Which is best from the likes of Monzo, Starling and the high street banks.
Since I set up my business I’ve banked with Santander, Yorkshire Bank, HSBC and now Starling. The big surprise at the start was that most accounts have a monthly fee and there are additional charges on top!
But it is possible to pay nothing at all thanks to new accounts from the likes of Monzo and Starling, and tricks to avoid paying even if you go with a high street bank.
Here’s what you need to know if you have or need a business bank account.
Watch my video discussing how to get free business banking, or keep reading.
Click to watch on YouTube and subscribe so you don’t miss out on future videos.
Do you need a business bank account?
If you’re a sole trader or just earning extra via a side hustle then you don’t need a specialist business account. You can make do with a standard personal account. And these are free!
It’s best to separate your business money from your personal cash, so I’d open up a new account. This is great for knowing what’s a business expense and what’s a personal one – handy when it comes to doing your tax return!
There are other advantages – you could earn interest on your balance for a start, or get free cineam tickets. I regularly update my guide to the best personal current accounts here.
But if you are part of a Limited Company then have to have a specific business account.
Digital banks vs high street banks
Whether you are required to have a proper business bank account, or just want to take advantage of some of the additional features, there’s a huge range to choose from. So what to consider?
Do you need to pay in cash? or cheques? Do you need a high street branch? If these are important then you’ll be better off at a high street bank.
If not then you could try one of the newest banks such as Monzo or Starling.
With all banks there are ways to get your banking for free.
The best free digital bank business accounts
Monzo & Starling Business accounts
So you get budgeting/tracking features, the ability to put money in separate pots or spaces and fee-free spending overseas. You can also take photos of receipts and attach them to the expense on the app.
And if you’re worried about relying on your phone to manage the account, don’t worry. Unlike standard accounts, both have the added feature that you can manage most of your money on a desktop computer too.
Starling also lets you integrate with accounting software such as Xero, Quick Books and Free Agent for free. Plus you can pay in cheques up to £500 via the app.
Though free, if you want to pay in cash you will get charged each time by both accounts.
For most small businesses this should be enough, though there are paid-for versions with extra features.
Personally I opted for Starling, though you can always try both the personal versions of the accounts for free to see which you prefer.
Tide and Coconut Business accounts
There are a few other digital business accounts. Tide and Coconut for example are worth a look.
Tide’s free account includes read access for others and accounting software integration but does charge 20p for transfers in and out.
Coconut’s free account includes the tax estimate feature and lets you to sending three invoices a month, but it charges for cash withdrawals and deposits.
However these two accounts are not fully regulated banks they don’t have FSCS protection. Since Monzo and Starling do I think they have the edge.
Paid for digital Business accounts
All four of these accounts also have paid for versions.
These let you do things like send invoices, record VAT, estimate your tax liability and give other employees or accountants read-only access.
If that’s of interest it’s worth comparing what you get, and looking at the features that’ll work best for you
Monzo Business Pro and Coconut Grow are both £5 a month. The Starling Toolkit is £7 per month, though add it by 31st July 2020 you’ll get three months free. Tide has a Plus account at £9.99 + VAT a month or Premium at £49.99 + VAT a month.
Free High Street bank business accounts
As I mentioned, the big problem with the digital accounts is you will get charged to pay in cash. And of course there’s no branch to visit. So if those are likely you’ll need to go to a high street bank.
But these aren’t actually free accounts. They all charge monthly fees. Between £5 and £8. And on top of this there will be charges for bank transfers and even those important cash deposits.
However you can avoid the fees for a limited time as a new customer. Some only offer the discount for new businesses, generally within the first year of starting.
But others will let you switch an existing account over even if you’ve been trading for years.
So you could start of with a free year with one bank when you start, then move to another for 18 months free banking, and then move again, and so on.
It’s easy to do, and you’re protected by the same guarantees you get switching your personal account. So payments in and out, standing orders and direct debits – all are moved and compensated for if something goes wrong.
Do check you are eligible for these accounts – there could be an annual turnover limit for example. And the free offers might also be subject to other restrictions. Plus, don’t forget there will be charges if you don’t switch again once the free period ends.
Free banking for new businesses (up to 18 months)
- Barclays Start Up Business Banking – 12 months free then £6 a month
- Lloyds Business banking – 12 months free then £7 a month
- Natwest Start Up Business Banking – 18 months free then PAYG
Free banking for existing businesses (up to 25 months)
- HSBC Business Banking – 12 months free then £6.50 a month
- Santander Business Banking – 12 months free then £7.50 a month
- TSB Business Banking – 25 months free then £5 a month
- Yorkshire Business banking – 25 months free
Listen to Cash Chats, Andy’s twice weekly podcast. Episodes every Tuesday and Friday.
Other business debit and credit cards
Though the bank account is the most important card to get, you can also get separate debit cards which can be really handy. I’ve got both a Curve card and a Paypal card.
Curve is a smart card where you can add a mix of personal and business debit and credit cards as the underlying payment, and then choose which one you want to use when you make a purchase.
The big reason I love it is the feature to “go back in time” and move a transaction from one card to another. So if I buy something for my business but accidentally use a personal account, I can switch it later – or visa versa.
Here’s my full review and a code to get £5 when signing up.
Paypal debit card
This Paypal debit card is only available to those with a Paypal Business account. When you spend on it, it takes money from your Paypal account, or the connected account. Why bother? Well you get 0.5% cashback on transactions!
Business credit cards
If you’re after a business credit card check out my guide here.