This article was first published in 2015. Nationwide have now tightened up on this, and said that ‘business use’ would be reviewed on an individual basis. In the meantime, if you need a basic business account without any credit checks, take a look at Cashplus Go or Tide accounts. Both are free accounts with no credit checks and are the closet you’ll come to a basic business account. See the bottom of the page for more information.
Can you use a personal bank account for business transactions? This article we asked some of the main high street banks for their take on the situation, and also look at some of the alternatives.
In November 2014 the Government reached a deal with UK banks to ensure the provision of fee free personal banking in the form of basic bank accounts.
Unfortunately when it comes to business there’s no such thing as a basic bank account. Even the ‘no-frills’ Natwest Foundation account requires that the owner/directors undergo a credit check.
That’s a problem, since large numbers of entrepreneurs, freelancers, and would-be business owners are struggling to set up a dedicated business bank account for their business, whether due to previous bad credit or other reasons.
If you fall into this category then first see our guide on ‘How to open a business bank account with a poor credit history.‘
Self employed, sole traders, freelancers, contractors, small businesses
The difficulty in opening a business bank account leads many to continue to use their personal account. Let’s clear one thing up first and for all. HMRC requires business owners to separate business and personal transactions, but there is no requirement for separate bank accounts.
In fact HRMC doesn’t require you to have a bank account at all, though unless you’re a market trader, or other ‘all cash’ business, you’ll find it difficult to operate without one.
You see many posts across internet forums by doom-sayers and scaremongers. Saying things like “using a personal account for business purposes kills kittens.” And that’s terrible, kittens are cute. But in all seriousness, whilst legally you can use a personal account, your bank will have other ideas.
It all stems from the bank’s terms and conditions, which are likely to include a clause stating that ‘the account is for personal use, and should not be used for business.‘
By breaching these terms and conditions you are at risk of having your account closed, and where would that leave your fledgling business?
Perhaps it’s all that time spent studying contract law but I’m obsessed with semantics, and the phrases ‘used for business‘ or ‘business use‘ are certainly open to interpretation.
For clarification, I contacted a number of banks, and the results were (not that) surprising.
Now it’s a given that if you have a limited company, you’re not going to get away with using a personal bank account (see our guide on opening a business bank account). But what of all the sole traders out there? In my email to the banks I included a few scenarios:
A dance teacher working a number of schools in a local region being paid in either cash, cheque, or electronically, and all earnings being paid into a personal bank account.
A freelancer carrying out work for a single or multiple clients and being paid electronically, and paying for bills etc..
Here’s what the banks said:
Nationwide:
I can confirm that you can use the current account as a self employed individual to receive your wages from your clients/customers. Hence all the examples you’ve sited are not in breach of the terms and conditions of the current account, however it’s your responsibility to declare your earnings to HMRC.
TSB
Any business transactions on an account are considered business use. For example; a dance teacher receiving money for services provided, a musician insuring his instruments or maybe paying a supplier. I hope this helps. Many thanks.
Lloyds
If you’re self employed, this would be considered business use.
HSBC
HSBC wouldn’t comment directly. They said that they would need to discuss the specific merits of the business before being drawn on whether a business bank account would be required.
Barclays
I actually know of number of people who’ve been using a Barclays personal account for their business for over 5 years. This was where the dance teacher scenario came from. Barclays however, were quite insistent to me that you’d need to open a business bank account under such circumstances.
Starling Bank
In an update to this article we asked Starling Bank the same question. The response was similar to that of the traditional high street banks.
…thanks for reaching out ? Our Terms do not allow the use of personal accounts to trade or do business. But you can check our Sole Trader accounts if it suits your current business.
It is well known that Starling has set its sights on overtaking Barclay’s in the business banking sector, so that could be part of the reason. Since the Starling sole trader business account is completely free, and doesn’t require a hard credit check, It could just be that Starling really does believe its self employed customers would be better served with a business account.
We have a winner
So while that’s not an exhaustive list, the answer is clear, that some banks don’t consider self employed earning as ‘business use.’ Nationwide seems the winner here, whilst the likes of TSB, Lloyds, and Barclays would all require a business bank account even for a babysitter.
