First Direct/HSBC - personal vs business banking
Thread poster: Marie Jackson

Marie Jackson  Identity Verified
United Kingdom
Local time: 10:25
Member (2012)
French to English
+ ...
Jul 31, 2013

Hello everyone!

Sick of the commission charges charged to my Natwest business account to receive foreign payments (EUR), I've been trawling the web over the past week to find a new account to put on my invoices for clients.

I'm very impressed with First Direct's 1st Account offering, and I know that many translators in these fora are customers, however, they apparently can't offer business banking. From what I understand, this is a licensing issue and so affects them more than me, but I'm curious to know how so many freelancers here are banking with them without being 'caught out', leading to the closure of their accounts; I phoned them this morning about this and they seemed quite insistent that it would be a problem.

I have read online that sole traders are a special case, since we are, legally-speaking, our businesses. Does this provide some kind of loophole for us/the banks? Is that how you're all doing it? Or is this rather a case of 'don't ask, don't tell'?

I have, of course, looked into other business bank accounts, the best of which in terms of foreign transfers would appear to be HSBC's Business Direct Account, however, I resent paying fees for what is essentially the same service as I would require from a personal account; I don't need an overdraft, just a separate account which can receive bank transfers.

Does anyone have experience of one or both of these banks regarding this issue and how did you find it? Are day-to-day bank fees a necessary evil, even for sole traders?

Also: why is there always a charge for business banking, when the actual service provided is no different to an ordinary bank account (until you get into borrowing/lending etc.)? Does anybody have any idea? The more research I've done this week, the more cross I feel about having to pay for something I could easily have for free...

Sorry for rambling a bit; I hope I've been clear. I'd appreciate your input, since I would much rather apply for the free First Direct account than the HSBC account for which I'll be charged for every transaction after the introductory period expires.

Thank you in advance and well done if you made it this far!

Marie


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Norazilinah Ingram  Identity Verified
United States
Local time: 05:25
Member (2013)
Malay to English
+ ...
Commission charges Aug 1, 2013

Sick of the commission charges charged to my Natwest business account to receive foreign payments (EUR), I've been trawling the web over the past week to find a new account to put on my invoices for clients.


[quote]I have, of course, looked into other business bank accounts, the best of which in terms of foreign transfers would appear to be HSBC's Business Direct Account, however, I resent paying fees for what is essentially the same service as I would require from a personal account; I don't need an overdraft, just a separate account which can receive bank transfers.[/qoute]

Hi Marie,

I can relate to your frustrations. As a person who worked in the bank before and small business owner, I can share with you what I know. When I owned a business before and had a business account, I couldn't keep up with the balance because of the constant charges of service fee both from the bank and credit card company. I ended up having to close the account before I have a negative balance. When I worked in the bank, I began to learn a lot of things that simple things customers were not aware of. Banks make money from selling their services and earning interest. If you have a business account with the bank, they would prefer the customers to keep up with the minimum balance or you'll find surprising service charges here and there because in order to be able to give interest to customers who doing well with their account, they have to make money first, there's where all the money come from. Services and interest. It takes money to make money. Unless you have a constant or daily deposit make to your business account, I suggest you just close or don't open a business account at all because its not worth to be charged all those unnecessary service fee.

Have you try to open a separate account (personal) in a different bank? Maybe that can save you from having to open business account. Or have you try PayPal? So far I have compared it with a lot of banks, their service charge is still by far the cheapest. I hope you find what you looking for. Best regards.

Nora Ingram


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Marie Jackson  Identity Verified
United Kingdom
Local time: 10:25
Member (2012)
French to English
+ ...
TOPIC STARTER
That's my question really Aug 1, 2013

Norazilinah Ingram wrote:
Have you try to open a separate account (personal) in a different bank? Maybe that can save you from having to open business account.


The personal account issue is precisely the one that I'm trying to get my head around with this question... I'm just not sure I'm allowed to do it. I did ramble on a bit, granted!

It's not so much that I can't afford the fees anyway, it's just that I don't see why I should have to pay them. This probably makes me sound quite stroppy and entitled, but really I just like something for nothing (as long as it's legal!).

Thanks Nora, though. I guess that makes you yet another personal account holder for business...


