How a separate Business Bank Account helps sole traders

If you’re a sole trader, a separate business bank account is not a legal requirement. So, unless you’re planning to register as a limited company, you can use your personal bank account for money coming in and out of your business. 

However, like handstands and playing ‘Chopsticks’ on piano, just because you CAN keep doing something, doesn’t mean you should. 

Team Smarta and our partners at Tide think there’s a better way… 

Whilst using your personal bank account as a business account may seem like less admin and avoids any extra fees, keeping business and personal bank accounts separate will save you time and stress. Particularly when it comes round to that lovely time of year when your self assessment tax return is due.

Tide helps you make sense of your finances 

Having a dedicated business bank account makes it far easier to identify incoming and outgoing payments that are business-related. Detangling business and personal expenses (is that electricity bill for your house or your business?) can be time consuming and tricky to unpick if you get it wrong. The last thing you want is to accidentally record a business expense which isn’t actually allowable. 

With a business bank account, every transaction is related to your business, giving you a much clearer picture of money moving in and out. 

When it really matters 

Having your accounts in order makes submitting a self assessment tax return a simpler (and less daunting) process. 

Having a separate business bank reduces the risk of mistakes that could lead to you accidentally submitting false information to HMRC and getting fined. 

Keeping your business transactions in your personal account on the other hand, requires you to spend your valuable time sifting through grocery bills, mortgage payments and cinema trips to find the purchases you made that were legitimate business costs.

There’s an app for that! 

Any business owner, including sole traders, can use accounting software that directly links to your bank account.

Build trust and confidence 

It’s a badly kept secret that anyone else who’s ever started a business felt like they were ‘winging it’ at the start. (Over on our sister site Smarta you can read what our Commercial Director Rich Myers learned after he started an indie night at the worst nightclub in Europe). 

Having a business account adds credibility to your business and can give you a vital boost of confidence - really important for an early-stage entrepreneur. 

People tend to feel more comfortable making a payment to a registered business account, and it shows your customers and suppliers that yours is a serious operation. This helps to build trust.

Future-proof your business 

If you are currently using your personal bank account for business transactions, you might like to take a look at the terms and conditions. Some banks will shut your account down if it becomes apparent it’s being used for business purposes! 

If you’re thinking about growing and scaling your business, having a business bank account already set up puts you in a much stronger position to move forward with a loan or ask for credit. You’ll also be more attractive to lenders and investors than an entrepreneur still operating out of their personal account. 

Finally, from a security perspective it’s wise to keep your personal and household accounts separate so that any ‘blips’ in your business finances won’t affect your credit score.

Get your new business bank account in minutes with Tide.