There’s no Nationwide business account, so perhaps this is why the building society offers a little more leeway. For those wanting the easiest account with minimum fuss, then the Nationwide Cash Card account could be the ticket. This is a basic account with no credit check, though those who’s credit history is in order may prefer the benefits of the Flex Account.
A word of warning
It’s important to note that the scenarios I approached the banks with were quite specific to freelance time-based workers such as graphic designers, gardeners, web developers, teachers etc.. What they all have in common is that they are like to have less than 20 or so ‘business transactions’ per month since the transactions themselves are higher value.
This is in stark contrast to the owner of a corner shop, or an eBay/Amazon seller. These types of activities are likely to involve many if not hundreds of small transactions and would likely require a full business account. See our guide on business bank accounts for more information.
The drawbacks of using a personal account
While using a personal account basic business transactions might be quick and easy, it does have a number of drawbacks.
- Lack of professionalism
- account not in business name
- unable to cash cheques made out to the business
- lack of separation – personal funds mixed with business funds
Basic business bank accounts with no credit checks
Using a personal bank account whilst, doable isn’t going to be ideal for most people. You are limited in the type of transactions you can carry out, and of course it’s not in the business name. Add to that the time and inconvenience of identifying and separating your personal income/expenditure to that of your business, and you can see why even sole traders might seek out an alternative.
This article was original written before the onset of digital banking. Now in 2022 if you need a guaranteed business account as soon as possible then digital alternatives in the form of Cashplus, Card One Money, or Tide could be worth a look. The former now has a full banking licence. Whilst Tide and Card One Money are e-payment institutions, Tide has a partnership with ClearBank allowing it offer most of the features of a traditional account including FSCS protection. It’s low cost and low barriers to entry make it a good sole trader account for the self employed and micro-businesses, whilst Cashplus might be a better option for Limited companies.
These business accounts don’t require a credit check, making them perfect for those with either bad, poor or no credit history. What’s more, you could have an account up and running in as little as 24 hours. Bear in mind that both services have annual or monthly cover charges, and some basic transactions will cost. The good news is that all of these can be offset against profits thus reducing your tax liability. Also see our article ‘do I really need a business account?‘ or compare the top business current accounts no credit check
19 comments on “Yes, you can use a personal bank account for business”
I found this article very useful but when enquiring at Nationwide myself (about being a sole trader / freelancer and using the description in this article) I received the following response:
“Nationwide’s current are not permitted for use as a business account as its for personal use only. Nationwide currently do not provide a business current account.”
This is curious. I’ve gone back through Nationwide’s Twitter stream along with my on own for 26th March 2015 – 4th April 2015, and responses by other banks are there, but the Nationwide tweets are missing. I wonder if they have now changed tact and deleted them. Will look into it some more.
Hi,
I am not sure how relevant my question is but I would be really grateful if you could advice me on this.
I have a LTD company, and I manage to open an business bank account with HSBC.
Although I haven’t use the account that much, I found out that they have really high fees for international payments.
My problem is that I mostly do international payments, and I am thinking of using another bank account for the company
I found an online banking system, revolut https://www.revolut.com
Can I use it for my LTD company? They also offer a business account.
I am wondering if its legal to use this type of bank for the company’s expenses and incomes.
Many thanks,
Eleni
Hi Eleni,
We’re not aware of a Revolut Business account in the traditional banking sense, but they do offer business currency cards, and they would work for you considering you already have a standard business account. Totally legal,but do watch out, as fees may differ from the regular Revolut personal card.
I sent an email to you a while ago asking for information about cashplus, the latest information about whether their application for full banking services have been granted. Any further update about this would be highly appreciated.
Hi Richard, the banking licence hasn’t been completed yet. These things take time. It could be up to a year, before their is any significant change. I’m sure once it is granted their PR machine will kick in and we’ll all know about it.
I recently got a letter from tesco. Saying they r giving me this 2 months notice if I don’t stop treating currant account as a business account. What I work I put money in and transfer it to get a better interest. I may buy things through PayPal. Never heard anything so stupid I rung up saying yes I put money money in from my work. They asked if I got paid by cash. Yes that’s why I put it in bank. They have told me to carry on and put note on system. I said its a bank. A bank u put money in and transfer. Good god. Never heard of anything so stupid I. If u want to be pety. May be I will stop shopping at tesco too.
