Which Bank Account For Self Employed Tradesman

[Louise07]

hi my husband is in the process of becoming self employed carpenter. he wants to keep all personal and business banking separate. from hmrc website I understand he can open a personal bank account rather than business account but I just rang the bank to make an appointment to open an account and they said their terms and conditions do not allow this. all he wants is an account so that customers can transfer payments on completion of the work, to pay in any cash payments, to make payments for materials on trade accounts, to purchase any new tools he needs etc etc. also wherr do we pay class 2 national insurance from, personal account or account used as described above. can someone help with ypur experience? thanks

[BRIGHT SPARK]

Most banks make money from business accounts so they wont allow you to use a personal account for business.

[DJHawkes]

my OH has that exact same arrangement with errrrr Lloyds TSB

[FredPuli43]

HMRC are dead right. Don't know why the bank objected. They might object to a Joe Bloggs No 1 account, No 2 account and so on, all the same.

But it is standard practice to have two accounts. Every bank does this. You call the first e.g.
"Mr Louise" and the second "Mr Louise , trading as Mr Louise the Plumber". And you have all the business money in and money out, go through that account . NI can be paid from either: I'd pay it from the t/a (trading as) account . The confusion may be in the words 'personal account'..In one sense, they are both personal, because neither is of a company. Perhaps the bank sees it differently but whatever the term , every sole trader has such a second account

[boxtops]

perhaps they didn't understand that he wanted a business account - if he's been a good customer with his personal account, I'd have thought they would have bitten his arm off. Perhaps he should go back and try again!

[Khandro]

He simply opens an ordinary current account with a bank of his choice and doesn't have to say what it is for, - just a personal account in which monies will be deposited and withdrawn. Don't start talking about 'business'. I ran a self-employed business like that for twenty years, (never going into the red). If he is thinking of trying to get large loans (fat chance!) to launch his business then that would be another matter.

[Louise07]

Thanks very much everyone, just one more thing. our usual account is a joint account. when he opens a new one does he have to have it in his own name only or can it be a joint account. I dont suppose it really needs to be. its just that I will be paying his trade accounts etc and want to be able to have some kind of access like my own card or online banking. im probably reading far too much into this lol

[Khandro]

It's up to you both to decide, but my advice would be to have the new account in his name only; he wouldn't want to pay for materials and find meanwhile you have that morning just bought yourself a new £200 handbag :-)

[Louise07]

ha ha you shouldn't put those thoughts in my head lol

[Skyline D]

HMRC doesn't care a jot what kind of bank account you operate. You don't even have to have a bank account. You can work entirely in cash if you like. You need to be able to accurately declare your business profits and if necessary prove it so it would be unusual not to have a bank account but you don't need to have one.

The bank on the other hand absolutely won't let someone operate a trading business from a personal bank account. Personal banking is (generally) free of charge. Business banking is not. If they believe an account is for business purposes there's not a chance they'll let you use a personal banking product. Of course, you don't have to tell them but contrary to popular opinion banks are not completely stupid. A business bank account will be very obviously a business bank account very quickly unless your business throughput is virtually nil. If you open a personal account I'd bet you are pulled in within three months and tactfully (or perhaps not very tactuflly) informed it will be converted to a business account.

It's not illegal for him to put funds from a business he runs as an individual into a bank account in joint names but it would be pretty pointless and unnecessary. There's absolutely no reason at all you couldn't be a signatory on a business account without being directly involved in the business. Lots of businesses have their company accountant or bookkeeper as a signatory without them actually owning the business. Of course that will be much easier if it's a business bank account.

[Khandro]

skyline D; I disagree, I think we are talking about someone starting up as a self-employed carpenter, not a big-time business entrepreneur. Money will enter and be withdrawn from a personal account as is normal in any account and there is nothing wrong or illegal about that, it doesn't matter, from the bank's point of view where funds come from or to whom they go.

[ubasses]

Years ago Khandro would have been correct but these days Skyline is nearer the mark. It may take longer than 3 months, but Banks charge for a Business account whilst personal accounts are free. Last few years before I retired it had become quite strict on this.

