Separate bank account tax return

[Penguinsetpandas]

I have just finished an employed job and as now living rurally looked at work from home jobs. Got first weeks work come in, will be paid in US dollars. Not sure if its the only job I will get or there will be more.

I know I have to do a tax return but do I need a separate bank account for payment. No need to pay payments out other than to myself. Normal current account has had loads of activity due to buying a house so don't particularly want HMRC going through every transaction - they are all legal but don't need the hassle. This job could be a one-off though. Thanks. Also can be paid into Paypal though not sure that would help.

[VeganCow]

I just emptied a savings account and use that as business account, that way there are no charges which you get with a 'real' business account.

[TangelasVine]

It makes things easier to keep track of if you do. A lot of banks will have in their terms and conditions that you can use their personal accounts for business purposes. A lot of people do though and just risk it.
If you are Ltd you'll need a business account though.

[TangelasVine]

*Can't use!

[Penguinsetpandas]

Thanks very much - saw HRMC don't require a business account but banks t&c tend to insist though think worst they do is close your account. Looks like HMRC require bank statements so will get separate account.

Transferwise seems to be cheap for US dollars, not covered by FSCS but guess no business account would be. I would guess best thing is to get money paid in then transferred to personal account quickly. I don't know if my current account would take payment in, in dollars - think it might but might well flag up as a transaction. It is through a freelance platform so will be invoices. Natwest say they offer free accounting software but presumably if you are just getting earnings in and no money going out its pretty simple to do tax return. Have to check how they do dollars though, maybe that days exchange rate. Thanks very much.

[TangelasVine]

I've never had to send a bank account to HMRC. I'm assuming that's just if you are investigated?
On the tax return you put income and expenses but a total expense figure.
It's worth keeping track somehow - I use Wave which is free accounting software do all my invoices, receipts etc are in one place. But you could use a spreadsheet or similar.
I've heard Starling bank are good and some of the big banks do a free 18 months for startups.

[Kazzyhoward]

Have to check how they do dollars though, maybe that days exchange rate.

If you mean Freeagent, yes, they adhere to HMRC rules and do indeed use exchange rate as of date of transaction, which is correct.

[Penguinsetpandas]

It may well be just if you are investigated. I've never done a self-assessment tax return but does seem to say they can ask you for bank account statements so think its easiest to have business side seperate.

I've done an account with TransferWise and that's let me create accounts in dollars, pounds and euros and there's no standard fees and transactions fees are really low.

Thanks - I will look into Wave, it should be fairly straightforward especially if this is the only contract I get.

[Cherries101]

Sole traders don’t need a business bank account but partnerships and companies definitely do.

[PiperPublickOccurrences]

I am freelance too, and registered as a sole trader with HMRC. I have never had a separate business bank account. All payments just go into a standard account in my name, or through Paypal into the joint account. Just make sure you're keeping accurate records - no need for fancy accounting software, I just use a very simple Excel spreadsheet.

It's been a few years since I earned in dollars but I had a long conversation with HMRC about it a few years ago and at that point they set an average exchange rate for the tax year and you use that to calculate your earnings in sterling. So just add up everything in dollars then convert it once.

www.gov.uk/government/uploads/system/uploads/attachment_data/file/696926/average-year-to-march-2018.csv/preview

[PiperPublickOccurrences]

Oh and I've been doing tax returns for a decade on a freelance basis and have never been asked for any evidence whatsoever.

[pacer142]

Oh and I've been doing tax returns for a decade on a freelance basis and have never been asked for any evidence whatsoever.

Most people don't but HMRC go to town on you when they do pick you for an enquiry/investigation, which may be due to "intelligence" they think they have, or purely random. And yes, if you are selected, they often ask for all bank statements of all bank accounts through which any business transactions have been put through. So, just a single payment/receipt in your main personal current account, and they can ask to see all the bank statements, and can ask for further information, evidence, documents, etc of any (or all) transactions. So, yes, general good practice is not to confuse business and private transactions in the same bank account.

[Penguinsetpandas]

Thanks very much. I am going to separate it to be on the safe side, work is coming from a tax haven so may flag up some triggers.