[Finance] Sole trader business accounts

[Herr Tubthumper]

Thanks for this.

I’ll add this to my reading list, for sure. I have some background in these matters as my parents owned their own business as I grew up, but going through everything yourself is a different matter and I always think it’s good to get everything laid out as best you can before starting.

The skill set I’m going to be selling is marketing based. Primarily on the digital side. I’ve actually had an eclectic career so have a few skills I think I could monetise given time, but an opportunity has arisen to get some clients using this skill set so it makes sense to try and get off the ground using it and go from there.

It might be worth considering setting up as a limited company as it offers you certain benefits and protections. I can’t speak for your sector but it might be the case some potential clients won’t deal with a sole trader; this is certainly the case in mine.

 

[Springal]

Keep in mind some of the ‘new’ banks like Starling probably won’t be good enough if you move from sole trader to a small business so keep that in mind

 

[willalbion]

Hi all,

I figured this may be a good place to ask a couple of questions considering the wealth of experience on here.

I’m looking into doing some freelance, side hustle work, with the intention of building up a business that will hopefully take over as my main source of income in the long term.

Does anyone have any recommendations about the best bank accounts to start with? Does anyone have any experience with any of the main high street banks or with the app-only accounts, like Revolut?

And lastly, is it best to set up the bank account before notifying HMRC of my intention to go down this route, or is it best to use my own bank account in the short term and then create a business one once I’ve got a steadier stream of income?

Apologies for the ignorance here - any help would be gratefully received.

I use WISE for my business account, it's great.

 

[Mo Gosfield]

Join the FSB ( Federation of Small Business ) It will cost you a one off annual fee ( approx £250 ) You may baulk at the initial fee but they offer a wide range of services and offers. They have agreements and deals with many banks. They offer free advice on a wide range of subjects.
Starling is a popular, online bank. I use the Co-operative bank for one of my businesses and get free banking ( no charges ) as an FSB member. Most banks have apps and a facility for paying cheques in using your mobile phone ( check the limits...Lloyds is £1999 ) You can pay in cash and cheques into your business account at any Post Office ( again....check the limits for each bank )
Register your business first, at Companies House. It costs £12. Set it up as a Sole Trader or Limited Co. A Limited Company has limited liabilities, which enables directors to mitigate losses but it has to submit annual accounts ( audited ) A self-employed sole trader has to submit an annual tax return.
Keep your costs as low as possible. Work from home. Take the minimum you can out of the business initially. Seek advice as to what you can claim back through your business. Corporation tax paid to the government each year by businesses has now risen to 25% if you make profits over £50,000. Under this level its 19%. For the next three years you can subtract any investment in IT equipment and machinery etc from the tax you pay to the govenment.
You will be liable for VAT if your business turnover exceeds £85,000 p.a ( £1700 per week ) You will have to submit quarterly returns.
Good luck.

 

[zefarelly]

Admittedly both times I've used a business account they were for a limited business but Lloyds were OK but very inflexible, HSBC were brilliant.

Why would you need to inform HMRC when you've not earnt anything yet ?

Please note I'm not an accountant or a lawyer.

Same, I started a limited Co in 2008 with HSBC until I wound up 2 years ago, banking was free OD interest aside.

 

[Weststander]

Thanks. I’m in a safe gig at the moment but feel totally demotivated and know that no matter what I do, I’ll never progress there because of the company set up. So the two options were find another job somewhere else or try to go out alone, but I thoroughly dislike working for other people, so the latter option seemed best.

It’s just having the courage to jump really.

At heart I think I hated the master and servant basis of employment. My Dad ran a business from very young, I too am free thinking and don’t take to arrogance/bullying from above. I put up with it for a long time.

A wonderful thing to break free.

If your day comes too, be disciplined in your day and work hard, whatever your field produce great work and new work should arise from recommendations.

 

[Weststander]

Same, I started a limited Co in 2008 with HSBC until I wound up 2 years ago, banking was free OD interest aside.

I’ve been with HSBC business for a long time.

Business accounts £7 a month fee. I’m fine with that, I really like the bank,

Personal accounts free.

 

[Weststander]

Don’t rush into the ltd co route, unless your business is one where your at risk of being sued.

Reason being you want to get shareholdings correct. Do you have a long term partner or spouse, it may suit to have 2 share categories with shares held by each of you. Although you can amend later, best to do this on incorporation, to stand up to hmrc scrutiny.

Second reason is that some folk hate the restrictions and tax rules eg all drawings have to covered by paying yourself a salary and/or voting yourself dividends. Otherwise you face the tax nightmare of an overdrawn director’s loan account.

It’s far more involved.

 

[Justice]

I would not use a current account/personal account.
Clients won’t take you seriously most pay by bank transfer these days and with banking software knowing the difference between a business and personal account it’s not a good look.
I’m with Starling best bank I’ve ever been with. Most issues resolved super quick great customer service.

