Do I need a separate bank account for my content creator income?

Deciding whether to open a separate bank account for your content creator income depends on several factors. Primarily, the question comes down to whether you operate as a sole trader or you run a limited company. Our experts in accounting for content creators have put together this guide to explain the differences between the two and help you come to an informed decision when it comes to managing your content creator earnings.

More specifically, we’re going to look at:

• The advantages of a second bank account for both sole traders and limited companies.
• The most common banking setup for content creators.
• The most common questions we get asked relating to multiple bank accounts.

Let’s go!

Sole Trader vs. Limited Company

In a nutshell, you may be better off opening a separate bank account regardless of whether you operate as a sole trader or run a limited company. However, for some content creators, opening a separate bank account may be a need, and for other’s a want. Here’s why:

If you’re a limited company = Need. There are potential tax and legal implications if you don’t have a separate bank account for your company.

If you’re a sole trader = Want. There are benefits to separating your content creator income from your personal income. For instance, this will create less admin and tidier records for HMRC.

Below, we’re going to break this down into more detail so you can understand exactly how to approach your earnings from content creation.

Separate bank account for Limited Companies

If you run your content creation as a limited company, you need a separate bank account for your business transactions.

A Limited Company is governed by company law and is seen as a separate entity from the business owner who runs it. This means that all the money you make from running the business belongs to the business, while you take on the role of Director. Think of it like this: when you own a limited company, you become an employee of your own company.

Most often, the money you take out of the company will be your salary. When you originally set up your limited company, you may also have learned about other ways to take money out of the business personally. Or it could be completely new to you. Either way, here’s a brief look at how you can take out earnings as a content creator:

• • Salary – Like any other employee, you’ll need to pay yourself a salary as your main source of personal income from content creation.
  • Dividend – A dividend is a share of the business profits paid out to a company’s shareholders. It’s important you get advice on how to take dividends out of the business so you’re doing it in the right (and smartest) way for tax.
  • Expense repayment – When you buy things for the business using personal money, and provided you keep track of the receipt, you can reimburse yourself the expenses.
  • Director’s loan – When you borrow money from your own business, it’s called a Director’s Loan. Director’s Loans are different from all the methods of payment mentioned above. These can be useful in some circumstances but can also cause a bit of a tax nightmare if not done correctly. With that in mind, this is another one where we highly recommend getting advice – such as with our specialist accounting for content creators – so you don’t shoot yourself in the foot.
  • Benefit in kind – These are the “work perks” you can take out of your business and provide to employees. That includes things like company cars, childcare vouchers, and cycle to work schemes. These are pretty complicated tax wise though. As above, definitely get advice to use these correctly!

The reason we recommend getting advice on how to take money out of your limited company as a content creator is because of those separate entity rules.

So, it’s vital as a starting point to have a separate account for your business. As a bare minimum, you’re able to separate the profits that belong to the business from the regular salary that belongs to you. If you don’t separate your content creator income this way, it can get messy. Personal and business money will get muddled and could result in some high tax charges and legal implications.

As an example, if the business transactions are going into a personal bank account and not into a business account under the company name, it will be treated as a Director’s Loan withdrawal from your business. This can result in a 32.5% tax charge on your content creator earnings. Umm, no thank you! You don’t want that.

It pays to remember that tax plans need to be put in place to withdraw a salary or dividends so that you’re not getting slammed. If you’re a limited company, ask us to help you figure out the most tax-efficient way to take your salary out of your business account. As specialist accountants for content creators, we offer a range of services, whether your income comes from streaming, social media, or elsewhere!

To summarise:

• • If you are a content creator operating as a limited company, all business transactions need to go directly into/from a limited company bank account.
  • If not, they will be treated as Director’s Loans – you don’t want this.
  • Otherwise, this will result in a 32.5% tax charge as well as benefit in kind issues.
  • Even PayPal accounts need to be in the limited company name.
  • Tax plans need to be put in place to withdraw salary/dividends.
  • Ask us for help as specialist accountants for content creators.

Separate bank account for Sole Traders

Next, we’re going to look at the advantages of opening a separate bank account for sole traders, but the same advantages also apply to limited company owners. After all – and besides all the legal and tax reasons – separating your bank accounts can be just as good for the sanity of either!

First off, being able to easily identify what is personal and what is business can save you time and energy. If you’re a sole trader with various streams of income from content creation, having a business bank account will save you hours of admin work every year.

