It’s not personal, it’s business!


A question we are often asked is “Can I use my personal bank account for business?”, the answer is, yes you can, but it’s not good business practice and is frowned upon by HMRC. We often see small business owners dipping into business funds for personal reasons, or using the business bank account for personal standing orders, direct debits etc, this causes problems in terms of making bookkeeping more time consuming and expensive, so all in all it’s best to have a totally separate business bank account and here are five reasons why:

  • Cashflow

If personal transactions intermingle with business transactions it will be harder to prepare a cashflow forecast, understand where the trouble points are and how much working capital your business needs on a month by month basis. A business bank account may seem healthy and it can be tempting to dip in, but there may be a corporation tax bill around the corner or VAT to pay so it may run short to pay these bills.

  • Tax

When there are personal and business transactions in the same bank account, you risk expenses being incorrectly allocated as drawings or dividends ultimately meaning you end up paying too much personal tax.  Plus personal expenses could be allocated as business expenses meaning you incorrectly receive corporation tax relief – HMRC will take a dim view of this in the event of an investigation!

  • Accurate Reporting

Personal expenses allocated as business expenses will result in incorrect results being presented and make it difficult to understand the true profitability and cash position of the business.

  • Personal Finances

By keeping your business expenses in one place you gain a better understanding of income, costs and profitability.  The same is true of your personal finances.  By understanding your own personal expenses and income, you can equally look at where you may be able to save money or see that your income is not sufficient to cover your expenses and you need to increase your salary.  If you want to apply for a mortgage, for example, your potential lender will want to see your salary and feel comfortable that you can cover the repayments.

  • Money Saving

If your accountant or bookkeeper has to spend time reviewing personal transactions as well as business, it will inevitably add time and therefore cost to your bookkeeping.  Keeping things tidy and separate means they only need to deal with relevant information and avoids them having to ask you lots of questions as well as providing you with the right business information you need.

If you are struggling with separating your business and personal expenses get in touch with us.

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