 

[Herr Tubthumper]

At heart I think I hated the master and servant basis of employment. My Dad ran a business from very young, I too am free thinking and don’t take to arrogance/bullying from above. I put up with it for a long time.

A wonderful thing to break free.

If your day comes too, be disciplined in your day and work hard, whatever your field produce great work and new work should arise from recommendations.

I went freelance 27 years ago and never really looked back. I currently have two clients at the moment which keep me suitably occupied.

Financial logistics are a bit weird/complicated as one pays me into a UK Ltd and the other is German and paid locally.

I much prefer working for myself for 3 reasons

1) I prefer the simply idea of an hour’s work for an hours pay. I’m not into company pensions, bonuses, share options etc.
2) working from contract to contract creates a regular periodic review/appraisal (on both sides). If I’m not happy I can move on, if they’re not happy they can choose to not renew. ie no drifting or coasting which is what I felt when employed.
3) I feel much more in control of both my work and my finances….and therefore life.

 

[Ⓩ-Ⓐ-Ⓜ-Ⓞ-Ⓡ-Ⓐ]

Do not use Barclays. I have a business account with them and it's been nothing but hassle recently; they wanted me to re-confirm my business details and it took me around 7 months, numerous calls, numerous hours and numerous headaches to resolve.

I appreciate you are wanting a sole-trading account but if I can persuade anyone to not have any type of account with them it will make me feel a little better.

I also complained to their customer services. I was told that they would not uphold my complaint because they had followed all their processes correctly. I pointed out it's the processes which are at fault...the guy agreed but said they had followed them correctly....at which point I wanted to bang my head on a brick wall.

Same and similar situation here with the business details - took around 7 months also. Getting through to anyone on the phone is also a hassle and you need to talk to an automated robot to put you into the correct department, now I just repeat "Speak to a human, speak to a human" until the machine gives in. It does make you feel slightly odd shouting that down the phone repeatedly though.

Additionally, you need to constantly pester them whenever you need a document from them that is slightly out of the ordinary. For example, I'd recently been asked for my bounceback loan statement by my accountant. No worries I thought, just log in and download it from online banking. No such luck, there's no online statement for your bounceback loan, just an account tab saying how much you owe, but with no repayments recorded anywhere. Tried going through online chat on the app. Couldn't help me with that request, had to call customer support. After going through the horrendous robotic telephone menu I finally got to speak to someone who said these statements need to be specially generated and they will be emailed to me in two days (yawn). Did they arrive in two days? Of course not. Eventually after more robotic telephone calls and pestering I finally received the documents after about a month of trying.

I had almost the exact same palaver trying to get account statements for my US Dollar account.

Such a waste of time.

I've heard good things about Starling, thinking of switching over, especially as it's free. Not sure I can do that easily though until I clear the bounceback loan.

Does anyone have any tips for the best business credit cards to accrue points?

 

[Ⓩ-Ⓐ-Ⓜ-Ⓞ-Ⓡ-Ⓐ]

Double post

 

[sussex_guy2k2]

At heart I think I hated the master and servant basis of employment. My Dad ran a business from very young, I too am free thinking and don’t take to arrogance/bullying from above. I put up with it for a long time.

A wonderful thing to break free.

If your day comes too, be disciplined in your day and work hard, whatever your field produce great work and new work should arise from recommendations.

This is how I’ve always felt. It’s been nagging me for a long time. I’m always creating value for the people I work for, and they always reap the rewards. But I’ve always hated the game that needs to be played to move up the corporate ladder.

I’ll be giving it a good go either way. You only live once, after all.

 

[sussex_guy2k2]

Join the FSB ( Federation of Small Business ) It will cost you a one off annual fee ( approx £250 ) You may baulk at the initial fee but they offer a wide range of services and offers. They have agreements and deals with many banks. They offer free advice on a wide range of subjects.
Starling is a popular, online bank. I use the Co-operative bank for one of my businesses and get free banking ( no charges ) as an FSB member. Most banks have apps and a facility for paying cheques in using your mobile phone ( check the limits...Lloyds is £1999 ) You can pay in cash and cheques into your business account at any Post Office ( again....check the limits for each bank )
Register your business first, at Companies House. It costs £12. Set it up as a Sole Trader or Limited Co. A Limited Company has limited liabilities, which enables directors to mitigate losses but it has to submit annual accounts ( audited ) A self-employed sole trader has to submit an annual tax return.
Keep your costs as low as possible. Work from home. Take the minimum you can out of the business initially. Seek advice as to what you can claim back through your business. Corporation tax paid to the government each year by businesses has now risen to 25% if you make profits over £50,000. Under this level its 19%. For the next three years you can subtract any investment in IT equipment and machinery etc from the tax you pay to the govenment.
You will be liable for VAT if your business turnover exceeds £85,000 p.a ( £1700 per week ) You will have to submit quarterly returns.
Good luck.