As a content creator, you might have a number of streams of income, from donations to sponsorships and ad revenue. With all these incoming payments, it’s important to be able to separate out your salary and expenses (i.e. personal living expenses).

The reasons why:

• • TRUST ME when I say this will save you hours of undesirable admin work – If you don’t have a separate account, you’ll have to print 12 months’ worth of bank statements when it comes time to paying tax on your content creator income, highlighting all the business transactions in your account and crossing out all the personal ones. Not fun. It’ll also cost you more money for an accountant to work through for your tax returns. Good to avoid all round.
  • You’ll be able to see when you’re approaching or are over the VAT threshold – If your content creator income reaches £85,000, you will need to register for VAT and account for the VAT you charge customers or have been charged by suppliers.
  • You’ll be able to connect your business bank to Xero – As of April 24, connecting to Xero will no longer be just an advantage, it’ll be necessary for Making Tax Digital (MTD); the government move to entirely digital tax records. Getting started now is the right move as it means a smoother accounting process and less time wasted doing things manually.
  • It’ll allow your accountant to do accurate, regular bookkeeping for you – You’re a creator; that’s where you find your joy. Working with an accountant for content creators means you can hand off all the accounting stuff to them to sort. And sorting is made a lot easier when business income is separated out. When we have a clear view, we can make sure you’re only paying the tax you need to be (and no more), and make sure you’re claiming back all your expenses.

At Ocelot, we prioritise our clients’ goals and long-term ambitions. Bigger picture, separating your sole trader income and paying yourself like an employee can help you treat what you’re doing as a viable business. You can see how your business is supporting your short- and long-term life goals, and get some helpful advice to make it work better for you.

The most common banking setup for content creators

First, set up a separate bank account for your business. Side note: I usually recommend Starling, Revolut, ANNA, or Tide Bank. These are all modern digital banks that you can set up from an app within 24 hours, and they all connect to Xero.

Following that, it can be helpful to set up a business PayPal account for content creator income like donations from fans and subscribers. This income then flows to your business account once a month.

All other income – like Twitch, YouTube, and Patreon – goes directly into the business account. All business expenses come directly from the business account.

• • For Sole Traders: You can then transfer weekly/monthly amounts from the business account to the personal account for living expenses/tax budgeting.
  • For Limited Companies: Remember, ask us to help you figure out the most tax efficient way to take your salary out of your business account. Tax plans need to be put in place to withdraw salary/dividends, so you’re not overpaying tax or getting in any tax dramas.

The most common questions we get asked relating to multiple bank accounts

Q: Can I have more than one bank account?
A: Yes, as a content creator, you can have as many bank accounts as you like.

Q: As a sole trader, does my bank account have to be a proper ‘business account’ or can I use a second personal account?
A: Some banks’ T&Cs ask you not to use a ‘personal account’ for business reasons, so there is a risk they can raise red flags if they see business activity within it. Generally, however, there is no legal HMRC requirement to do so.

Q: Do I need to share the activity of all my personal bank accounts?
A: Nope, there’s no requirement or need to! If you’ve used your personal bank account to pay for business expenses, we can give you a spreadsheet to drop all of the business transactions into so we can upload it to your accounts.

Q: If I get paid into my personal account, does that mean I’m taxed personally?
A: No, not necessarily. This really depends on how your channels and contracts are set up. Since a Limited Company is a separate legal entity, we really need to understand who ‘earned’ the income: the business or the person.

Q: Do I get taxed on amounts going into my PayPal account or only when I withdraw it?
A: As soon as any amounts hit your PayPal account, they are considered ‘earned’ and so should be taxed! However, there’s a few websites and platforms that will consider your money theirs till you withdraw it, so it’s best to consult us on each and every content creator income stream just in case.

Got a question about business banking we haven’t covered?

Let us know! We’re working with content creators every day, and we see these experiences pop up a lot. If there’s something you’re still unsure about, we’re here to help. Simply drop us an email.

At Ocelot, we work exclusively with content creators, offering specialist accounting services in streaming, gaming and esports, YouTube, influencing, and modelling.

It can feel a lot more reassuring to get support from an accountant who knows your industry, knowing you’re getting advice specific to what you do. Plus, we just love hearing about your pursuits! Want to know more? See what it looks like to work with us by visiting our services page!