Getting started: Do you need a separate business bank account to freelance?
One of the boring bits of being a freelancer is making sure your finances are in check. That means recording income and expenses separately from your personal financial affairs. Is it worth getting a separate business account to streamline this process?
When you first start out, you’re most likely to work as a sole trader. That means you don’t have a company set up to handle your freelancing. It also means that clients will pay you money straight into your normal personal bank account. This is all completely legal but it also means that your freelance income and expenses are mixed in with your gas bill, your cinema tickets and that romantic weekend away in Paris which you’ve finally had time for now that you’re no longer employed full time!
The general advice therefore is to set up a separate bank account that you use only for business expenses and business income. Doing your bookkeeping in that case is as easy as looking at your bank statement.
Side note: On top of getting a separate bank account, I would also recommend getting a separate credit card that you only use for business purposes. Again, it’s about separating the two finance streams completely, so that you can easily see which expenses were for your business and which expenses were for you personally. A good place to start is MoneySavingExpert, remember to link the card to your new business account and pay off the balance each month!
So far, this should answer half of your question: Should you get a separate bank account when freelancing? The answer is YES!
The 2nd part was: Should you get a business bank account?
The answer here is that it’s generally not worth getting a business account when you work as a sole trader. In the UK at least you are able to get a business bank account if you’re a sole trader, however there are usually fees attached of around £5/month and it’s often a fairly complicated process to get it set up, with absolutely no benefit to you.
To summarise: The easiest way by far is to go to your bank, where you have your existing current account, and open a new personal current account specifically for freelancing purposes. Keep your freelancing finances separated from your personal affairs and you should be good to go.