This is all great stuff. Thanks for clarifying all of the above.

 

[sussex_guy2k2]

Join the FSB ( Federation of Small Business ) It will cost you a one off annual fee ( approx £250 ) You may baulk at the initial fee but they offer a wide range of services and offers. They have agreements and deals with many banks. They offer free advice on a wide range of subjects.
Starling is a popular, online bank. I use the Co-operative bank for one of my businesses and get free banking ( no charges ) as an FSB member. Most banks have apps and a facility for paying cheques in using your mobile phone ( check the limits...Lloyds is £1999 ) You can pay in cash and cheques into your business account at any Post Office ( again....check the limits for each bank )
Register your business first, at Companies House. It costs £12. Set it up as a Sole Trader or Limited Co. A Limited Company has limited liabilities, which enables directors to mitigate losses but it has to submit annual accounts ( audited ) A self-employed sole trader has to submit an annual tax return.
Keep your costs as low as possible. Work from home. Take the minimum you can out of the business initially. Seek advice as to what you can claim back through your business. Corporation tax paid to the government each year by businesses has now risen to 25% if you make profits over £50,000. Under this level its 19%. For the next three years you can subtract any investment in IT equipment and machinery etc from the tax you pay to the govenment.
You will be liable for VAT if your business turnover exceeds £85,000 p.a ( £1700 per week ) You will have to submit quarterly returns.
Good luck.

Just to clarify, I was of the understanding setting up as a sole trader meant no Corporation tax, due to the double taxation, essentially. Is that not the case?

 

[Herr Tubthumper]

Same and similar situation here with the business details - took around 7 months also. Getting through to anyone on the phone is also a hassle and you need to talk to an automated robot to put you into the correct department, now I just repeat "Speak to a human, speak to a human" until the machine gives in. It does make you feel slightly odd shouting that down the phone repeatedly though.

Additionally, you need to constantly pester them whenever you need a document from them that is slightly out of the ordinary. For example, I'd recently been asked for my bounceback loan statement by my accountant. No worries I thought, just log in and download it from online banking. No such luck, there's no online statement for your bounceback loan, just an account tab saying how much you owe, but with no repayments recorded anywhere. Tried going through online chat on the app. Couldn't help me with that request, had to call customer support. After going through the horrendous robotic telephone menu I finally got to speak to someone who said these statements need to be specially generated and they will be emailed to me in two days (yawn). Did they arrive in two days? Of course not. Eventually after more robotic telephone calls and pestering I finally received the documents after about a month of trying.

I had almost the exact same palaver trying to get account statements for my US Dollar account.

Such a waste of time.

I've heard good things about Starling, thinking of switching over, especially as it's free. Not sure I can do that easily though until I clear the bounceback loan.

Does anyone have any tips for the best business credit cards to accrue points?

I had the following situation. The Frau is a shareholder of my UK Ltd, and her address Barclays had was old and needed updating . I told them her new address during a call. They said she had to provide it, by calling them and the new address being verified. There’s no evidence of the wife’s details on my account from my end; I don’t recall ever supplying this her name and address to them. But they’re somehow somewhere in the background on their side.

She called the number they gave, first response was “We need to take you through security….” She has no account with Barclays. She explained why she was calling. I went back and forth with Barclays over this, each time they told her to call, each time she wasn’t able to pass security as she doesn’t have an account. I did ask if I was expected to provide her with the account info to pass the security questions…I was advised against passing on security info and PIN numbers. All the while this was going on I was getting threatening letters about my account being closed down if I didn’t comply.

I eventually got through to a guy who did a call-back at 11pm at night. Turns out he was a reasonably senior guy helping out with the huge volume of work Barclays had generated for themselves. I explained the crazy situation with the wife’s address…..mysteriously I got a letter a week later saying all the checks were now complete.

 

[Weststander]

Just to clarify, I was of the understanding setting up as a sole trader meant no Corporation tax, due to the double taxation, essentially. Is that not the case?

Double taxation is normally to do with overseas income!

Sole trader - you'll pay income tax on profits, Class 2 National Insurance (tiny) and Class 4 National Insurance on profits above a certain level (significant).

Limited company - you'll pay corporation tax on profits, the profits being after deducting the salary through PAYE paid to yourself as an individual. Then tax on dividends paid by the company to you as an individual.

 

[sussex_guy2k2]

I

Double taxation is normally to do with overseas income!

Sole trader - you'll pay income tax on profits, Class 2 National Insurance (tiny) and Class 4 National Insurance on profits above a certain level (significant).

Limited company - you'll pay corporation tax on profits, the profits being after deducting the salary through PAYE paid to yourself as an individual. Then tax on dividends paid by the company to you as an individual.

I thought this was the case. Thanks for clarifying!

 

[SeagullinExile]

I use CountingUp. Online only, really easy to use and never any issues.