If I start selling cakes - is it illegal if people just pay into my personal bank account?

[strawberrycheesecake1989]

Just that really! Looking to start selling bespoke cakes from home. Finding the admin side of it pretty overwhelming and looking to keep it as simple and straight forward as possible.

Can people just do me a bank transfer or would I legally have to set up a business bank account?

TIA X

No, you do not need a separate account but it does make your accounts harder when you get to year end.
The good news is, lots of business bank accounts are free for the first 12 months

Get an easy account with eg Mettle, it just runs off an app and you get a pre payment card

Are you aware of the need to submit self assessment etc OP?

No. But it’s easier to have a separate account for doing your books

You don’t need a separate account or a business account but you do need to keep records and declare earnings to HMRC

Separate account is far easier when it comes to tax return time. It doesn't have to be a business account necessarily, but I'd advise opening another account.

If you're looking to make it simpler then get a separate account!

You don't need one but it will make your bookkeeping much easier when it comes to submitting your tax return (assuming you are going to be earning over £1k).

It's much easier for your self assessment if you have a separate account so you have accurately see income and outgoings

I don't think you need to do anything for the first few months when you're just starting out, but you will need to make a business account eventually. As a customer I'd feel a lot more comfortable sending money to a business rather than a personal account

Not illegal but heard a piece in the radio where someone had her accounts closed down as bank saw they were being used for business.

Whatever you do, print out your bank statements and keep them in a folder. You can then tick things off and make notes as to what is what.

And your bank might close your account if they see you running a business via a personal account.

Look on their website. Most offer free business accounting for a few months, up to 18 months i think.

Not the best idea. You will need to pay tax on earnings etc so it's best to set up a business account

Business account - will make it easier to track income, and also expenditure (Which may be tax deductable) on expenses such as raw ingredients / pans / energy used / liability insurance / health and safety certificate etc (as well as asset depreciation on cooker / oven / mixers etc. . Then the difference can be relatively easily determined for tax assessment. HTH

Thank you very much everyone ! Super helpful!

Do I need to register as a business with gov.Uk / companies house in order to set up a business bank account?

No.

You can set up a business account whenever you want to

If you are going to be a Ltd Company then yes, you will need to register. BUT that might not be right for you initially or in the long run.

You probably need to discuss the size of business you anticipate with an accountant. They will be able to explain the differences in the various business entities as applied to your new business.

Using a personal bank account for a business is usually a breach of the bank account terms & conditions so they'd have every right to freeze/close the bank account if they discovered you were using it for business transactions.

Just get a business bank account - it'll make it easier in the long run when you come to have to prepare accounts/tax returns etc to have your business and personal transactions separate.

@strawberrycheesecake1989

Do I need to register as a business with gov.Uk / companies house in order to set up a business bank account?

Nope. You can just be a sole trader. When I first went freelance I was a sole trader and used my own account and like everyone here says, it was a pain in the bum and so hard to keep track of what was mine, what was the business’s, and what I was saving for the tax man.

As others have said having it all go through the one account isn't as 'clean' I have done accounts for lots of small traders who put it all through the one account. If you plan on going to an accountant just have your bank statements printed and mark somehow which transactions are business. Do this on a monthly basis or you will be going back through the account a year later thinking hum....what was that for.

Also I always recommend to businesses starting out to set up a separate savings account and for every sale you make put 10-20% into it when you get paid for income tax. I have had clients getting small loans after their 1st year of business to cover tax.

@irishfarmer

As others have said having it all go through the one account isn't as 'clean' I have done accounts for lots of small traders who put it all through the one account. If you plan on going to an accountant just have your bank statements printed and mark somehow which transactions are business. Do this on a monthly basis or you will be going back through the account a year later thinking hum....what was that for.

Also I always recommend to businesses starting out to set up a separate savings account and for every sale you make put 10-20% into it when you get paid for income tax. I have had clients getting small loans after their 1st year of business to cover tax.

This is great advice re the savings account too, if you reach payment on account territory then your first tax return especially will be a big hit as it will be a larger than usual bill.

You just need to set up a separate business account (and savings account as above) and then get yourself set up for self assessment (tax returns) with HMRC.

Just to add, for a cake making business, maybe worth keeping a spreadsheet which tracks prices of things like milk, vegetable oil and flour as these are anticipated to go up by up to four times current levels in the next 8 months or so, so worth calculating your prices versus profit margin. Good luck!

The link below has some information on setting up. Not sure it applies and I think it’s England so may be other regulators for NI/Scotland/Wales

www.food.gov.uk/business-guidance/starting-a-food-business-from-home

It will benefit you in the longer term to keep it separate OP.

Keep all receipts relating to work (equipment purchased, ingredients, mileage), all invoices and bank statements and keep on top of them - a folder my month/type is a good idea.

I've no idea of your predicted earnings for the first year of business or existing income but it is a good rule of thumb to set aside 30% of earnings for income tax purposes if there is any chance you will be tipping over your personal allowance for the year.

Depending on what you are selling and how it will be package you may need to register with the local authority in order that they are able to inspect the premises from a food hygiene perspective, this needs to be done 28 days prior to 'opening'. You may find the below helpful:

www.food.gov.uk/business-guidance/starting-a-food-business-from-home

www.food.gov.uk/safety-hygiene/scenarios-where-registration-may-be-required-when-providing-food-in-the-community