Astrid Elke Johnson wrote:
Yes, if you are going to be in business long-term you will need a business account.
It has nothing to do with taxation - in that it does not affect the amount of tax that you pay - but it is a - highly advisable - way of separating your personal money from the money of your business. Thus, you have all income from business sources, i.e. all the income from the invoices you have written, coming into the business account. If you buy business stationery, for example, then you pay that out of the business account. Anything that could be considered a business expense should be paid out of the business account.
What it does is to facilitate your book-keeping, and it can, in certain circumstances, make it easier to justify business expenditure if your books are audited.
You should transfer a monthly (or at first, if you like, weekly or fortnightly) amount to your personal account, which is then the wages that you pay to yourself. This also gets you thinking about not simply using everything that comes in, down to the last penny - as, a year or so later, you will need to pay your (high) income tax bill out of it.
However, you should probably not rush out to open a business account immediately. Most people test out their business first, for a year, and just keep on using their personal account. Towards the end of your first year in business - if you live in either Britain or Germany, at least - it is usual for your bank to contact you and tell you that they are setting up a business account for you - whether you like it or not. You will not initially greet the news favourably, since it will start to cost you money. You will have to pay for each transaction on your business account (a few pence, at least) or for each one after the first five, ten, or whatever. Nevertheless, you will also at that point probably wish to continue in a more organised way if you do continue, and it will be right at that point to start a business account.
I am not disputing that it may make sense to separate your personal money and open a business account, if you find it more convenient to deal with our finances that way. But you don't "need" it. We are talking about one freelacer, in other words a self-employed person, and in the UK it is not compulsory for the self-employed to have a business account.
I have never heard of a bank contacting you and demanding that you should open a business account because you are self-employed. Actually, I think it would be illegal to do so.
What is paramount , that you keep your invoices, paying in, relevant expenses, etc. in order, well documented, so you are able to do your tax return properly (or have an accountant to do it for you).
As far as tax is concerned, it has to be saved for. It will not make the slightest difference, what sort of account the money is/was in, if you spent it. To me it makes more sense to put a monthly sum into a saving account than paying extra for a business account.
The best advice is to look up some relevant sites on the internet, go to your local tax office and ask them for advice, approach your Business Link or Enerprise Agency, Chamber of Commerce or the banks themselves. They all have information about the business side of self-employment.
Once you get your bearings, you can decide whether you want to have a business account or not.