personal bank account for business?

Legally, if you’re a freelancer or sole trader, you can use your personal bank account for both business and non-business transactions. Personal accounts are freely available, and often free to use, but are they really suitable to use instead of a business bank account? 

What’s the difference between business and personal bank accounts?

A personal bank account offers you cash and cheque handling services and a debit card. It also allows you to set up direct debits and standing orders, and will usually provide an overdraft should you need one. A business bank account offers the same basic services but it will also be set up for further facilities such as accepting card payments from customers, taking out a business loan and using a business credit card.

What do they cost?

Most business bank accounts charge a monthly fee, plus additional fees for specific transactions. This can be off-putting for sole traders and freelancers but if you shop around you can often find business accounts that offer an initial fee-free period of up two years. This will give you time to get your business off the ground, and potentially make use of some of the business-focused services that are available to you through the account provider. Personal bank accounts are often free, but they will not offer these extra services that might include business support and advice, access to finance and tailored business insurance.

Are there any risks?

As a freelancer or sole trader, you are your business, which means your personal and business finances are treated as one. In theory this means you can use a personal bank account for your business. However, the small print of your account documentation will almost certainly state that it is for personal use only. If the account is clearly being used for business (e.g. you’re paying in a lot of cheques or large amounts of cash regularly), the bank might threaten to close it and ask you to open a business account instead.