Stop Using Your Business Account Like a Personal Wallet

Hi there, I’m Louise from Performance Accountancy. Let’s talk about something I see constantly, and it can have serious implications for your tax return and your accounts.

If you are trading as a limited company, you should not use your business bank account like a slightly more glamorous personal account. Supermarket shopping, coffee shops, Apple purchases, random Amazon orders and other personal spending all create problems when they run through the business account.

By the time we get to the year end accounts, there can be 15 different supplier names appearing in the records, including Sainsbury’s, Aldi, Tesco and Co-op. That is not bookkeeping. That is chaos.

If something is personal, it should be coded to drawings. Drawings simply means money taken out of the business for personal use. Personal spending does not reduce your business profit, and it does not reduce your tax. It just records what has actually happened.

The more personal spending that sits inside business expenses, the more inaccurate your accounts become. Inaccurate accounts take longer to sort out, and that can lead to higher accountancy fees.

If you have mixed your accounts historically, don’t panic. Personal spending can be bulk coded properly, but going forward, it is sensible to make a clean break. Use the business account for business transactions, and use your personal account for personal spending.

Your future self will thank you.