[DTCwordfan]

Dont take on RBS ...I had things set up for commercial property - savings accounts for each property, money into the top of the hopper quarterly or monthly, some limited expenditure, mainly by cheques, then quarterly or monthly distribution to "shareholders" (family members in different combos). Bit like you, it's transparent to fgt's mob.

Worked very well but they have informed me that I need a current account for each account for the standing orders............the kicker though is that they can't set up an order to transfer the shareholders money on a set day. "You can do it by internet (I don't use internet for banking), well then phone banking (try calling 0845 from overseas!)" and "why, in this day and age, with all this technology can't you do it, why feck around with something that works, why are RBS hell bent on destroying their liquid assets. I am the sixth person to start moving accounts away from them to a competitor.

Shop around Louise. Try the building socs too......(Lloyds don't do this above either)

[Khandro]

ubasses; You may have a point, but I still think at this stage, to start talking about "business accounts" is a bad idea and will produce unnecessary complications and expense, to what is after all a very small (and good luck, by the way) enterprise. Why do the bank's 'job' for them? We need more new businesses than banks.

[buildersmate]

I am aware of a situation where a self-employed individual has managed to 'get away' with running it through the same personal account as individual expenditure. The bank didn't pick up on it, but that isn't what the OP wants to do.
The way it was done was to maintain business accounts (MS Excel) of income and expenditure. However this business provided services and the expenditure on purchased materials were few and far between.
I don't see any choice (these days, bearing in mind ubasses comments) to bite the bullet and pay for a small business account. Provide it you operate it online and don't have humungous numbers of cheques going in and out, the charges don't seem too bad to me.

[ladybird49]

Lloyds wanted to charge my son for a business account , hes used lloyds since he was a child saving regularly so he said no thanks ! he asked at santander and got one for free

[Skyline D]

I actually do a small bit of book-keeping outwith my employment for a single client and stick it through my personal bank account. As buildersmate says, it's a service business, there's no purchases and there's only one receipt of income per month so the bank will never pick up on that. It's properly declared to HMRC though.

However, the idea that you need to be some kind of "big time business entrepreneur" for the bank to notice you are sticking quite obviously trading transactions through a personal bank account is frankly naive Khandro. The OP is talking about self employed carpentry. I would guess he's likely to work on several jobs a week and have a lot of pay-ins. He'll also be buying wood, tools, nails, screws, etc, etc, etc. You cannot possibly expect that to go unnoticed for long. The bank's computer system will throw it up as suspicious activity on a personal account.

"Normal" people run their personal bank account with one receipt from an employer per week, per fortnight or per month. There is a pattern of consistent income. That's not going to be the case with a jobbing carpenter no matter how small unless it's hobby stuff and not an attempt to make a living.

[Khandro]

skyline; //....transactions through a personal bank account is frankly naive Khandro.// I am not proposing a theoretical position here! I'm stating what I have had personal experience of for 15 years. Regarding the purchase of materials; we are talking about the amount only required by a single person, a lot of which will be paid for in cash or by the use of a credit card which can be settled with one cheque at the end of the month. Unusually large or expensive items can even be paid for directly by the client. I kept every receipt which I gave to my accountant and he presented the total sum to the tax authorities as one figure; 'Materials', no problem.

[Skyline D]

True. If you desperately want to avoid it, you can "hide" trade from the bank on the debit side at least by getting the client to make purchases for you, working mainly in cash or using a credit card for everything. It's not really a very practical way of going about business though.

And it doesn't solve the issue of presumably a dozen or more different people paying you each month. They may all pay in cash of course but it's all just getting a bit desperate just to avoid owning up to running a business.

At the end of the day, if you desperately want to run a business through a personal bank account you will manage to find a way to do so at small trading levels. But that wasn't what the OP was asking about. She was trying to openly run a business through a personal account and they won't wear that. To avoid the bank picking up on it in the medium term you'd have to actively inconvenience yourself to hide business transactions.

[chrissa1]

When my late husband ran his Consultancy business from home he had a personal account at The Cooperative Bank. He took payments from abroad and ordered materials for manufacturing through this account. No problem.

[Khandro]

skyline; //If you desperately want to avoid it, you can "hide" trade from the bank// Nothing "desperate" about it and no intention of "hiding" anything. I, my accountant and my bank (Halifax) were completely relaxed about the whole arrangement.