Business Account

[fairycakes69]

My daughter has just started up her own cake business, she is working from home. Does she need to open a business account at the bank or can she use a separate private account? She did go to the bank and opened a business account, but they won't let her do online banking with it, or have a debit card, they say she has to show that she uses the account for 6 months before they will let her do online banking. Problem is she buys all her goods online, mainly with PayPal and customers pay her online as well. Any advice welcome.

Thank you

[pixie373]

I'm not sure on the legal situation of whether you have to use a business account. My sister and i work together and we have a separate joint personal account. Most people i know use personal accounts as business ones charge for each transaction. Maybe she could start with a separate personal account and then look into it further when she's a bit more established.

[boxtops]

She could open up a separate personal account or instant access savings account with another bank/building society, just for funds for her business. That would keep the transactions separate. I have a small account I keep just for eBay/PayPal transactions, to funds can be moved on-line.

[themas]

I've known quite a few self-employed people who don't have a business account. I'm pretty sure there is no requirement to do so, but the banks may be awkward if they conclude a personal account is being used solely for business.

However, in my view it is essential to have an account which is quite separate from personal income/expenditure as mixing the two up can make it very difficult to prepare the business accounts & tax returns properly. In particular, HMRC can become difficult if they are not satisfied the accounts are a true representation of the business.

Incidentally, have she registered with HMRC as self-employed & started paying Class 2 NI (unless she is exempt based on low income)?

[fairycakes69]

Thank you for your replies, she has a separate account she can use for business, she is a low earner, but has informed the HMRC and got all her certificates in place, also has done book keeping so she can keep up to date. Just thought best to check she can use a personal account.

[Skyline D]

There is absolutely no legal reason you can't use a personal bank account. You don't need to use a bank account at all if you don't want to. It's not illegal to trade in cash! HMRC require you to be able to accurately report your business income and expenditure. They do not require you to have any particular kind of bank account.

However, the BANK will not consciously allow you to use a personal account for business purposes normally. It's against their terms and conditions as they charge for business services but not normally for personal accounts.