How to Separate Business and Personal Finances (Without Overcomplicating It)

Why keeping things separate matters

For many sole traders and small business owners, business and personal finances start out mixed and before long, it becomes hard to see where one ends and the other begins.

Maybe you’re a decorator paying for supplies from your personal card, or a self-employed driver using your personal bank account for fuel and invoices. It feels easier in the moment, but when it’s time to work out profits or submit your Self Assessment, the confusion (and stress) builds fast.

Keeping your business and personal finances separate isn’t about making things complicated. It’s about clarity, so you know what you’re earning, what you’re spending, and what belongs to you.

1. Open a dedicated business account

Even if you’re a sole trader, a separate bank account for business income and expenses makes everything cleaner and easier to track.

For limited companies, it’s a must, your company is a separate legal entity, so its money isn’t your personal money.

If you’re in the trades, think of it like keeping your tools organised. You wouldn’t store paint tins, spanners, and invoices in the same box so don’t let your finances get mixed up either.

There are plenty of modern business accounts with easy app access, spending insights, and accounting integrations. The goal isn’t just compliance, it’s control.

2. Pay yourself properly

Many small business owners and tradespeople dip into their business funds as they need to, especially when income varies week to week. But a better approach is to pay yourself a regular amount as drawings (for sole traders) or salary/dividends (for limited companies).

It helps you:

• Keep business and personal spending distinct

• Plan for tax, because you’ll always know what’s left in the business

• Build a more professional routine, especially if you’re growing

A small mindset shift here makes a big difference to financial stability and peace of mind.

3. Record your income and expenses consistently

Consistency is key. Whether you use software like Xero, FreeAgent, or a simple spreadsheet, record your business transactions in one place only, not mixed with personal payments.

If you’re buying work clothes, tools, materials, or fuel, keep digital copies of receipts. Apps like Apron or your accounting platform’s own app make this simple.

Keeping everything in one system means you’re not wasting time separating things at year-end and you’ll be far less likely to miss out on valid tax deductions.

4. Avoid using personal cards for business purchases

It’s tempting to grab your personal debit card at the trade counter, especially when you’re in a hurry. But doing this repeatedly blurs the line between personal and business spending.

A quick fix is to carry your business card or use your mobile banking app when you’re out on jobs. If you do end up using your personal card, log it as “money you’ve put into the business” so your records stay accurate.

The key point: make every transaction traceable and explainable.

5. Review regularly (don’t wait for the accountant)

You don’t need to do a full financial review every week, but setting aside a short monthly check-in helps you stay in control.

Use that time to:

• Reconcile your bank account

• Check what’s owed to you (and what you owe)

• Move money for tax into a separate savings account

If you’re VAT-registered or under the Making Tax Digital rules, these habits will make submissions smoother, and you’ll feel far more confident about your numbers year-round.

A simpler way to stay organised

Separating business and personal finances doesn’t mean spreadsheets and stress. It’s simply about putting clear boundaries in place, so you can see your business for what it really is.

At Barleyfields Accountancy, we help small businesses and trades keep their bookkeeping simple, accurate, and compliant, so you can focus on your work knowing everything’s in order.

Need a hand setting up your systems or reviewing your accounts?

Get in touch with us today to make business finances easier, not harder.

Take Care,

Emma - Barleyfields Accountancy