Starting your own business can be a scary venture. You have probably spent lots of time weighing up the pros and cons, putting a business plan in place, saving up and finally of course, making the leap. 

When you have made the decision to work for yourself, there are many things that you need to start considering such as which customers you want to target, what your marketing strategy will be, if you need to employ staff for additional support and of course, your business finances.

Managing your business finances can often be daunting, especially when you are first starting out. It can become over whelming to remember what needs completing, registering and submitting but, don’t worry we are here to offer some help and advice. 

The first thing to remember when you first start your own company is to register with HMRC. The main options are to register as either a sole trader, partnership or limited company. 

Sole trader 

It is simpler to set up as a sole trader but, being a sole trader does mean that you are personally responsible for your business debts. You also have accounting responsibilities including; keeping business records and records of expenses, sending a self assessment tax return every year and paying income tax and national insurance. You can find out more here. 


Setting up a partnership is the simplest way for two or more people to run a business together. You and your partner (or partners if more than two), personally share the responsibilities of your business. This includes any losses the business makes and bills for things you buy for the business such as stock. Partners share the business profits and each pays a tax on their share. A partner however does not have to be an actual person. A limited company for example can count as a ‘legal person’ and be a partner. 

To set up a business partnership, you need to choose a name, choose a nominated partner and register with HMRC. The nominated partner is responsible for managing the partnership’s tax returns and maintaining business records. 

Limited company 

If you start a limited company, it’s finances are separate from your personal finances. There are however, more reporting and management responsibilities. As a director of a company, you must; keep company records and report changes, file your accounts and your company tax return, pay corporation tax and tell shareholders if you may benefit from a transaction the company makes. 

You can hire an accountant to manage some of these day to day tasks for you but, you are still legally responsible for your company records, accounts and performance. 

How to manage your finances when you have your own company 

When you have your own company, it is really important to understand how to manage your finances. Learning what to do from the beginning can save lots of time and worrying later down the line. Knowing how to maintain cash flow and when to submit your tax returns for example are steps you can take on board from the very beginning. 

It does however vary, depending on what business you have set up as to whether or not you have to set up a business bank account. If you are setting up as a sole trader, you are not required by law to have a business bank account and you can legally use your personal account. You are able to use your personal account for business and non-business transactions or, you can set up a second personal bank account to use for your business. 

When managing both your personal and business finances in one account however, it can quickly become complicated and it is often easier to keep them separate for ease of use and clarification. There are often also different perks that come with a business account as opposed to a personal account. 

A limited company is classed as a separate identity however, therefore if you have just set up as one, you need to open a business bank account.

Personal accounts vs business accounts 

Personal and business accounts have a number of features in common including: 

  • Cash and cheque handling 
  • Debit and credit cards 
  • Overdrafts 
  • Loans 
  • Direct debits and standing orders 

The biggest difference between accounts is that business bank accounts usually charge monthly fees or a range of fees for certain transactions. Many banks offer an initial fee-free period before they will charge but, it is important to shop around to get the best deal.

A business account ultimately helps to keep your finances separate so it is easier to manage. You may also find that they offer additional features that you are not included in your personal account such as: 

  • Specialist business banking managers 
  • Business finance 
  • Online tools and software to assist running your business 
  • Ability to take payments from customers 

Why set up a business bank account? 

Whether you are a sole trader and not legally required to have a business bank account or, have set up a limited company and need to, there are a number of reasons why they are a good idea when it comes to managing your business.

Clarity for the HMRC

Each year when your tax return needs completing, you have to tell HMRC how much money your business has made. You are able to deduct certain allowable expenses such as travel and office costs for example to calculate your taxable profit. 

If your personal costs are mixed up with your business costs due to using the same account for both, it can be difficult to make these calculations accurately. 

Simplify your admin

As well as being helpful when returning your tax return to HMRC but, having a separate business account also makes it much easier to manage your business budget and forecasts for the year. It will save you time in bookkeeping as you won’t need to separate your personal and business costs.

Banking terms and conditions 

More often than not, in your personal bank account, the fine print will say that it should only be used for personal banking only. If your bank realises that you use it for business use, you could be liable for a fine. 

If you have just started your own business and would like support with your accounts, get in touch with the Cooper Accounting team, we would be more than happy to assist.