It is good practice to maintain a separate account for both your personal and business activities, to help keep your accounts clean.

As a sole trader, you may want to open a business bank account for a few reasons:

• Your bank may specify that a personal account is for personal use only, and threaten to close your account if they see a large number of business-related transactions.
• If your personal costs are mixed up with your business costs, it could be difficult for you to inform HMRC about how much money your business has made.
• Having a dedicated bank account is likely to make your business appear more professional to clients and partners.

It is relatively straightforward for a business to set up a bank account in the UK, as long as it is eligible.

Make sure you have the following documents to hand when you open your account:

• Proof of ID – all named company directors will need this. You can use a passport, national ID card or photo driving licence.
• Proof of address – this can be a utility bill, a council tax statement or a recent bank statement.

If you have a company, the following details will also need to be given:

• Full business address (including postcode)
• Contact information
• Companies House registration number (for limited companies and partnerships)
• Estimated annual turnover.

Typically, monthly fees will be charged for business bank accounts. Research different types of business bank accounts and their respective rates online before you choose one.

This website could be a good place to compare business accounts as it is easy to use. You can also use the UK Finance guide here to see what information you would need to provide to open different accounts. If you aren't sure which business bank account to open or can't find one that works for you, reach out to TERN and they can share some recommendations with you.

Next up: What to consider before taking out a business loan