If you are a sole trader, contractor or freelancer, one of the debates you may have come across is whether you should get a business bank account or just use your personal one.
While there is no legal requirement for a sole trader to have their own business bank account, there are many benefits to having one. Below we outline some of those key benefits to consider when deciding what to do with your money.
Keep everything separate – for your sanity
The main benefit to having a business bank account is that you can keep everything separate. Income and expenses are not mingled together with personal finances, which makes everything neater.
When it comes to doing your taxes and claiming for expenses, it’s so much easier to do this when everything is separate.
No more time wasted scrolling through transactions, trying to remember which that £5.99 transaction was last week or whether you can claim for it. If you have a separate business account, you know that everything coming out it is an expense.
Give your accountant less of a headache
On the same note – nothing gives an accountant more of a headache than finding out your finances are all mixed up.
Please spare your accountants the hassle of messy bookkeeping, so they can spend more time doing your accounts and giving you helpful tax advice. It’ll make life easier for the both of you because your accountant will need more of your input to determine which transactions are business-related if finances are mingled together.
Integrate with software
With modern accounting software, you can usually link up your bank account to the software. This will then automatically pull over transactions, doing most of the hard work for you.
This is, of course, much easier to do when your finances are separate. Otherwise everything will get pulled over and you won’t have saved yourself any time because you’ll have to go in and manually remove irrelevant transactions.
What type of bank account should you get?
You may automatically gravitate towards high street banks, perhaps the one you have a current account with. However, a lot of these options will have monthly fees. If you’re looking for something a bit cheaper and more straight-forward in some cases, online banks could be an option for you.
Online banks tend to offer accounts for low or no fees besides transfers and withdrawals in some cases. Many of them are designed with small businesses and sole traders in mind and can be set up easily online in a few minutes.
Which accounts are best?
Luckily, you’ve got a few great options to choose from. Take a look at the likes of Tide, Revolut, Coconut, Starling bank or Monese – which are all popular options for sole traders.
They’re cheap and easy to set up and some have other useful features like accounting and tax estimates, to make managing your money simpler than ever. The above examples are all highly rated, so you won’t be compromising cost for quality.
Are you considering a separate bank account? Have you ever tried a business bank account before? Please share your thoughts in the comments below.