I’ve received duplicate letters from M&S — one for current account, one for their credit card. Both saying certain transactions are for business use. The credit card?! Nope. Wrong. The current account? *Maybe* there were one or two in the past few months whereby as a freelancer I was paid electronically for work completed. We’re talking a couple of hundred quid. My last bank didn’t have a problem with this for more than 20 years. Think I’ll be switching back. Seems a lot like bullying to me.
Hi –
would I be able to use a personal current account to receive payments and then transfer this to my business account?
I have a fee-free business, however I cant receive oversea payments, there is no IBAN number. I will use my business account for purchases only. Is that acceptable? – thanks
Hi
I run a vat registered business, but with a small turnover over of around £60k. I am running the business through a personal account, but run the account like a business account. Nothing personal goes in or pays out. I take a wage out that is payed in to another personal account. Is this legal on the hmrc side. Thanks
If this is a Limited company then no what you are doing isn’t correct.
If the business is run a sole trader or partnership then there is absolutely no problem.
The difference stems from the fact that in a Limited company the money doesn’t belong to you, hence why the business needs a separate account in its own name, as it is a separate legal entity.
As a sole trader, the money is yours to do with as you please, but a separate account wither in the business name (preferable) or in your own (as you are doing), helps to keep your business affairs and your regular day to day living separate.
The biggest issue is that if your bank decides to crack down it, it may terminate your account. Treat business accounts as any other supplier, and ensure you have a back up if something goes wrong.
Small online banks are trying to fill this gap. I’ve been considering using a ‘spare’ Nationwide current account that I already have (hence finding my way to this article). But for peace of mind, I’ll probably get Starling Bank’s Sole Trader account, no monthly fees, does everything I need. Tide is another one that looks great if you don’t need to pay in cheques. Both proper FSCS bank accounts. It’s worth looking beyond the big boys to see what else is out there now.
Hi guys, I’m really struggling with setting up a bank account for a small holding company. None of the fee-free banks like Starling will accept holding companies but then as I go through the major banks like HSBC, many have also said they won’t take holding companies either. Ideally I want the account in the business name even though it’s only to hold monies from our families small businesses but I’m considering having to set up a personal account in our names. Any ideas on a way around this?
Hi, I have an LTD company and was wondering how I would go about linking this to my personal bank account. As I feel there is no need for a business account at this current time, please could you give me some information on how I could go about this. Thanks
Really you’d only likely get away with it if you were operating as a sole trader. A Limited company is a separate legal entity. I’d try opening an account with Tide and take it from there. That account costs about 20p per transaction so works out pretty cheap. Once you are well up and running you could look at a more featured account. Good luck.
Hi Carl,
We are a couple (sole traders) and looking to have a joint account that we can both use for personal and business purposes.
We have one with Triodos who are not threatening to close the account as they have realised we make business transactions. Never thought it to be a problem as we are not required by law to have a business account. Any ideas how do we work around it?
Are you aware of any banks that allow a joint account to be used for business too? Nationwide, I have just enquired, said no.
Thank you!
Hi Rose, sorry we don’t know of any. Many banks will crack down on using a personal account for business, as they make money on business accounts. You could open a business account with Tide if you don’t need need ‘in branch services. This account is free to open, just 20p charge per transaction. The problem is only one person will have access to the account.
Most of the free or low cost options don’t allow ‘partnerships’ which is what I imagine your business with your partner is.
We’ve set up a Ltd Compan for our son – we’ver financed the set up through savings and we’re due to open a small shop for him begining of October.
The company registration is under myself and my son who is 16. I hold sole responsbility of the finacial management of the business.I’m really struggling to get a business bank account because he is under 18
Are there any banks / online companies that will look at individual cases? Mettle, Cashplus and HSBC have all declined.
Hi Sarah, Barclays is the one of the few I’ve heard about where someone under 18 was able to open a business account. There might be some hoops to jump through, and the east way to go about it is probably to call them and make appointment. Most of their larger branches have a team of dedicated business advisors. This way you actually get to speak to someone rather than just a ‘computer say no’ response. Good luck.