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Decipherit  Identity Verified
United Kingdom
Local time: 10:25
Portuguese to English
+ ...
These links might help you Aug 1, 2013

http://www.brighton-accountants.com/blog/sole-trader-bank-account/
http://www.theguardian.com/money/2011/jul/08/self-employment-financial-services
http://www.diyaccounting.co.uk/Sole-Trader-Business-Start-Up-Article.do

The bottom line is that you don't need to open a business a/c but the banks will of course encourage you to do so.


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Charlie Bavington  Identity Verified
Local time: 10:25
French to English
Something for nothing Aug 1, 2013

First, as you might already know, there is no legal obligation for the self employed to have any kind of separate bank account. It just makes life massively easier (IMHO).
HMRC acknowledge as much here, for instance: http://www.hmrc.gov.uk/startingup/working-yourself.pdf (p.5)


Marie Jackson wrote:

I have, of course, looked into other business bank accounts, the best of which in terms of foreign transfers would appear to be HSBC's Business Direct Account, however, I resent paying fees for what is essentially the same service as I would require from a personal account; I don't need an overdraft, just a separate account which can receive bank transfers.

I actually had free "business" banking with HSBC for several years (ending last year) when I was self emp'd (I'm a ltd co now so closed that account) - the chequebook has the words "trading account" on it - I don't recall the account's official name although the one you give has a familiar ring to it.



Also: why is there always a charge for business banking, when the actual service provided is no different to an ordinary bank account (until you get into borrowing/lending etc.)? Does anybody have any idea? The more research I've done this week, the more cross I feel about having to pay for something I could easily have for free...

As a very general point, the free (and indeed interest-paying, when the circs are right) personal banking we're now used to in the UK is not universal, and it was not ever thus, either. I remember paying for personal banking, way back when. I still do on my French account (not much, admittedly). And I do on my UK ltd co account.

I suspect charges are higher for business accounts because they're tax deductible. I'd rather not pay a charge and pay some tax (especially in view of what tax is likely to be at least partly spent on, in contrast to lining the pockets of the liars and thieves in our banking system), but there you have it.

So, to sum up, if you're self employed, you don't *have* to do anything. As has already been suggested, if you can't find a bank who give you a free trading account, open a personal one (and don't tell them what it's for, else no doubt you'll fall foul of some "policy" or other!).


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Hazel Underwood  Identity Verified
United Kingdom
Local time: 10:25
Member (2005)
German to English
+ ...
Business account not necessary Aug 1, 2013

Hi Marie,

Absolutely no need for a business account unless you are trading as registered company.

So go with First Direct (always tops customer service polls!).

Hope that helps!

Hazel


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Marie Jackson  Identity Verified
United Kingdom
Local time: 10:25
Member (2012)
French to English
+ ...
TOPIC STARTER
Thank you Aug 9, 2013

Hi Charlie!

Thanks for taking the time to give me such a detailed response! Having established where I stand legally, and having spoken to FD directly about where they draw the line, I've decided to go with the HSBC account: free for just 18 months, after which I'll have to pay £5.50 a month, but the fee is surely worth the convenience of receiving all of my money for free into the one account (as compared with the complicated system I'd been using up to now)! Given that I'm expecting the business to grow quite a bit this year, I decided that it might be worth sorting things now. I did read your blog(?) post about the trials and tribulations of trying to sign up for an HSBC account, but the only problem I seem to have had so far is not receiving my codes for online banking. Pleased with the decision so far!

May open up a FD account anyway though... they've been a real pleasure to deal with!


Hi also to Hazel,

The problem with the FD account was rather that it is their policy not to offer business banking. I called them and asked exactly where the line is, and basically any truly successful business shouldn't be banking with them; it's a licensing issue and can land them in a lot of trouble, and you'd be forced to close the account sharpish if caught (which would cause lots of billing issues if it happened at the wrong time of the month). Avon ladies would apparently be fine, but companies wouldn't, whether sole traders/partnerships/Ltds, since their business expenses would go through that account, too. Those translators holding FD accounts are basically doing so on a 'don't ask, don't tell' basis. I might go FD personally, but they'd catch me out pretty quickly when business banking because of the money going in and out of the account. Best to keep things above board on all levels, I suppose, and the HSBC account actually offers much the same products and services, albeit for a (small) monthly fee.


Thanks to everyone for the advice! It's good to have finally got everything sorted - my accountant also thanks you!

Marie


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First Direct/HSBC - personal vs business banking

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