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If you are operating as a sole trader, there is no legal requirement for you to set up a business bank account. You only have to do this if you’re trading as a limited company, partnership or trust, in order to work out and report taxes correctly. That said, it is sometimes just easier to have separate bank accounts for your business and personal finances.

Can I use any account as a business account?

Sole traders who do want to have a separate bank account for their business don’t have to use a business account as far as HMRC are concerned. That said, some banks prefer that you open a business account, and might want to discuss your business plans in detail. If it’s a free service, then it can’t hurt to take them up on it.

A business bank account can make it easier to work out tax

Whether you’re doing it yourself or have an accountant to handle your tax affairs, this is a lot easier to do when you have a business bank account.

In a business bank account you can clearly see the cash flow of the business without getting it mixed up with other finances. This will end up saving you or your accountant time and stress.


accounting services for sole traders

Easier to track expenses

As well as working out your tax, having separate finances will make it easier for you to track your expenses.

In order to claim tax relief on business expenses you’re going to need to record all of your business expenses and report them to HMRC as part of your tax return.

It’s a lot easier to see your business expenses if you’re just looking at your business account. If you just use a normal personal account, you’re going to have to sort through your transactions to find out which ones are business expenses and which are personal.

This makes them harder to keep track of and you may end up missing out on claiming for certain items as they’re easier to overlook or forget.


It can look more professional

Having a business bank account for other companies to do business with will show that you’re a professional. It tends to look better than giving out bank details for your personal account.

How to choose a business bank account

Business bank accounts generally charge a small fee whenever you pay in or withdraw money. Some accounts will also charge a monthly or quarterly fee. With some banks you can sign up for an introductory offer where the first 12 months are free. So shop around and find the best deal for you.

Sole Trader Guide

Keep an eye out for extra benefits that different banks are offering with their business accounts. Compare transaction fees and overdraft limits of a few business bank accounts to see what offers suit you and your business best. You should also look at the amount of support you can get from bank advisors.

Not ready for one?

While business bank accounts make sense for the reasons above, some sole traders find that they don’t mind working with their personal account.

This often applies to people who aren’t making much or work on a casual basis. In this case it may not be worth it.

If you’re in the early stages of building a business, you might prefer to save the money that could go into paying for your business account. There’s nothing stopping you from opening one later down the line should you feel the need.

Learn more about our online accounting services for sole traders. Talk to an advisor using the live chat button on screen, or call 020 3355 4047.

About The Author

Kara Copple

An experienced business and finance writer, sometimes moonlighting as a fiction writer and blogger.

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