Building your own business is an incredibly rewarding way to earn a living, working for yourself and sculpting your company exactly as you want it to be.

Of course, being so close to the running of your enterprise, it’s probably no surprise as to why so many business owners find that the boundaries between their work and personal lives become blurred in every way.

In particular, this can happen with your business and personal finances, treating all your wealth as if it were just one single entity. However, this approach can have some negative consequences, which is why it’s often prudent to keep the two separate.

You may have read our previous article in which we explained why your business is not your pension, and the importance of having a dedicated retirement pot. In it, we outlined the benefits of keeping your retirement savings separate from your company.

Along the same lines, there are other key advantages of keeping your company and personal wealth separate, at least to some extent. Keep reading to find out why.

It’s simpler for you to manage your wealth

First and foremost, it’s simply easier administratively to keep your wealth separate so you know precisely what belongs to the business and what is your personal wealth.

This can make it easier to manage payments you receive from customers or clients, and you’ll be able to track the footprint of transactions over time. Having this ability can be especially important if you ever receive queries or complaints about payments being received or processed.

Similarly, while you can do so through a personal account, it’s easier to claim back on business expenses if you know that all transactions from a particular account are exclusively for business purposes.

All this combined can improve record keeping and accounting, too, ensuring you pay an accurate amount of tax.

Improving budgeting and cashflow management

Alongside these administrative advantages, you’ll also be able to budget and monitor and manage your cash flow more effectively, both personally and for the business.

You’ll be able to accurately track incomings and outgoings in your company and your personal life, giving you a clear picture of what you can afford to do in each.

In turn, this can encourage better spending behaviours, as you may not be as tempted to use money from the “wrong” account. This can force you to prioritise your spending and trim the fat off your budget, whether that’s in the business or personally.

This can be powerful in helping you make the most of the wealth you earn from running your company.

Separate accounts can provide additional asset protection

A key benefit of keeping accounts separate is that it may afford greater asset protection.

Sole traders are inherently liable for all losses and debts incurred within their businesses. But, if you have gone from being a sole trader to employing multiple individuals and running a larger business, you may well have incorporated as a limited company.

In this case, it’s a legal requirement to have a separate business account. So, keeping your personal finances elsewhere ensures that your wealth is somewhat shielded in the event of something happening to your company.

Similarly, in the case of partnerships, whether it’s compulsory to have an account will depend on the nature of the partnership; Limited Liability Partnerships must have a separate account, for example.

Even so, keeping your accounts separate – especially between partners – is wise to avoid disagreements over who owes and is owed money.

It’s worth speaking to an accountant if you’re unsure what your obligations are in this sense. We can connect you with a trustworthy professional.

It could look more professional in front of customers and clients

When you’ve just started out and your business is small, having customers and clients pay into your personal account is no issue. In fact, in those very early days, you’re probably just thrilled to be making sales!

But, as your business grows and so does your reputation, it can be sensible to open a business account with your company’s name on to instil confidence in your patrons.

Rather than them having to pay invoices into your personal account, it can look more streamlined and efficient in front of your customers and clients to pay into a dedicated account with your business’s name attached.

Similarly, it could look positive in front of suppliers who might perceive you as a bigger player in your market. In turn, you could be able to negotiate more attractive deals in future.

It might be subtle, but a simple change like this could be effective in improving your standing among clients, customers, and anyone else you work with.

Get in touch

At Cordiner Wealth, we help business owners like you to organise your wealth so you can reap the rewards of all the work you pour into your company.

If you’d like to find out how we can support you, please do get in touch.

Email hello@cordinerwealth.co.uk or call 0113 262 1242 to speak to a member of our team.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate cashflow planning or tax planning.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.