Why It Pays To Keep Your Business Banking Separate

If you operate your business as a limited company, you should have a separate business bank account. But if you’re a sole trader then although you’re not obliged to have a separate bank account, it’s worth considering opening one for the following reasons:

  • Keeping your personal and business expenditure separate makes it easier to identify all your business expenses – this is important because if any business costs are missed, your profit will appear higher and you’ll pay more tax
  • It will save time as you won’t need to go through your statements to split out your business and personal transactions
  • Your bookkeeper will usually ask for a copy of your bank statement to check that your bank balance and the balance in your accounting software agree – by having separate business and personal bank accounts, they won’t need to see what you spend your personal money on
  • From a customer’s perspective, it looks more professional if your business banking is separate from your personal banking
  • Merchant services (such as being able to accept card payments and Direct Debits) are often easier to access with a business account
  • You may even wish to open a second business account so that you can set money aside for your tax bill or VAT payments

Although there is often a small monthly fee associated with a business bank accounts, many banks offer a fee-free period at the start, and some don’t charge at all!

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