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Do You Keep A Separate Bank Account For Tax?

Allegrif

Allegrif

New Member
I have a terrible habit of spending money I'm saving for my tax bill and thinking to myself that I'll just have to work harder and make it up next month. A solution I'm looking at is to open a second bank account purely for tax. Does anyone else do this, and would you recommend it?
 
LucidCaledonia

LucidCaledonia

New Member
No, but I do keep an accurate record, and when I ever do look at my account I instantly dismiss the figure I know is set aside for tax. However for the sake of simplicity, and to prevent me accidental spending money set aside for tax, I do plan to open a separate account.
 
stugster

stugster

New Member
We do this. Our main current account and then our high interest reserve account.

50% of all income goes into the reserve account to pay for all tax and unexpected costs we incur. VAT, PAYE, NIC, Corporation Tax, and things going wrong.
 
Scottish Business Owner

Scottish Business Owner

New Member
I'm of the view that business and personal expenses should never be through the same account irrespective of how your business is set up (Limited Company, Sole Trader etc etc).

You should treat your business as a business from the very start or you'll ondoubtedly have further issues down the line.

Keeping them separate allows you to manage things much easier.

You can get into issues very easily with HMRC by running it all together to the extent that they could question certain expenditure and actually ask you to prove that you are running a legitimate business!

Imagine trying to do your tax return when it's all through the one account - doesn't bear thinking about :confused:

I think ultimately though it's about being professional and putting that across to your customers and with the range of free banking offers just now from pretty much all major high street banks it's not going to cost you anything to start out either :)
 
Allegrif

Allegrif

New Member
I'm of the view that business and personal expenses should never be through the same account irrespective of how your business is set up (Limited Company, Sole Trader etc etc).

You should treat your business as a business from the very start or you'll ondoubtedly have further issues down the line.

Keeping them separate allows you to manage things much easier.

You can get into issues very easily with HMRC by running it all together to the extent that they could question certain expenditure and actually ask you to prove that you are running a legitimate business!

Imagine trying to do your tax return when it's all through the one account - doesn't bear thinking about :confused:

I think ultimately though it's about being professional and putting that across to your customers and with the range of free banking offers just now from pretty much all major high street banks it's not going to cost you anything to start out either :)
Hm. I should probably get on this, you've convinced me. At the minute I'm saving notes in a tin for my tax bill :oops:

Could you recommend any accounts?
 
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Scottish Business Owner

Scottish Business Owner

New Member
Currently most of the banks offer free banking to new businesses for a period of time. Mainly between 1 and 2 years.

I've heard good things about Santander but have never used them myself.

HSBC also seems to get alot of positive reviews.

Bear in mind though they probably all have their horror stories as well!

I would always say to start with the bank you bank with personally as it may make the process easier.

Do your research as well though as the offers change like the weather :)
 
LucidCaledonia

LucidCaledonia

New Member
You can get into issues very easily with HMRC by running it all together to the extent that they could question certain expenditure and actually ask you to prove that you are running a legitimate business!
This is actually quite worrying. Although as I said earlier I've been keeping a strict record from day 1, so that hopefully shouldn't cause too much trouble.

How much do banks usually charge for business accounts?
 
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Scottish Business Owner

Scottish Business Owner

New Member
This is actually quite worrying. Although as I said earlier I've been keeping a strict record from day 1, so that hopefully shouldn't cause too much trouble.
Good record keeping will definitely help but I would still say keep it separate as you're still giving HMRC the ability to see your personal transactions. They wont accept bank statements with black lines through it - they'll want to see it all!

How much do banks usually charge for business accounts?
Business accounts tend to be free set-up and free day to day charges. It's a very competitive sector for banks so they all tend to have similar offers to entice people in.

This article is probably a good one to read to get a feel for what banks offer >>> http://www.smallbusinesspro.co.uk/banking/free-business-banking.html#Major_Banks
 
Allegrif

Allegrif

New Member
Good record keeping will definitely help but I would still say keep it separate as you're still giving HMRC the ability to see your personal transactions. They wont accept bank statements with black lines through it - they'll want to see it all!



Business accounts tend to be free set-up and free day to day charges. It's a very competitive sector for banks so they all tend to have similar offers to entice people in.

This article is probably a good one to read to get a feel for what banks offer >>> http://www.smallbusinesspro.co.uk/banking/free-business-banking.html#Major_Banks
Thanks for the advice on this thread, much appreciated.

I've been trading for about 3 months - If I move over to a business account now am I looking at a big transitional headache? Should I do it ASAP, or wait until the next financial year?
 
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LucidCaledonia

LucidCaledonia

New Member
Thanks for the advice on this thread, much appreciated.

I've been trading for about 3 months - If I move over to a business account now am I looking at a big transitional headache? Should I do it ASAP, or wait until the next financial year?
I'd say do it ASAP, you've got no reason to delay, and it'll help you sort things out a bit easier. It shouldn't be too much of a headache, although you should have done it when you started to make things easier.
 
MarkB

MarkB

New Member
Staff member
I have a direct debt set up each month for my accountancy fees so maybe an idea to do a similar set-up with your potential tax liability. However, it would need to be a totally separate bank account as if it was connected to your business current account it would be too tempting to dip in when you were struggling.
 
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