As a sole trader your personal and business affairs are treated as one for tax purposes. i.e. you are your business. This means, in theory, you can use your personal bank account for business transactions. (check if your bank allows this) Even though it is not a requirement I strongly advise having a separate account for your business.
It doesn't have to be a business bank account but many banks may insist on this being a business account which can have charges.
There are advantages to having a separate account:
- Bookkeeping is easier. You know all the transactions in the account are business related. At the very least it will save you time and money when you hand things over to your bookkeeper or accountant to prepare your accounts.
- It looks more professional - you can have the account in your business name, you can use a ‘trading as’ (t/a) name, so that all payments are made to a business name rather than your personal name.
- Its easier to keep an eye on your cashflow and whether you have been paid by customers.
Limited companies are separate legal entities from their shareholders and directors and therefore the personal finances of company owners are distinct from those of the companies they run. This is one reason many people choose to operate as a limited company rather than sole trader.
A Limited Company has to have to have an account in the businesses name and usually a bank will insist on this being a business account.
Having a separate account for your business really will make your life easier. When looking for an account shop around, most banks offer free banking introductory periods