Thoughts on Personal vs Business banking for freelancers?

I have recently decided that I am going to close my business bank account, for more than one reason:

  • My business bank account has a minimum of charge of £10 a month, and even more if I make lots of transfers, so it has a minimum cost of £120 per year. On top of that, I have a business credit card, that comes with my account as standard, which costs £30 per year. So the account in whole comes to £150+ per year just to keep it open.
  • The only reason I really have this account open is to save my for my tax – I get paid into my personal account (as most of my clients know me as “Callum Chapman” and not “Circlebox Creative”. I then pay a percentage of that into my business account, which is saved until the end of the tax year – I don’t earn any interest on this – instead it is costing me every year.
  • I took out a business loan, paid it all off every month, and use my credit card for big purchases and pay them off within 1-2 months. My business has a perfect credit rating; but when I apply for credit on a personal level, it is hard to get it. As a freelancer I feel I should be making these purchases from my personal account, credit card etc so it improves my own credit rating, especially as I’m planning on buying a house next year.
  • It’s a massive pain in the ass having a completely different login (which is hard to remember as it’s just a bunch of random numbers) to check my business account – I want to be able to check it all in one login and make instant transfers between my personal and business accounts.
I have ultimately decided I am going to opt for an e-Savings account which is only accessible online (no debit cards etc) which is attached to my standard savings account. Pros to this are:
  • You get interest on the money in the account, and it is fee-free, no matter how much you save or how many transfers you make.
  • My bank can see that I have more money in the bank, and therefore are more likely to lend me money in the future (again, thinking of my future house purchase here).
  • All accessible from one login, rather than 2 (actually, 3, if you include the business card login which for some reason is separate to my actual business account).
Obviously there are pros and cons depending on the individual, such as being able to accept cheques written out for your company name rather than your own name, but in my situation, I’m finding it’s just a waste of £150 a year – might not seem like much but it is in fact 50% of my annual phone bill – every penny counts, right? Some claim that it is also easier to distinguish the difference between personal and business expenditure, but I’m always so on top of this it really makes no difference to me.
What are you opinions on this, and as a freelancer, how do you manage your accounts? Do you separate your personal and business spendings? Do you get paid into your personal account and then pay a percentage into your tax savings, or do you get paid into your business account and pay yourself a set wage per month? I’m very interested to hear what others do!

8 thoughts on “Thoughts on Personal vs Business banking for freelancers?

  1. James

    You should check your banks terms and conditions as it is against a lot of banks terms and conditions to accept business payments in a personal account.

      1. James

        I think it is still classed as a business payment, I know RBS class it as a business payment.

        I’m with HSBC and pay nothing for my business account. I only get charged for paying in cheques (which I never do since all my payments are done online).

        You also get two accounts, a current account and a savings account (for tax).

        Ask your bank if they class it as a business payment, they might not.

      2. Callum Chapman Post author

        I bank with Natwest who are owned by RBS. I did speak to one of the online support guys and they said I can open up another eSavings account to save my tax money. I think at the end of the day, what you don’t tell them, they won’t know. My payments are mostly made online too, and are paid from my personal PayPal account into my personal bank account at the moment – so not having a business account really won’t make any difference to me (apart from I’ll have an extra £150 a year!).

  2. saad

    I’ve been using Personal Account type for my business from last 5 years, and I never wanted to switch. It won’t only make your bank statements healthy but also easy to manage in case you are on a big break from freelancing and working on personal projects.

  3. Damian Herrington

    I have two accounts with Santander, one is a current account that I’ve had forever and the other is a business account both free and I don’t have an overdraft or credit card for either. Everything business related is paid into my business account, and at the end of each month I ring Santander business (put straight through) and move money to my personal.

    It is interesting you saying about helping your credit rating by having a credit card I think I might have to look into mine and see if I can/need to do the same. Saving for a house too. I am also thinking of a e-savings account again with Santander for said house savings.

    If you are still wanting a business account definitely look at Santander I’ve never had to pay any fees even with cheques coming in and going out and logging in is easy with a personable ID, passcode and reg number.

    1. Callum Chapman Post author

      I’ve never considered banking with Santander, always been with NatWest. I have a good long-term relationship with them so not eager to leave. I closed my business account and just use my personal account for both now. I just have an e-Savings account for my tax savings, so everything I earn, I just transfer 30% (20% tax, 9% national insurance, 1% extra) into that account. Works pretty well and by the end of the year, I always have a little bit extra left over (because of the £8,000 tax free earnings and the extra 1%).

      I have another e-Savings for my house deposit savings, and also a ISA too, which I top up every April with the savings from my e-Savings. :)


Leave a Reply