Can I use a personal credit card for business expenses?

When you’re in the early stages of building your business, it’s not uncommon to wonder whether it’s acceptable to cover business costs with your personal credit card. After all, it’s quick, convenient, and often feels like the easiest option when you’re just starting out.

The short answer is: yes, you can. In the UK, there are no specific laws preventing you from using a personal credit card for business expenses. However, just because it’s allowed doesn’t necessarily mean it’s the best approach. In fact, combining personal and business finances can create complications that could grow over time, from messy accounting practices to tax challenges and even potential threats to your personal credit score.

Keeping your business and personal finances separate isn’t just good practice — it’s a fundamental step towards building a solid financial foundation for your business. It can make managing your cash flow, tracking deductible expenses, and filing your taxes easier and more accurate, while also giving your business a more professional appearance to lenders, investors, and partners.

In this blog, we’ll dive into the risks involved with using a personal credit card for business purchases, the potential impacts on your financial health, and smarter alternatives for accessing the credit your growing business needs.

Why you might use a personal credit card for business expenses

The most common reasons for using your personal credit cards for business purchases are:

• You need quick access to credit for startup costs
• You haven’t yet built the credit history needed to get a business credit card
• You want to earn personal rewards like cashback or air miles

When starting out, qualifying for a business credit card can be hard. Many providers require the business to have a trading history, and if you’re brand new, you likely haven’t built that up yet.

A personal credit card can seem like the fastest and most convenient option. However, this convenience has drawbacks.

5 risks of using a personal credit card for business expenses

Before relying on your personal card to finance your operations, it’s important to understand the potential drawbacks. Here are some of the main issues you could encounter when mixing personal and business finances:

1. It becomes harder to manage your business cash flow

Mixing personal and business finances can make it harder to track what your business is really spending or earning. You’ll need to comb through your statements line by line to identify which purchases were business-related, and this can be time-consuming and prone to error. Without a clear view of your business cash flow, it’s easy to overspend.

2. It can complicate tax calculations

When filing your Self Assessment or Corporation Tax return, you need to prove which expenses were made for business purposes. If your business costs are side-by-side with personal costs on your credit card, you may have to manually extract and evidence each business transaction.

This increases your administrative burden and raises the risk of missing out on tax deductions. For example, if you can’t provide a valid receipt or proof of purpose for an expense, HMRC may not allow it as a deductible cost.

3. It may increase your credit utilisation and affect your credit score

Your personal credit card usage affects your personal credit score. Using the card to fund your business could raise your credit utilisation ratio (the amount of credit you use compared to your credit limit).

High credit utilisation can negatively impact your credit score, as lenders see it as a sign of potential financial instability or over-reliance on credit. This can make it harder to qualify for mortgages, loans or other personal credit in the future.

4. It could put your personal assets at risk

If you operate as a sole trader, you’re already personally liable for any business debts. But even if you run a limited company, using your personal credit card can blur the line between your personal and business finances.

This could weaken the legal protection of limited liability that normally shields personal assets. If the company ever gets into legal or financial trouble, this could increase the risk that your personal finances are involved in the dispute.

5. It doesn’t scale well as your business grows

Using your personal credit card might work for one-off purchases or small startup costs, but it’s not a sustainable solution in the long term. Business expenses can quickly exceed your available credit limit, and you may not want to keep putting your credit score or finances at risk.

Smarter ways to access credit for your business

If you need access to credit but you’re not yet eligible for a business credit card – whether due to a short trading history, low revenue, or limited credit profile – don’t worry. There are still several alternative financing options available to help you manage cash flow and cover necessary expenses without relying solely on personal credit.

Here are some smart alternatives to consider:

Apply for a business loan

Many banks and online lenders offer startup business loans, including government-backed options. These may be easier to obtain than a credit card and can provide a lump sum to fund equipment, stock or setup costs.

Start Up Loans, for example, offers government-backed low-interest personal loans of up to £25,000 per founder.

What is considered a good business credit score?

If you’re starting a new business – here’s how NOT to fail

What does limited liability mean?

Use a business overdraft

Check whether your provider offers an overdraft facility if you have a business bank account. This can give you flexible short-term credit and may be easier to get than a loan or credit card, especially if you have a relationship with the bank.

Rapid Formations customers get the option of a free business bank account when they register a new company, including Barclays, NatWest, Tide, Monzo, Zempler, Anna, Wise or HSBC. Compare the terms and interest rates on the overdrafts they offer if access to an overdraft is important to you. Find out more in our guide to the easy way to get your business bank account.

Best practices for using a personal credit card for business expenses

If, for any reason, you need to use a personal credit card for business purchases, here are some tips to help you stay organised and minimise the risks:

Keep detailed records

Always keep receipts and document the purpose of each transaction. This will help you separate personal and business expenses when bookkeeping or filing your taxes.

Use one card exclusively for business expenses

Delegate one of your personal cards solely for business use. This can help you maintain clearer records and reduce the risk of mixing personal and business finances.

Pay off the balance promptly

Aim to pay off your balance in full each month to avoid interest charges and financial strain.

Monitor your credit utilisation

Keep an eye on how much of your available credit you’re using. As we mentioned earlier, high utilisation rates can lower your credit score. Try to keep your balance below 30% of your credit limit.

Plan to move to another credit option

Consider switching to a business loan, overdraft or, once you qualify, a business credit card to improve financial separation.

Better manage your personal and business finances

Using a personal credit card for business expenses may be convenient, but it can lead to complications with accounting and your personal credit score. Business loans and overdrafts may be better options for accessing credit.

If you have any questions, comment below or explore other Rapid Formations blogs for more information on setting up and funding your business.