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Does a Sole Trader Need a Business Bank Account?

As a sole trader in the UK, you don't need to have a commercial bank account, but you can. Legally, you can use your personal bank account for business and non-business transactions or create another personal bank account for your business. However, there are several reasons why it may be a good idea to create a business account.

Business Bank Account

Can I use any Account as a Business Account?

A sole trader who wishes to have a separate bank account for their business does not need to use a business account for HMRC. However, some banks prefer that you open a business account and discuss your business plans in depth. If it's a free service, they can't take any damage.

To Keep Things Clear for HMRC

When completing your tax return, tell HMRC how much money your company has made. You can deduct certain deductible expenses (such as travel and office expenses) to determine your taxable income. When your personal expenses are mixed with your business expenses because you both use bank accounts, it can be difficult to make these calculations accurately.

A Business Bank Account can Simplify Tax Calculations

Whether you do it yourself or leave your tax affairs to an accountant, it's much easier if you have a business bank account. With a business bank account, you can clearly see the cash flow of the company without confusing it with other finances. This saves you or your tax advisor time and nerves.

Easy Expense Tracking

In addition to calculating your taxes, it's easier to track your expenses if you have a particular economy. To claim a business tax deduction, you must record all of your business expenses and declare them to HMRC as part of your tax return. It is much easier to see your business expenses just by looking at your business account. If you only use a regular personal account, sort your transactions to see which are business and which are personal.

This makes them harder to track and you can't claim certain items because they're easier to lose or lose.

Your Bank's Terms and Conditions

It's likely that somewhere in the fine print of your personal bank account documents it says that your account is for personal use only. If your bank sees that you are using the account for business purposes, especially if there is a lot of money in circulation, or if you handle a lot of cash and checks, they may force you to close your account and ask you to open a business bill.

Be aware of the additional benefits that different banks offer with their business accounts. Compare transaction fees and overdraft limits across multiple commercial bank accounts to find the best deals for you and your business. Don't forget the support of bank advisors.

Look Professional

A dedicated bank account can make your business look more professional as customers can make payments to an account in your business name instead of yours. Some Sole Trader does not like to pay on personal accounts.

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