There’s no actual requirement to have a separate bank account if you’re working as a self-employed hair and beauty professional. In fact, you don’t actually need a bank account at all if you’re happy to deal exclusively in cash.
Having said that, there are a number of reasons why having a separate business bank account can make a lot of sense. A separate business account makes it considerably easier to keep your business and personal spending separate and, in turn, that makes completing your tax return easier. It also gives you more options in terms of how your clients can pay you.
Managing your business finances
Although you could use your personal account to receive incoming business payments and make outgoing business payments, if you do that. it can create problems when it comes to doing your tax return because you would need to work out which of the entries on your bank statements related to personal transactions and which related to business transactions.
Of course, you could keep a record of your business transactions in a spreadsheet or even via paper records, but it’s a lot simpler to have two accounts to keep the transactions separate. That way your business transactions are listed on one set of bank statements and your personal transactions are listed on a different set of bank statements.
Having a separate business account also makes it easier to keep track of how well your business is performing. You can tell exactly how much money is in the business so it’s easier to work out whether your business could afford to buy a new piece of equipment, for instance.
Clearly, if your clients are paying you in cash, it’s not a problem. You just hold out your hand and wait for your clients to fill it with their coins and banknotes. But some people will want to pay by credit or debit cards, or even via cheques.
It can be difficult at the best of times to get paid when you’re self-employed, so the last thing you want to do is make it difficult for people to pay you. Offering to accept payment via a number of different methods makes it easier for people to give you money.
But if you want to accept card payments or payment via cheque you’re going to need a business bank account.
Credit & debit cards
Payment via credit and debit card is rapidly becoming the standard way to pay for everything and many people don’t actually carry any cash. If you don’t accept card payments, you could be missing out on sales.
It’s possible to accept card payments without a separate business bank account, but most card payment providers will require you to have one. As such, if you don’t have a separate business bank account, your options will be limited and you could well end up paying more for your card payment facility as a result.
Cheque payments are rare these days, and since cheque guarantee cards were phased out, it’s unlikely that you’ll be receiving payments from your clients in the form of cheques.
However, some businesses still make payments via cheques, particularly if the payments are being made by post. You may also prefer payment via cheque if you’re reluctant to give your bank account details to someone so they can make a payment to you via bank transfer.
If you receive cheques made payable to your business name rather than made payable to your personal name, you would not be able to pay those cheques into your personal bank account. You’d need a business bank account to pay them into.