Should I have a separate bank account for my business?

We always recommend operating a separate account for the business.

First the running balance of the bank account will give you a measure of how the business is performing as it’s not mixed with your personal transactions. It’s a great way to see if you are covering your costs including paying yourself.

Secondly, HMRC are entitled to see the bank statements to go along with the business records if you have an enquiry. If HMRC see your personal bank statements we know from experience this will generate a considerable number of questions e.g.  Cash banked just after Christmas that you have to then prove this was a gift from a relative and not business income.

What you need to do is have a bank account that the business income goes into and you pay the business expenses out of and then pay yourself into your personal account. This way if you ever do have an enquiry from HMRC they are entitled to only see those bank statements for the business

Ask Red Tulips Accountants for advice

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