• Evolve Team

Can I use my personal bank account for my small business?

This is a question many of our clients ask us all the time. It seems to be a hot topic with many small and medium business owners. There are now an increasing number of people becoming self-employed or transitioning from their side hustle to a fully blown start-up, so it felt like a good time to answer this question and related queries.



Let’s start at the top...


Should I Open A Business Bank Account?


In a word, yes! In particular, we see so many self employed people run their business through their personal bank account and it quickly becomes a mess. Business purchases are muddled up with their supermarket shop, they find it difficult to budget and year end records are hard to decipher making it harder for the accountant to ensure maximum tax efficiency. All this adds up to hours spent on managing the mess and can be a costly accounting bill!


So yes, please open a separate business account for your business if you are a solopreneuer, self-employed in any capacity, running a business from your kitchen table… all the way up to a multi-location limited company. A business bank account is an essential tool for the legal and financial success of your business.


We’ll cover all the main benefits of having a separate business account further down but for now let’s explore some of the related questions we are asked about this topic.


Can you run a business without a business bank account?


Technically yes. You probably could run a business without a business bank account and there are many entrepreneurs that do. However, we really advise against this because ultimately it helps to keep your business finances professional, trustworthy, legal and much easier to manage.


Why should you have a business account separate from your personal account?


In some cases there are specific legal reasons why you need to have a business account separate from your personal account - if you have a limited company then this is a legal requirement. But for your own sanity it’s going to be very helpful to keep your business transactions completely separate from your personal and household banking. Additionally, when you grow your business and require a book-keeper and need an accountant, you won’t need to share your private transactions and banking history with these members of staff or outsourced suppliers. No one wants their accountant to see their subscription to Naked Wines or quite how often they are eating out. That’s your personal business and no one else's!


Is it illegal to use a personal account for business?


It’s not illegal to use a personal account for business if you are self-employed but it certainly is if you are a limited company. If your business is growing and successful there could be a really good chance that you may make the move to become a limited company in your future. If you already have a separate bank account for your business then you are already used to keeping personal and business banking transactions separate, so you will be well used to it and opening a new account for your limited company will be a doddle. Much easier to start with the end in mind!


Is it a legal requirement for a limited company to have a business bank account? / Do I need a business bank account for a limited company?


Yes, there is no grey area here. If you are running a limited company then the business must have a bank account in its own name. We don’t need to elaborate on this, you just have to do it!


Do I need a business bank account if self-employed?


The rules are not as strict if you are self employed and so technically you don’t have to use a separate bank account if you don’t want to but we strongly advise that you do. It’s so much more professional to do this and reassuring to your customers that you take your business and their custom seriously.


In fact, keep reading to see why we recommend a separate business bank account no matter what the form or size of your business...


What Are The Benefits Of Having A Separate Business Account?


Ah, there are sooo many benefits to opening a separate business bank account (and no, we are not linked or tied to the bank industry in any way, it’s just really good advice!):


  • It keeps all of your business transactions in one place so that they are much easier to track.


  • Keep your accounting costs down by making it easier and quicker for your bookkeeper/accountant to find and list business transitions.


  • You do not accidentally (YOU SHOULD NOT) use your business account for personal spends, instead transfer personal money to yourself as wages, dividends or drawings from your business bank account into your personal bank account.


  • You can clearly see how much money you have just for your business. You’ll also know your personal account is just for you and that you can go wild (if you are in the black!).


  • You can link your business bank account to digital bookkeeping software such as Xero to easily manage your record keeping, which saves a lot of time and costs.


  • A business account looks so much more professional and trustworthy to clients if the bank account is in a business name.


  • If you are compliance checked by HMRC you will find it easier to prove your business income & expenses if it’s all through a dedicated business account.


  • You can create a separate savings account or sub-account from your business account to set aside taxes.


  • It feels good to have your business separate. When you set it up professionally and separately, then you will find you run your business more professionally too. You are effectively setting yourself up and planning for success.




What To Look For In A Business Account


Most business accounts come with a cost attached and whilst some will offer a short period of free banking, we would advise you to look beyond this short term incentive to see what else they can offer you.


Our strongest recommendation is to use a bank that will link up with some bookkeeping software services that you might already be using or are looking to use. Most of our clients now use Xero, so tend to look for banks that offer this integration. Most UK banks now offer this integration as well as most online banks too. But remember if you opt for an online bank, if you take cash payments then it’s going to be difficult to pay that in.


Some banks also offer free bookkeeping software with their bank accounts such as:




To summarize, you can tell we are quite evangelical about opening a separate business bank account and this is based on our experience of bookkeeping and producing annual accounts for hundreds of small and medium businesses. The clients that have already had a separate bank account set up tend to have lower costs and simpler accounts to file with less questions from HMRC. It’s a no-brainer all round!


If you have more questions, just get in touch.


☎️ TEL: 01480 775 611

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