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Freelancing used to be restricted to a few professions, but the end of the “one job for life” era has made it much more common. The Association of Independent Professionals & The Self-Employed (IPSE) estimate that 1.88 million Britons are freelancing in 2015.
Freelancing has many benefits, one of which is that freelancers aren't tied to one place. People taking advantage of this flexibility are known as “digital nomads” - able to work from anywhere as long as there's somewhere to charge their laptop. Choosing the right bank account is important when dealing with a fluctuating and variable income and running a small business - and we’ve put together a guide to give you some ideas of the sorts of things to look out for.
There is nothing to stop you* running a freelance business through your current account, and many people do. However, setting up a small business account can have other benefits - not least business advice from your bank. Although it might seem counter-intuitive to the idea of “keeping things simple” to have a separate business account, in actuality it can be much easier to keep your “personal” and “professional” money separately, especially when putting money aside for taxes.
Paying yourself a salary from one account to the other can be the most straightforward way to manage your money - especially if HMRC decides to audit you. *as a general rule - but check the terms and conditions for your specific current account.
Although it’s pretty unusual for a bank not to offer online and telephone support, make sure that you can do what you need to without having to visit a branch. As a freelancer your time is precious, and you can save hours a month with decent online banking.
Unlike current accounts, business accounts normally come with a whole raft of charges for standard transactions - so make sure you are aware of them. Small business accounts are often free to start with and then charge after this introductory period. Don’t let the expense automatically put you off though - it’s often better to pay a little for a really excellent service that might save you time and money in the long-run.
You can easily offset some fees as well - a secure money transfer service such as Wise can save on bank transfer fees when sending money abroad, which can really add up if you are travelling while freelancing and still running an account in the UK.
If you have international clients, you can use Request Money to save when getting paid. You'll save on fees plus get the real exchange rate. An online dashboard allows you to track your outstanding requests and you'll receive an email each time you receive a payment.
Some business and current accounts don’t offer interest at all, while others are more competitive. If your income is likely to be high then this is especially important.
Old-world bank accounts only work properly in one country. They hold money only in one currency. And it gets expensive when you try to use them across borders. Wise's new Borderless accounts solve all of this.
Now you can send, receive and organise your money internationally, without crazy fees or even-crazier exchange rates – just a small, fair charge when your money moves between currencies.
Currently the top three on the market for UK small businesses are:
- Santander’s Start Up Business Account (free day-to-day transactions for a year, and then a choice of fees depending on how much cash you're likely to withdraw)
- NatWest’s Start-up package with two years free unlimited transaction banking
- TSB’s Start-up account which is free for the first 18 months
Before you make a decision about whether to open a small business account, or just keep going with your current account, get some advice from other freelancing friends. Find out what their experiences have been and whether their bank or account might be a good fit for you. If you are planning on travelling while working, take a look at our top tips for working as a travelling freelancer.
This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from Wise Payments Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.
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