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Do I need a separate bank account?

Wednesday, May 9, 2018
Do I need a separate bank account?

Do I need a separate bank account?

Whether or not you need a separate bank account depends on the structure of your business – whether you are a Sole Trader or a Limited Company.

If you are a sole trader there is no official requirement for a separate bank account, you and your business are one and the same for tax purposes – however we always recommend you do have a separate account for your business. 

It is good practice to have a separate account – your personal and business transactions are separate, so it is easier to see what relates to your business when these are the only transactions in your statement – and it will save you time at year end to work out what are and aren’t business income and expenses.

You don’t have to open a business bank account, you can use a personal current account, however some banks don’t like this so please check their terms and conditions.

If you are a limited company then you have to have a separate bank account set up in your limited company name.  When you set up the account you will need to take a copy of your incorporation certificate with you to the appointment.  Banks will only allow you to have a business account for a limited company.

Many banks offer free banking periods or other benefits to new customers – however this isn’t the only thing you should consider when choosing which bank to use.

If you are currently a customer of your chosen bank (ie you have your personal accounts with them), then quite often it is easier to set up a new business account, and sometimes you can even do this online rather than attend a branch.

Logistics is another thing to bear in mind – if you don’t need to pay in cash or cheques then one of the newer online offerings may be more beneficial to you.  However, if you do need to pay in cash or cheques then you need to ensure there is a branch local to you that you can get to when you need to.  Most banks are open the usual working hours, but some of the newer high street banks are now open later in the evening or at weekends – so make sure the bank you choose is accessible when you need it to be!

Lastly – if you are looking to use a bookkeeping software, like Xero, look at the banks which have direct feeds with your chosen software.  One of the major benefits of online software is having the bank feed with your chosen bank, so ensure your bank connects (and the feed is stable & reliable) before you open the account.

This is a good link to compare bank account services/packages: https://www.moneysupermarket.com/current-accounts/business-bank-accounts/?p=0&cicp1=&source=MIC-005D8106&mckv=aRA6MMbW%7Cdc_pcrid_516069282_mtype_bp_kword_business%20bank%20account_2764ri918980&uuid=bcabcb15-441a-48f0-aabb-ae09057d64cd&Device=c&engine=bing&utm_term=business+bank+account&utm_campaign=MON_Business+Banking_Phrase_PC_%5BM-MON-BUSBNK%5D&utm_medium=cpc&msclkid=59f3a42e953a1f6aeb55fe88e7b80cbf&utm_content=Generic&utm_source=bing

If you would like any advice on bank accounts that work well with Xero please contact us.