open and maintain the account. Monthly fees can range from £5 to £15. There also may be a chance that you have to pay additional fees to undertake transactions. This may include using cards and depositing cheques.
There is a chance that the account you open up will be free for the first few months. However, this may only be for between six and 12 months. So, you should speak to your bank to ensure you get the best deal possible for your business. You may even want to consider looking into a business bank account that comes with a mobile app.
Am I legally required to open a business bank account?
No, you do not have to open a business bank account if you do not think that you need one. Instead, take a look at your finances and your job type. That way, you can decide for yourself whether or not a business bank account would work for you.
Would you like to have a more in-depth discussion about how our expertise here at ST Accountancy could benefit your business? If so, please do not hesitate to reach out to our team. We provide a range of services including accounting services in Suffolk as well as bookkeepers in Ipswich and business advice.