Can I use my private Bank Account for commercial purposes?

It appears to be a question every person has in their mind. It seems an easy job to run occupational and private expenses from one common bank account, but in actuality is it so simple?

Sole Trader:

In the event of a sole trader, there is no variance between the owner and the occupation, both are the same. The commercial liabilities are of the proprietor’s burdens. Both private and commercial affairs are used to calculate taxation. So, yes a sole trader can use own bank account to run his trade. But, it’s always better to label individual expenses and commercial expenses differently. Proper documentation will always be helpful in case of an audit raised.


hands shaking in black and white

In the event of partnership, the occupation is entirely distinct entity than the partners. A partnership is formed by two or more partners. So they cannot use their specific private bank accounts to run the commercial expenses. In the case of the Limited Liability Partnership, some or all partners have limited liabilities i.e. the commercial liability is not considered as the liability of the partner. In such cases, it is vital to create a commercial Bank account or business Bank account.


When a Company formation takes place in the Companies House, a new legal entity is molded. The new corporation is a separate body as compared to the shareholders. The liability of the shareholders is limited and they are liable only for their own money invested. The guarantors, on the other hand, provide their personal guarantee and are liable for the Company debt. But there will be other shareholders who are not legally responsible. This is called Co-Signing system.

In such cases, it is vital to retain unconnected commercial bank accounts and private bank accounts. In case of failure in keeping different accounts for private and professional purposes, the owners can be sued for commercial liabilities.

Easy to get bank loans

If a trade is in need of a bank loan, it will be done through a business bank account. A loan in personal account is considered as a personal loan. The two loans have different taxation.

Banks have different approval processes for approving Business loans, especially to the new trades. In the case of a new business, where there is no credit history, Bank inspects the private credit history of the owner.  Few basic points’ banks check while approving a business bank loan:

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Credit History of the borrower: A running trade has its own credit history. The payment modules, any default accounts, Credit availability, and total debt decide the credit history. For new company formation, all these points are checked for the owners.

Revenue generation capacity: The banks check the revenue generating capacity of the trade in order to approve the business loan. This helps them to understand how the loan will be repaid.

Capital assets: A capital asset means the corporate machinery and equipment, the inventory or office space/store/ warehouse. Banks can sell these assets and get their money back.

Collateral security: Often Banks asks for collateral security which they can use in case of a business failure. According to banks, collateral security makes the owner keep running the trade instead of just walking away if a business fails.

Importance of business bank account:

  • Getting a dedicated and specialized current account for a corporate is always beneficial. Some of the main benefits are:
  • Separate private bank account and business bank accounts.
  • Offers higher overdraft facilities to run a trade.
  • Gives access to numerous commercial guides.
  • Provides training materials for dealings.
  • Gives discounts on Foreign exchange rates.
  • Faster service on international payments.
  • Faster service on international insurances.
  • Gives a credit history to your trade, which will make it easier to get a business loan.
  • Free business bank accounts with most banks.
  • Easy tax filling.

How to open a UK business bank account:

Eligibility criteria:

Anybody who is running a business in the UK is eligible to apply a business bank account in the UK.  Different banks provide different accounts depending on the size of the business. The basic eligibility criteria are:

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  • The business owner must be 18+ years of age
  • The business income should be directly deposited to the Business bank account.
  • The business owner is not declared as a bankrupt.
  • Personal credit history is good i.e. did not miss any payments
  • Have a business address in the UK
  • The business was never dissolved
  • The financial accounts of the business show positive net worth
  • The directors were never disqualified.

Checklist for the information needed by a Bank to open a business account:

1.  Key Contact person details

  • Name
  • Address
  • Date of Birth
  • Nationality
  • Contact Number
  • Email ID

2.  Business details

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  • Corporate Type
  • Business Name
  • Trading Name (if different)
  • Company’s website address
  • Registered business address
  • Nature of trade
  • Number of Employees
  • Capital Invested
  • Source of income
  • When did you register a Company i.e. date of Company incorporation

3.  Shareholders Details

  • Name
  • Address
  • Date of Birth
  • Nationality
  • Contact Number
  • Email ID

 The shareholding percentage at the time of setting up a Company or at present

4.  Account Signatories

Checklist for documents needed to open a Business Bank account:

Stack of documents
  • Identity proof of Director(s), owner, Partners ( as applicable)
  • Address Proof of Director(s), owner, Partners ( as applicable)
  • Past 30 days business bank statement for a running trade
  • Past 30 days personal bank statement for a new trade
  • Detailed Business plan
  • Details of shares issued
  • Copy of agreement for partnership
  • Certificate of Company formation
  • UK Company registered address proof
  • Memorandum of the association made during setting up a Limited Company

Business bank accounts for non-residents

It is not legally required to be a resident of the UK to open a business bank account in the UK. But, most of the bank accounts, avoid banking with non-residents. There are but a few banks which allow a non-resident business bank account like Barclays, HSBC, and Lloyds. These banks provide international banking services to the non-resident bank account holders.

Different currencies falling down

One more way for a non-resident is to open an account in your homeland with an international Bank having branches in the UK. For example, if you have an account in HSBC India, you can easily have a business bank account in HSBC UK.

Another way for a non-resident to open a Business Bank account is to check with their local banks. Most of the big banks have arrangements with overseas banks in a foreign country. They can introduce their clients to the overseas banks and the accounts can be opened.

The best and easiest way to open a Business bank account for a non-resident is to apply through a Formations Company, like Seed Formations. We have tie-ups with various local banks and have the experts in the field to work on your behalf.

Banks in the UK

The UK is huge in the commercial and retail banking sector. There are numerous banks and other popular brands present in the market providing competitive rates to new bank account holders. Each bank has different products suitable for different customers.

The big four names in the UK Banking industry are:


Barclays is a globally recognized organization which provides International banking. It is a fit for any business size. They have suitable products for every type of businesses like sole traders, partnerships, and Limited Liability Companies.

Monthly account fee is £6.00 for Mixed Payments Plan and £6.50 for e-Payments Plan and free for new set up business for 12 months, Seed Formations can help you to get a free business bank account.


It is a real worldwide bank with its presence in more than 7 countries in the world. Whether you are registering a business, or you are well settled and looking for a switch, HSBC has the right banking solutions for you.

Monthly account fee is £5.50 and free for new set up business for 18 months, if you register your company with Seed Formations, you can choose free bank account within the process of setting up your company.


bank cards stacked in top of one another

Lloyds Bank has been a great support for its customers for the past 250 years. They have been serving business accounts to sole traders, partnerships, charities, companies, etc.

Monthly account fee is £6.50 and free for new setting up a business for 18 months, Seed Formations works also in partnership with Lloyds to offer bank account to its client, feel free to contact us if you want to know which the best bank for a business account is.

Royal Bank of Scotland

RBS serves domestic and worldwide clients with its varieties of suitable business accounts. Be it a start-up company or established a business, RBS provides different solutions.

Monthly account fee is £6.50 and free for new setting up business for 24 months.

Other than the big four, the UK has a presence of popular banks / financial institutions in the market. Some of them are:


Standard Chartered PLC

Santander UK

Nationwide Building Society

Schroder’s and many more.