Can I use my personal bank account for business?

Whether you’re just starting out or already running a business, you need to decide which bank account to use. Opening a business bank account may seem like unnecessary administration, but using a personal account can create bigger problems in the long run. Here’s what you need to know to help you choose the right banking solution for your business.

Key takeaways

• Sole traders can use a personal account for business, but limited companies can’t

• A business account separates finances, making tax and bookkeeping simpler

• Business accounts often include tools and support to help a business grow

Can I use a personal bank account for my business?

Whether you can use a personal bank account for business depends on your business structure.

If you run a limited company, you might run into legal trouble if you use a personal bank account. A limited company is a separate legal entity – it has separate legal rights and must remain entirely distinct from you, the owner. Using a personal account could therefore break company law and, at the very least, cause problems with tax and accounting.

If you’re a sole trader or in a partnership, you don’t have to use a business bank account by law. But many banks ban business use in their personal account terms. If you break those terms, your bank could freeze or close your account. Always check your account’s terms and conditions before using it for business purposes.

Business vs personal bank accounts

There are several key differences between personal and business accounts. Here’s how they compare:

Personal bank account

• For everyday spending and personal income

• Includes a debit card and online banking

• Offers limited tools to track income and expenses

• No support for shared access with colleagues

• May not allow business use

Business bank account

• For business income and expenses

• Often includes tools for invoicing, accounting and tax

• Keeps business and personal finances separate

• Supports access for multiple users

• Builds your business credit profile

What are the benefits of separate business and personal accounts?

Separating your finances with personal and business bank accounts provides a range of benefits. Here are six that stand out:

1. Simplifies bookkeeping

Separating business and personal spending makes it easier to track income and expenses. You save time on admin and reduce mistakes.

2. Helps with tax returns

A business account gives you a clear record of income and costs related to your business. That makes it easier to file accurate tax returns and avoid HMRC penalties.

3. Meets legal requirements

If you run a limited company, you must keep business and personal finances separate. A business account helps you stay compliant.

4. Boosts professionalism

Paying into an account with your business name helps build trust with clients and customers because it makes your business look more established.

5. Supports access to finance

Using a business account can help build your credit profile. This can make it easier to get loans, credit cards or other business finance. Some accounts also include sizeable business overdrafts.

6. Unlocks perks

Many business accounts come with added features such as accountancy tools, business advice or discounts on software and services. These extras can save money and help you run your business more efficiently.

Why switch from a personal to business bank account?

If you’re using a personal account for your business and your bank allows it, you might wonder if switching is worthwhile – especially if you’re working as a sole trader.

Mixing personal and business finances causes confusion. Switching helps by keeping everything separate and easier to manage.

And if you’re planning to grow your business, a business bank account often gives you access to tools, support and services built for businesses – making it easier to take the next step.

Are there fees for business bank accounts?

Many banks charge a fee for business accounts, but you can find options that keep costs low or even free.

Most high street banks offer a fee-free introductory period, usually lasting 12 months. And as with a personal bank account, it’s easy to switch business accounts using the Current Account Switch Service (CASS). So, once the free period ends, you can move to another deal.

Some banks, such as Monzo and Tide, offer fee-free business account options but with limited features. You can pay a monthly fee to upgrade and unlock more features if needed.

Watch out for other charges, too. Some accounts add fees for international transfers, cash deposits or going over transaction limits. Always check the terms so you know what to expect.

How to choose the right business account

With so many options, choosing the right business bank account can feel daunting. Here’s how to choose the right one for you in five easy steps:

• Check the fees Identify monthly charges, transaction fees and other costs. Make sure the account and fees fit your budget.

• Consider the features Pick an account with the tools you need – such as invoicing, accounting software integration or multi-user access.

• Match your business type Some accounts suit sole traders, while others work better for limited companies or partnerships. Choose one designed for your business. If you’re not sure, ask the account provider for more information.

• Check customer support Good support matters when problems arise. Check whether the bank offers phone, chat or in-branch support.

• Try the app and online banking A smooth, reliable app makes managing money easier. Test a demo if available or read reviews before you decide to move forward with the account.