Can I use my personal bank account for my business?

Find out whether you need to open a separate business bank account for your company.

If you run a small business, you might want to know whether you really need to open a separate business account or whether you can simply use your personal bank account instead. Here, we explain the rules surrounding personal and business bank accounts, whether you’re a sole trader, limited company or business partnership.

Can I use my personal bank account for my business?

Whether you’re allowed to use a personal bank account for your business depends on the type of business you run.

Sole trader

If you’re a sole trader or freelancer, or you’re contracting with a business that’s not a limited company, there’s no legal requirement to have a business bank account. That’s because your business isn’t legally separate from you – financially, you and your business are one and the same.

However, just because you don’t need one, this doesn’t mean you shouldn’t have one.

Limited companies

If you run a limited company, you are required to open a business bank account. This is because you’ve registered your business with Companies House, which means it’s a separate entity to you legally and financially. Opening a separate business account also makes it much easier to manage your company finances.

Business partnerships

Whether you need to open a business bank account as a partnership depends on the partnership you’ve set up.

General partnerships don’t need a separate business account as the business isn’t incorporated with Companies House. All partners manage their own profits and pay tax through self-assessment.

Limited liability partnerships (LLP) must register with Companies House, which means your company is a separate legal entity and you need to open a separate LLP bank account.

Limited partnerships also need to open a business bank account, as the company is a legal registered entity at Companies House.

Why you shouldn’t use a personal account for business purposes

Even if you don’t need to open a business account, there are reasons why it’s best not to use your personal account for business purposes. For a start, some banks won’t allow you to use a personal bank account for business transactions, and if you’re found to be doing so, your bank account could be closed or some features could be restricted.

On top of this, it can be a lot harder to track of your business expenses if they are combined with your personal transactions. This can make filing your tax return trickier.

Benefits of using a business account

Opening a business bank account has a number of benefits. For example:

  • It simplifies account admin. Keeping your business income and expenses separate from your own makes it much easier to file your tax return. Easily identifying business expenses can help ensure you pay the right amount of tax. What’s more, if HMRC has to investigate your business finances or you hire an accountant, they won’t have to look at your personal finances.
  • It can help you build a business credit rating. Having a separate business account can enable you to build a business credit score, which could make it easier for you to get accepted for a business loan or credit card in the future.
  • It can make your business appear more professional. Clients might be happier making payments into a bank account in your business name rather than your own.
  • You might benefit from extra features. Some business accounts come with additional features, such as accounting software integration and invoicing tools.

Bottom line

If you run a limited company, limited liability partnership or limited partnership, you’ll be required to open a business bank account for your company.

Sole traders and general partnerships, on the other hand, don’t need to open a business account, but there are many good reasons for doing so. Whether it’s to help track your business transactions or build a business credit score, using a business account rather than a personal one can make good financial sense.

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