Freelancers' Questions: Do I need a business bank account?
I have recently graduated and worked for a while in a summer job, I was then offered the chance to do some freelance work by a friend for the company he works for and as my summer work was coming to an end I then did this freelance work. After this has followed 2 more jobs, one for the same company and one for another company, hopefully, more will follow.
All the work was invoiced by me to them and the wages I received for this work has been paid into my own current account either by cheque or direct payment. As the work has paid well and hopefully there will be more of it and I'm an honest person, I want to register with the taxman so everything is completely legit.
My questions are as follows:
- Do I register as a sole trader?
- If so do I require a company name or just use my own name?
- Where do I stand in regards to the money being paid into my personal account? Is a business account required? (Obviously, I have kept records of my invoices etc and have bank statements)
Expert's Answer, by Preetesh of accountancy firm Tidy Money:
Since you have been carrying out self-employed work, HM Revenue & Customs require you to inform them as soon as possible. As a result, you will be registered as a self-employed individual. If you delay registering, you may have to pay an initial penalty. You'll also have to pay further penalties if payments become due and have not been met. You will be required to disclose your self-employed income through annual self-assessment and pay any taxes due, whilst paying monthly class 2 national insurance.
As a self-employed individual, you may trade under your own name or choose a 'trading as' business name. A trading as name will enable you to brand, prepare invoices and receive payments in that name.
There is no legal distinction between a self-employed individual and the business. Therefore, you do not necessarily need a separate business bank account, as long as business and non-business bank entries are clearly identifiable. It is a good idea to have a separate business bank account as this would simplify business record keeping.
7th December 2009