If you’re just getting started as a sole trader, it’s tempting to use your personal current account for business transactions. In fact, many people do, especially in the early days. But while it’s legal, that doesn’t mean it’s a good idea.
This guide looks at whether you can use a personal bank account for your business, what the risks are, and when you might want to open a proper business account instead.
Is it legal to use a personal bank account as a sole trader?
Yes – for sole traders, no law says you must open a business bank account. HMRC doesn’t require it, and many new self-employed people stick with their personal account for simplicity.
If you trade through a limited company, however, that’s different. Your company is a separate legal entity, so you must have a dedicated business account. Mixing personal and company money breaches basic company law and can cause accounting nightmares.
More on this in: What is a limited company?
Why using a personal account can cause problems
While it’s legal, using your personal account can quickly become messy. Here’s why:
- It’s harder to track business income and expenses – If you’re buying groceries, paying clients, and withdrawing cash all from one account, it’s easy to lose track.
- It makes tax time more difficult – You’ll need to go through your statements line by line to separate business from personal.
- It could raise red flags with HMRC – If you’re ever investigated, HMRC will ask to see your records. A clean separation of accounts looks far more professional.
- You could breach your bank’s terms – Most personal accounts forbid using them for business in their terms and conditions. Your account could be frozen or closed.
For a deeper dive into tax compliance, see our Self Assessment guide.
When a personal account might be OK
If you’re only doing the odd freelance job, or just testing the waters, using your personal account for a few transactions might be fine. But once things become regular, or you want to grow, it’s worth switching.
Think about the future – if your earnings increase, or you start trading under a name, a business account becomes much more practical. Some clients may even insist on paying into a business-named account.
Business account benefits (even for sole traders)
Opening a business account gives you several advantages:
- Cleaner bookkeeping – Everything business-related goes through one channel.
- Looks more professional – Clients are more confident paying into “Your Business Name” than a personal account.
- Easier to claim expenses – No more filtering personal costs out of your statement.
- Integration with software – Business accounts link easily to tools like FreeAgent and Xero for real-time reporting.
See our list of recommended business bank accounts for sole traders.
Free options: the halfway house
If cost is a concern, many digital banks now offer free business accounts with no monthly fees. These often include:
- Fast UK payments
- Integration with accounting software
- Receipt capture via mobile
- Spending categorisation
Tide and Zempler are both popular with sole traders. You can also compare FSCS coverage and fees in our business savings account guide.
What about partnerships and limited companies?
If you’re part of a partnership, or trading through a limited company, you’ll need a dedicated business account. That’s because the money belongs to the business, not to you individually.
Mixing business and personal funds in these cases can have serious legal and tax consequences. It also makes life harder for your accountant, and increases the chance of HMRC penalties.
What does HMRC say?
HMRC doesn’t require sole traders to have a business account, but it does expect accurate record-keeping. This is much easier when your business transactions are separate.
You can read more in HMRC’s official record-keeping guidance:
https://www.gov.uk/self-employed-records
If you’re signed up for Making Tax Digital (MTD), you’ll also need compatible software and digital records. Learn more: GOV.UK MTD for ITSA
Still not sure what to do?
Here’s a quick rule of thumb:
- Just started out, minimal income? You might get by with your personal account, for now.
- Trading regularly or growing? Open a proper business account. It saves hassle and looks more professional.
If you’re ready to switch, see our full guide: How to change your business bank account
Summary
Yes, you can technically use a personal account for your business if you’re a sole trader. But long-term, it’s rarely a good idea.
Separate accounts mean simpler taxes, cleaner records, and fewer headaches. And with so many free options out there, there’s really no reason not to make the switch once your business gets moving.
More help here: Choosing the right bank account as a sole trader