Separating your work finances from your personal ones is almost always a good idea, although it may end up being more expensive.
Here we cover why we think you should give business bank accounts some serious thought, and what’s the best way of using yours if you are a freelancer.
Can’t I just use my personal account?
First of all: if you have set up your business as a limited company, that’s a no. As a separate legal entity, your company must have its own bank account.
If you are set up as a sole trader instead, you can choose to just do everything from your personal account if you wish. And it might actually be ok if freelancing is just your side gig, and you only have to deal with a few occasional transactions.
However, if you manage a number of different clients and expect to receive various transactions a week or even a day, a business account will help you keep everything properly separated.
Also, keep in mind that most banks’ terms and conditions say you shouldn’t use your personal account for business purposes.
How a business account can help you organise your finances
A more organised workflow is probably the main benefit of using a business bank account for work, rather than dumping everything into your personal one. It’s the same difference between sporting a neat, clean desk, and working in a corner of your kitchen table.
It means not having to scroll through pub and supermarket transactions to find invoice payments, and being able to keep track of your earnings and expenditure.
A dedicated business account, together with a good accounting system, will enable you to quickly calculate how much you earn and what business expenses you have. Most importantly, it will save you time; and time really is money for a freelancer.
Once you have a clear picture of what your work finances look like, you can regularly transfer your net earnings into your personal account and use the money for everything that’s not business related, from bills to groceries to cinema tickets.
Dedicated business tools
Generally speaking, a business account and a personal account are pretty similar. But the best business accounts offer additional features that are built around the needs of small businesses and self-employed professionals.
For example, they sometimes come with some kind of accounting or invoicing service, or can integrate with existing software. This allows you to streamline your business finances, again saving you time and making it easier to keep track of what clients you should chase for payment.
Some also offer dedicated customer service, which can come in very handy if anything goes wrong.
Business accounts don’t have to be complicated
“Business account” sounds very official and grown-up, and it can feel weird if it’s just you, managing your business from a tiny desk in the corner of your living room. And indeed some of them are pretty complex products meant for big businesses.
But there’s also a whole range of business current accounts that are specifically meant for sole traders and very small businesses.
Some are digital-only, can be opened very quickly without too much hassle or administration, and are also cheap.
A business account can help you build your business credit rating
While you may have no intention of taking out a business loan now, you never know what the future holds.
At one point, you may want to grow your business, move it out of your living room, develop a great idea you’ve had, and might need credit to do so.
If that moment comes, you want to have a business credit history to show for, and getting a business bank account is a first step in that direction.
More costs
This is probably the main disadvantage of business bank accounts: they usually have more fees than personal bank accounts. Some come with a monthly fee, others will apparently be free but then charge you for things you wouldn’t expect, such as a simple bank transfer.
It may still be worth it, especially if the account is very good and offers extra features. It really goes back to the first point we made: Business bank accounts are great for freelancers that have to deal with quite a lot of invoices and transactions, and not just the occasional monthly payment.
Also, if you are looking for a mostly free business account and you don’t usually need to deposit cash, have a look at Starling Bank’s business account.
Pros and cons of business bank accounts if you are a freelancer
Pros
Keep your work and personal finances separate.
It’s easier to find clients’ payments, and keep track of how much your activity really earns you.
Dedicated business features, such as invoicing services.
It helps you build your business’s credit rating.
Some business accounts are actually easy to open and manage.
Cons
Business accounts tend to be more expensive than personal ones.
Slightly more banking administration, especially if you go via two different banks for your personal and business accounts.
What are the benefits of opening a business bank account?
Separating your business and personal banking is a necessity for anyone who owns a company. Not sure why exactly you should open a business bank account? Here are some of the many reasons:
All your business transactions are separated from your personal ones which makes your business accounting records more organised.
Some banks have mobile apps so you can check your records and make business payments anytime you want and anywhere you are.
You can set up standing orders for business expenses. No need to worry about not paying on time anymore!
You can pay your employees easily.
If you’re a small business owner, you may be able to enjoy a free banking period for some time.
From insurance to coffee supplies, some banks offer discounts for products and services that you may find useful for your company.
Bottom line
As a sole trader or freelancer you may not necessarily need to open a separate business bank account, but it can be a very good idea. If you manage a number of different clients and expect to receive various transactions a week or even a day, a business account will help you keep everything properly separated.
Opening a business bank account can help your business for several reasons. It can help your business build a credit rating, which may be helpful in future if your firm needs to borrow money.
Some business account providers also offer services tailored to small business owners, including invoicing features and basic bookkeeping via banking apps.
The main drawback of using a business bank account is that a fair few banks charge their business account customers transaction and account management fees. These fees apply make managing a business account more expensive than a personal current account.
Frequently asked questions
As long as your business account is with a fully licensed bank, it will be covered by the FSCS, which means that your deposits are protected up £85,000. The only thing you need to keep in mind is that, if you are a sole trader who also has a personal account with the same bank, protection only applies on deposits up to £85,000 in total (and not for each account). To claim separately for your business via the FSCS, it will need to be a separate legal entity, such as a limited company.
We have a longer guide on the topic, together with a selection of business accounts you can compare, on this page.
Short answer: if you set up as a limited company, your business becomes a separate legal entity, which can give you a series of advantages such as better tax conditions. The long answer is here.
We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you. Most of the data in Finder's comparison tables has the source: Moneyfacts Group PLC. In other cases, Finder has sourced data directly from providers.
Matthew Boyle is a banking and mortgages publisher at Finder. He has a 7-year history of publishing helpful guides to assist consumers in making better decisions. In his spare time, you will find him walking in the Norfolk countryside admiring the local wildlife. See full bio
Matthew's expertise
Matthew has written 244 Finder guides across topics including:
Helping first-time buyers apply for a mortgage
Comparing bank accounts and highlighting useful features
Challenger Countingup draws accounting and business banking together in one account. Our review looks at how it works and what it costs.
Feedback
How likely would you be to recommend Finder to a friend or colleague?
0
1
2
3
4
5
6
7
8
9
10
Very UnlikelyExtremely Likely
Required
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
Advertiser Disclosure
finder.com is an independent comparison platform and information service that aims to provide you with the tools you need to make better decisions. While we are independent, the offers that appear on this site are from companies from which finder.com receives compensation. We may receive compensation from our partners for placement of their products or services. We may also receive compensation if you click on certain links posted on our site. While compensation arrangements may affect the order, position or placement of product information, it doesn't influence our assessment of those products. Please don't interpret the order in which products appear on our Site as any endorsement or recommendation from us. finder.com compares a wide range of products, providers and services but we don't provide information on all available products, providers or services. Please appreciate that there may be other options available to you than the products, providers or services covered by our service.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
