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If you run your own business, you may be wondering whether you need a separate bank account for your business finances. It depends on your business structure – the answer is different for sole traders, business partnerships and limited companies.
Below, we explain when a business account is necessary and the potential benefits of separating your personal and professional transactions.
Compare the latest business bank accounts from top UK providers, including:
Can I use a personal account for business?
If you’re a sole trader, you can use your personal account for business – though you may find a dedicated business account helpful.
If you run a limited company, you must separate your personal and business finances using a business bank account.
A limited liability partnership (LLP) must have its own dedicated LLP business bank account through which its business transactions can be conducted.
You can find out more details about what is required for your business below.
Sole traders
If you are a sole trader, you can use your personal account for business transactions. Because you are not incorporated with Companies House, your trading activities are not a separate legal entity. You and your business are one and the same financially. So you can use the same account for both personal and professional expenses.
That said, you may want to consider having a separate business account for your self-employed work to help organise your finances.
» MORE: Guide to self-employed bank accounts
Limited companies
If you run a limited company, you cannot use your personal bank account for your business. This is because your company is incorporated with Companies House, and is therefore a separate entity to you legally and financially.
What’s more, having a dedicated business bank account can help you manage your accounts. When running a limited company, you need to keep clear and accurate records of your business income and expenditure. Using a separate account for all business transactions can make it easier to track your business spending, keeping it all in one place.
» MORE: Should I set up as a sole trader or a limited company?
Business partnerships
Whether you need a business bank account for your partnership depends on which type of partnership you have set up:
- General partnerships: You do not need a separate business account, as the business is not incorporated with Companies House, and all partners manage their own profits and pay tax via self-assessment.
- Limited liability partnerships (LLP): As an LLP has been registered with Companies House as a legally separate entity, partners will need to open a separate LLP bank account.
- Limited liability partnerships: You need a business bank account as your company has been incorporated with Companies House and therefore is separate from you.
Benefits of a separate business account
Even if it’s not a requirement for you to get a separate business bank account, you may want to consider how it could help your business.
One key benefit of using a business account to keep your personal and professional transactions separate is that it makes life easier for you when it comes to filing your self-assessment tax return. Your business expenses will be easier to find as they will all be recorded in the same place, rather than being mixed in with food shops or meals out with friends.
Another thing to bear in mind when using your personal account for business is your bank’s terms and conditions. Some providers explicitly state that using a personal bank account for business purposes is in breach of the terms of the account. Your account could be closed or some features could be restricted if you are found to be using it for business.
If you want more details about what a separate account could offer your business, you can compare business bank accounts with NerdWallet.
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