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Becoming self-employed is a big and bold step for anybody, you may be wondering whether you need to get a business bank account?

Looking after your finances is absolutely essential if you are working for yourself because you are accountable to HMRC and because you are responsible to be correctly reporting all business and personal income and paying taxes on that income being reported.

In our blog below, we’ll look at why we Jaccountancy advises people who are self-employed to get a separate bank account but first, lets consider what it actually means to be self-employed:


An increasing number of people are going down a self employment route, and according to data recently released by Statista, there are now over 4.2 million people who have chosen to register as self-employed (not including limited company directors).

The ongoing pandemic that is Covid-19 saw a significant reduction of self employed traders as many went out of business!
As at February 2020 they were over 5 million registered self employed individuals in the United Kingdom.

They are many reasons why people decide to become self-employed, ether they are pursuing a life-long dream and passion while for others it’s through a necessity.

Self-employment is a term that indicates that the person is not employed directly by a company or directly by another individual.

Being self-employed means you can decide what work you do and with whom. While it is a general overall-term self-employment includes:

  • Freelancers
  • Sole traders
  • Contractors
  • Locums
  • Side Hustles

Sole traders make up almost 60% of the UK’s private business sector.

It is important to point out that those individuals who own a company are not classed as being self employed.

This is because the private limited company (the business) is treated as a separate legal entity to its owner (the individual)

We outline what you need to do to become a limited company and the benefits of going limited in one of our previous blogs.


Nothing legally prevents you from using a personal bank account if you are a sole trader. (It is the law that companies must have a company bank account)

That means you can use your personal account for all your business transactions.

HMRC regards you and your business as being one entity (i.e the same person) when you are a sole trader, so a personal account is fine.

But-  there are a number of reasons why choosing to open a business bank account is better for you when you are self employed

First of all, it makes life so much simpler. – read that again.

When filling in your self-assessment return you need to know what is business income and what is personal income. You also need to declare any business expenses.

Click here for our free guide on what can be used as Allowable Business Expenses.

Should you decide to use your personal account, it makes life very complicated with mixed transactions.

Trying to filter out the payments made to your corner shop, fuel station or nights out from your ongoing business expenses makes life harder. You and your accountant will need to sift through a lot of data, which takes time and can be confusing.

Also, some personal bank accounts state in the terms and conditions that you cannot make business deposits into your personal account. If the bank realises that you are breaching a contractual clause, they may ask you to stop or, at worst, close your bank account.


There are a number of reasons why having a business bank account is advisable if you are a sole trader, freelancer or contractor.

  1. Cash flow simplified
    As we’ve mentioned, keeping things separate does not only help when you need to pay tax, it helps with your cash flow. You know how much income you are making and can follow payments more easily.
  2. Accurate self assessment tax returns
    HMRC requires all self-employed people to declare their profits through self-assessment. Mixing up your business income with any personal, tax-free income could result in you paying more tax than you need to, and, as we’ve mentioned, it saves you time and stress picking through the figures.
  3. Credibility
    Clients paying you via a business bank account will feel more confident about using your services, if you use a business account under a trading name. You don’t have to register a business name as a sole trader. But if your account says you are ‘trading as’ under a business name, you can use it on invoices. This demonstrates to clients and customers that you are serious about your business.
    Some customers and suppliers are often reluctant to pay into personal accounts when the transaction relates to business.
  4. Business growth
    You maybe only setting out, but for all new businesses the future holds lots of possibilities. If your business grows and you take on employees, commercial premises and increase your sales and marketing activities – it is easier if you have a business bank account. Applying for business finance is also much easier than if you’re using a personal bank account. It also helps boost your business’s credit score, so a business bank account makes a lot of sense.
  5. Make your Accountant’s life easier
    Your accountant will be unable to take your personal bank statements and split the transactions between Personal and Business – how will the accountant know?
    Should there be a business account however, then the accountant will know that everything in the account is business. Simples.


Most banks provide business bank accounts. Jaccountancy have partnered up with Tide – a bank designed for business, with real time integrations into Xero and with built in helpful cashflow insights.

If you are new to business, want to discuss going limited or want your tax return professionally done with all reliefs, allowances and compliances covered – Book a call with us today 

Click Here to open a Tide Account today