Do I need a business bank account?

Home to more than 5.5 million private sector businesses, the UK is a natural destination for commerce. In fact, it ranks number eight out of 190 nations on the World Bank’s Ease of Doing Business scale. 

Still, it can feel daunting to start a new business. What kind of business structure should you choose? Do you need to register a property in the UK? Will you have to get a business license? What about funding? Do you really need a business bank account? 

In this article, we’ll answer the last question and explain why it’s good practice to keep business and personal finances separate.  

Do I legally need a business bank account? 

Business owners, including sole traders and partners, don’t legally need to have a business bank account in the UK, but it’s good practice. After all, if you decide to mingle your personal and business transactions, they can be hard to separate when filing tax returns – and that can be a nightmare for your accountant. 

It’s important to remember that if you’re a limited company owner, you do have a legal responsibility to keep business and personal transactions separate, and this can be hard to do without a business back account. Maintaining a separate business account will also protect your personal assets if your business fails.

Finally, having a business bank account adds an extra level of professionalism to your enterprise. Customers feel better about transferring money for products and services into a business bank account, so they’re more likely to choose your business and stay with you for the long term. 

Ease of funding 

Another reason to open a separate business account is that it helps you build a business credit history, which is critical if you need to get a business loan or funding in the future.  

To raise funds, your business will need to demonstrate ethical due diligence. Effective bookkeeping and business-focused account management help investors gauge your company's health, whereas a personal account may raise concerns. Having a business account also provides the lender with reassurance if you apply for a business loan. 

Business account benefits 

Many traditional business accounts provide helpful benefits, including a higher upper limit on transactions and flexible overdraft. These perks can make it easier to run a company – especially when things change quickly in the marketplace.  

Some banks also provide debt-management assistance to business owners, making it possible for entrepreneurs to get through economic downturns and periods of lower-than-expected performance.  

Why can I not use a personal bank account for business? 

You don’t legally have to have a business bank account, but it’s best to keep personal and business transactions separate. Here's why. 

Your bank might prefer you to have a business account 

Banks often have differing fee structures, interest rates and service options for business and personal accounts. If a bank suspects that a personal bank account is being used for business purposes, they may ask you to open a dedicated business account if it goes against their terms and conditions. 

Bookkeeping and taxes get complicated 

Businesses have diverse expenses, from inventory costs to employee salaries. Keeping track of your expenses, revenues and taxes can be complex enough as it is – and even more confusing if you mingle your personal and business assets.  

A separate account can save you time, simplify your annual accounting and make taxes easier to file. You’ll also get a clearer picture of your business’ operational needs and capital flow. 

You might have difficulty claiming tax-deductible expenses 

Many business expenses are tax deductible – but if you use a personal account to run your company, you’ll need to retain extra proof that the expenses you accrue are business-related. If you’re ever subject to an HMRC audit, you’ll need to produce documents to back up your tax statements.  

What if I don’t get accepted for a business account? 

Opening a business bank account can be tricky if you’re based overseas, operate in a high-risk industry or have less-than-stellar personal credit. That’s where alternative solutions providers like Interpolitan Money come in.  

With flexible, customisable service packages, alternative providers can help you find finance management solutions for your business. Interpolitan offers multi-currency business accounts that come with an international bank account number (IBAN) so you can use the account for both domestic and cross-border payments.  

What is a multi-currency business account? 

Expanding overseas is a big step for any business. Having a single account that lets you make and receive payments in multiple currencies can save you time, money and effort. With a multi-currency account, you can transact in more than 55 different currencies and do business all over the world, just like a local. 

A final word about business accounts 

To recap, it’s best to keep personal and business transaction separate. The right business account can help you track profits, monitor expenses, build a business credit profile, fulfil compliance requirements and file taxes. A business account will also make you look more professional – and that can help you gain and retain clients. 

Opening an Interpolitan alternative bank account can help reduce your time to market in new regions, which can be convenient for your customers. You’ll be able to transact in over 55 currencies across the world, track analytics, and much more. Best of all, because Interpolitan is regulated by the FCA, you can rest assured that every transaction is compliant. 

Interpolitan delivers flexible and comprehensive alternative banking solutions by blending cutting-edge technology with personalised service. Learn more about us, or open an account today.