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Do you need a separate business bank account for your business activities?

Although it is not a requirement to have a separate business bank account for sole traders, it can make life much easier, and it can certainly make tax returns and national insurance contributions easier to determine. Opening a business bank account is also good practice for sole traders looking at registering a limited company in the future, as a separate bank account then becomes a legal requirement.

Why open a business bank account?

Business bank accounts allow sole traders and small businesses to keep track of business finances, and helps them identify the correct values to be reported for VAT returns (for VAT registered businesses), corporation tax and any national insurance obligations. This can be a significant help towards the business accounting process for small businesses and sole trader businesses, helping to ensure accurate year end account information. The separation of your accounts can also make it easier for accounting professionals to accurately assess your business financials for future planning purposes.

Choosing a business bank account

Similarly to personal current accounts, there are a number of business bank accounts available to choose from many different providers, which typically offer a range of services and associated monthly fees. If you sign up with Gorilla Accounting, we are able to help with the application process with Metro Bank and Cashplus who offer preferential rates to Gorilla Accounting clients.

What to look for

It is just as easy to search for business bank accounts as it is for personal current accounts, and you can use a variety of search engines or comparison websites with your search. Comparison websites generally give you a breakdown of the monthly account fees, turnover limits and interest rates available for the reviewed accounts. These sites will provide a brief overview of the main comparative account features, but it is definitely worth delving deeper into each account to assess whether it is going to be the best option for you over the long term. As business accounts can take time to set up, it is worth taking extra care upfront to save you any additional hassle in the future.

Introductory period

Ideally, you don’t want to be paying for your business bank account until you have a regular income and this is certainly achievable for a short period when looking for accounts with traditional banks. You will need to look for introductory offers that provide a free banking period, which can delay the need to pay a monthly fee for periods of up to two years. These deals only tend to be available for new businesses, but as a sole trader you may be able to apply for such accounts. Just be careful to ensure that your free period doesn’t then lead onto a comparatively expensive monthly account fee, which could actually end up costing you more over a long period. Although most business bank accounts do charge, the fees for sole traders could likely be very low.

Branch, phone or internet only accounts

An important feature to look out for with your new bank account is whether it enables you to internet, telephone and branch based banking services or whether you only get access to a limited range of services. Free or cheaper banks accounts tend to be more online based banking so if you are wanting to interact with your account through a local branch, then this is something you need to check for in advance. FreeAgent will also typically allow you to connect your bank feed to your account. See the full list of supported banks here.

Business advice and services

If you decide to operate under a limited company and then set up your new account, you may find help from a business manager very helpful. Some accounts provide you with a dedicated business account manager in your local branch who can offer basic business advice, which may be well worth the small monthly fee. At Gorilla Accounting, we also provide 24/7 access to FreeAgent as part of our services. If you’re after an accounts package, then this is definitely a feature to look out for.

Ease of application

Setting up a new account can be a bit of a hassle. You will usually be required to provide identification documents such as passport photographs, utility bills, driving license copies and a handful of signed contract forms. As mentioned previously, we will be able to assist with the application process for Metro Bank and Cashplus.

We understand that determining whether you need a separate bank account and trying to understand which account might be best, can be difficult. Our new business team will be able to help you with your accountancy needs by helping you navigate through these decisions.

By signing up to Gorilla Accounting, you’ll have access to a sole trader accountant who can help you understand how to manage your money and select a bank account for your specific needs. Get in touch with a member of our New Business team by calling 0330 024 0406.