When many people start out on their own, opening a business bank account is one of the first things on the ‘to do’ list. As the business grows, it may seem a good idea to open more accounts.
Can you legally have multiple business bank accounts as a sole trader? And more importantly, should you?
In short: yes, you can. There’s no rule preventing sole traders from opening more than one business account. In fact, there are several good reasons why having two (or more) accounts can make your financial admin a lot easier.
Why have more than one business bank account?
Many self-employed individuals maintain a single account where all transactions occur, including client payments, software subscriptions, taxes, and occasionally, business expenses such as coffee purchased on the company card.
A single account is often sufficient for many people, but things can become complicated.
If you split your finances into different accounts, you’ll be able to:
- Track spending more easily
- Ringfence your cash for tax, savings, or to cover emergencies
- Prepare for and meet your VAT or Self Assessment liabilities
- Keep client funds separate (especially if you handle deposits)
- Test out a new bank without switching everything at once
Many sole traders use the “pot” system, which separates their income into categories, and this becomes easier when you use multiple accounts or digital banking tools that support it.
What is HMRC’s view on multiple accounts?
HMRC doesn’t insist that sole traders use a business bank account – it’s not a legal requirement after all.
However, it does keep your business and personal finances separate. It also makes life easier in the long run.
If you’re using multiple accounts, just be sure everything is included in your accounts – from client payments and bank fees to any interest earned. Good bookkeeping means no surprises when it’s time to file your tax return.
When does it make sense to open a second business account?
1. To separate working capital from tax liabilities
Many self-employed people set aside a percentage of each payment to cover tax and National Insurance. Instead of leaving that cash in your main account – where it’s easy to spend – you could transfer it to a second account reserved for tax liabilities.
This makes budgeting more straightforward and reduces the temptation to use money which has been reserved to pay HMRC or other liabilities.
Zempler and Tide both let you tag or separate funds, which helps if you don’t want to open a completely new account.
2. To manage savings or significant expenses
If you’re saving up for equipment, tax-efficient pensions, or even just a quiet quarter, it’s helpful to move money into a dedicated account. Some business banks now offer linked savings accounts, although interest rates vary.
Alternatively, you can use a second current account and label it as “equipment” or “buffer”.
Please note that traditional banks may charge additional fees for maintaining multiple accounts.
If you’re planning a purchase, our guide to capital allowances for sole traders explains what you can claim. Thinking longer term, here’s how to set up a pension as a sole trader.
3. To test or switch providers
If you’re unhappy with your current bank – perhaps the app’s clunky or customer service is poor – opening a new account alongside your main one gives you a chance to try it out before making a complete switch.
Many sole traders do this with Tide, Zempler and other digital banks. You can set up an account in minutes, transfer one or two regular payments, and see how the service compares – no need to commit fully straight away.
When you’re ready, see our guide on how to switch business bank accounts as a sole trader.
4. Keeping different income streams separate
If you run more than one type of business activity – say consultancy work, and also an online shop – having separate accounts can make things a lot easier.
It helps you track what’s coming in from each source, manage expenses more clearly, and avoid confusion when it’s time to do your accounts.
It’s also useful if you ever want to see which part of your business is more profitable, or if you’re planning to grow one area in future.
Can you just use personal accounts instead?
Technically, yes – but it’s not recommended.
Most high street banks state in their terms that personal accounts shouldn’t be used for business purposes. And if you’re ever applying for funding, using accounting software, or signing up for digital tax tools, you’ll usually need a dedicated business account anyway.
That’s why the new wave of digital banks has been so successful. They’re built with sole traders in mind, don’t require a limited company, and offer helpful features built in, such as invoicing and real-time spending breakdowns. They also seamlessly integrate with accounting software like Xero, Quickbooks and FreeAgent.
Do you need to tell HMRC?
No. You don’t need to tell HMRC how many business accounts you have.
When completing your Self Assessment, you report your total income and allowable expenses – which bank accounts these transactions occurred in is irrelevant.
However, if you ever apply for a mortgage or grant, lenders might want to see statements, so it’s wise to keep your accounts clean and consistent.
Tips for managing multiple accounts
- Use accounting software that supports multiple bank feeds, so you’re not tied to a single bank – see our best accounting software for sole traders
- Keep clear notes when you transfer funds between different accounts
- Label your accounts in your bookkeeping software (e.g. “Trading”, “Tax”, “Savings”)
- Regularly reconcile all balances – not just your main account. You might have to do this manually if one of your accounts isn’t part of Open Banking.
To summarise
You’re free to open and use multiple business accounts as a sole trader, and doing so can actually make things simpler.
Whether you want to manage tax more effectively, ring-fence savings, or try out a new bank like Zempler or Tide, having more than one account is completely allowed – and in many cases, a smart move.
If you’re still deciding which account to go with, take a look at our updated comparison table.