THE BUSINESS OF WRITING
That’s 4.5% of that £200 income.
Naturally, these fees put off a lot of
writers, which is why many sole traders
risk using a personal current account
and hope not to get caught!
Banks understand that small start-up
businesses do not have a lot of money
coming in, so many offer free banking
for the first few months. This free-
banking period ranges from 12 months
to up to 30 months, depending upon
the bank you approach.
In theory, you could extend the free-
banking period by switching banks as
each free-banking period comes to an
end, but account switchers tend to get
shorter free-banking periods (such as 6
months), than the 12 to 30 months that
new businesses get.
The problem for many writers is that
our income fluctuates on a monthly and
an annual basis. It’s difficult to predict
how much we’ll need to pay in charges.
And some charges could wipe out
the actual income. Amazon will make
small payments to self-published
writers, especially those enrolled in
their Kindle Unlimited programme.
It’s not uncommon for Amazon to pay
out amounts of less than 10p. If your
business bank account charges 50p per
credit, that small income could lead to a
bigger expense!
Challenger banks
But all is not lost. The High Street
banks are being pressured by new kids
on the block, known as Challenger
Banks. These are attracting large
numbers of businesses, in particular sole
traders, like us writers.
Challenger banks were created after the
banking crisis, and are designed to shake
up the British banking system. Many
are internet-only, which means they
don’t have the huge costs of the branch
network that traditional banks have to
endure. As a result, many of them can
offer free business banking facilities, only
http://www.writers-online.co.uk APRIL 2020^69- Revolut: http://www.revolut.com
Basic freelancer account is fee-free, with limited free transactions. - Starling Bank: http://www.starlingbank.com
No monthly fees, free electronic payments, domestic transfers and
ATM withdrawals. - Mettle: https://mettle.co.uk
No monthly fees or transaction charges for sole trader accounts
with less than £50,000. E-money licence, not a banking licence. - Tide: http://www.tide.co
No monthly or annual fees. Free card payments. Free transfers between
Tide accounts. Electronic transfers 20p, ATM withdrawals £1, cash
deposits at Post Office £1. E-money licence, not a banking licence.
BUSINESS DIRECTORY:
Branch Directory
charging when the number of credits and
debits exceed a certain number, or the
account balances exceeds several tens of
thousands of pounds.
Some sole traders using these accounts
pay little or no fees at all.
So if you’ve held off from opening a
business bank account because of the
costs involved, a challenger bank might
be the solution you’ve been looking for.
Services like Revolut, Starling Bank,
Mettle, and Tide all offer business bank
accounts for free. Other day-to-day
transactions like bank transfers and card
payments are also free, up to certain limits.
Many of these internet-only banks also
offer extra useful benefits, such as being
able to allocate money to various virtual
pots. This means whenever you receive a
payment you can automatically allocate
a percentage of it to your tax pot. That
way, you know you’ll always have money
set aside to meet your tax bill.
A word of caution, though. Not
all of these business accounts are run
by banks. Banks are regulated by the
Prudential Regulation Authority, and
each bank licence safeguards customers
to the tune of £85,000 under the
Financial Services Compensation
Scheme (FSCS). If the bank were to
collapse, customer bank accounts are
protected up to the £85,000 limit.
However, some of these accounts, like
those provided by Tide and Coconut,
are not bank accounts but electronic
money services. This means they’re not
protected by the FSCS.High Street challenger
If you’d rather bank with a bricks and
mortar financial institution, then there’s
another solution on the horizon.
The Nationwide Building Society
is planning to launch a business bank
account free of monthly fees for self-
employed people in the near future.
As Nationwide communications officer
Anabel Goncalves explains, ‘We are alreadyinvesting our members’ money in laying
the foundations needed to launch our
business current account early in 2020. We
have developed a new, dedicated mobile
business banking app which allows eligible
customers to open a business current
account within minutes. We continue to
test and refine the experience to maximise
usability and to deliver a best-in-class
customer experience.’
And the building society also hopes
to make it easier for its business bank
account customers to accept card and
contactless payments directly from
customers. That could be useful to
writers who regularly attend book fairs
or books signings and have to take their
own stock and process payments.
So don’t get caught by your bank
for using a personal account for your
writing business, if the terms and
conditions forbids this. Respect your
writing business and open up a business
bank account for it. It might not cost
you as much as you think.
Needing to open a business bank
account is part of the coming-of-age
process for your writing business.