Small business and tax blog

The simple answer is No: a separate bank account is not needed, and by not using a business bank account, the sole trader may be able to save on the bank charges that are usually applied to business accounts.

This follows from the fact that the business is not legally separate from the self-employed person who is running it.

However, there are a number of reasons why it might be better to open a separate business account:

1. The terms and conditions of a personal bank account may prevent it from being used for a business.
2. If the sole trader is using a different business name, and receives cheques in that name, it might not be possible to pay them into a personal bank account.
3. The business may wish to accept payments by credit card or debit card, which is unlikely to be possible with a personal bank account.
4. The bookkeeping is made easier if all transactions relating to a business are grouped together into a separate bank account. At the very least, it saves having to pay your accountant to filter out your weekly personal shopping trips to the supermarket in the process of adding up your proper business expenses.
5. By regularly monitoring the balance of a separate business bank account, it can give some idea of the profit or loss being made.
6. Money can be left in the account to pay the tax on the business profits, reducing the risk that the money might instead be inadvertently spent elsewhere.

For similar reasons, a person running more than one self-employed business may prefer to have a separate business account for each business, but again this is not a legal requirement.

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