Having a business bank account can be the last thing on your mind when you’re just starting up. This can lead to the assumption that you can use your personal bank account as your business bank account, and just have both sets of transactions in there. However, this isn’t the case.
Even though there is no legal differentiation between the business and the individual running it as a sole trader, it’s still not a good idea to mix personal and business finances. This is because you need to be able to prove the origin of the transactions. Imagine if your business is audited, would you be able to prove whether the £15 in fuel was a business expense or a personal one?
If you’re using one single account, this can be difficult. Whereas, if you keep business transactions in a business account, you can easily differentiate personal transactions from business ones.
In the case of limited companies, there is a legal distinction between you, as a company director, and the company itself. Therefore, there is a legal requirement to have a dedicated business bank account.
Why does it have to be business-specific?
Business bank accounts typically operate the same way as personal accounts, leading some to wonder why they need a business-specific account rather than a personal account set up in the business’s name.
Some personal bank accounts have terms and conditions stating that they don’t allow business transactions. So, while they are typically free to set up and use, they may not be the solution your business needs.
Many business bank accounts also come with additional features that personal accounts do not, such as business support, categorised transactions, and accounting software integrations.
However, business bank accounts often come with fees, such as monthly, annual, or per-transaction fees, and these vary by provider. So you need to shop around before committing to using any specific bank.
Who can open a business bank account?
As long as you’re over the age of 18 and have a UK address, the following can open a business bank account:
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Sole trader
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A partner in a Limited Partnership (LLP)
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A company director in a limited company
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A partner in a non-limited partnership
Depending on the bank account and provider you’re using, there may also be other requirements before you can open your account, such as annual turnover or trading length.
We have a list of some of the banks that offer business accounts, along with key features and some costings, which you can find on our main website.