We thought we would take a few moments to share this week’s most FAQs, particularly surrounding business/personal bank accounts, as everyone starts to prepare for Making Tax Digital.
1. If I’m a sole trader or CIS Subcontractor, am I still a “Business.”
Yes, and technically both are the same thing. Your business legal entity is a sole trader, and you subcontract in the construction industry scheme.
You are most definitely a business and should be operating out of a Business account.
2. Who should be operating out of a business account?
Sole-traders, limited companies, partnerships, CIS subcontractors, if you are self-employed and trade as any of the above, the chances are you should already have a business bank account.
3. Is a business account a legal requirement?
No, not yet…
However, you will find that operating through a personal current account for business purposes will be against the bank terms and conditions, as they will want to impose their business account fees.
Your account is at risk of immediate closure at the bank’s discretion should they judge you to be acting in breach of the T’S & C’s.
It is just good practice to use the correct account for the correct purpose, especially if you can get a free one.
You’ll find links to the business accounts we recommend in our business banking hub.
4. What do I pay in and out of the business account?
Simply, everything related to your business, all income, cheques, cash, comes into the business account.
All business purchases, bills, stock, materials, supplies, direct debits, fuel, phone, everything related to the business go out of the business account.
4. What do I pay in and out of the business account?
Simply, everything related to your business, all income, cheques, cash, comes into the business account.
All business purchases, bills, stock, materials, supplies, direct debits, fuel, phone, everything related to the business go out of the business account.
5. How do I pay myself from the business account?
Once you have separated your finances, you can then identify how much comes into the business and how much your business needs to cover its costs.
Whatever is then leftover in the business account is the profit (minus tax and NI.)
You can also make use of the “Goals” feature in Starling to tuck money away for tax bills and any future long-term costs etc.
You can then set up a weekly/fortnightly standing order referenced as “owners draw” for X amount of the profits into your personal current account (we also recommend Starling)
The aim is to transfer over enough weekly to keep dipping in and out and transferring over regularly.
You’ll find the more you separate your finance and review what’s going where the easier it will be to work out how much you can effectively “draw” from the business on a weekly/monthly basis.
Simple!
