There are millions of freelancers and small business owners who could benefit from opening up a business bank account.
There are just over 4.5million self-employed workers in the UK and if you’re a limited company, you’ll need to have a separate business bank account, but even if you’re a sole trader, it’s worth setting one up.
A separate account just for your business costs simplifies things – keeping a clear divide between your business and personal finances.
Yet many of these accounts cost money to set up, or have specific requirements to open one, so it’s important to do your homework and find one that’s right for your business needs.
Here we look at everything you need to know before you open a business bank account.
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Why do I need a business bank account?
A business bank account is just for finances to do with your business and it can help with many different aspects of running a business. These include:
- Keeping records for accounting and tax purposes
- Tracking your cash flow
- Allowing customers to pay by card or bank transfer
- Building a credit rating for your business
- Giving employees access to cash and a card to pay for things
- Handling high-volume transactions
Opening a business bank account is a lot like opening a personal bank account, with a few key differences as we set out here.
How to choose a business bank account provider
There are lots of providers offering business bank accounts, and our top-rated business current account comes from Starling Bank. If you’re a sole trader a business bank is handy but you don’t have to have one, but if you’re a limited company you need to have a separate business account by law.
A few things to look out for when choosing an account include:
Traditional banks vs. online-only bank accounts for businesses
If you need branch access and want to speak to someone face-to-face, and you need to regularly deposit cash, a traditional bank might work best for your business. Make sure you choose one with local branches and one which has an account you can access. Traditional banks may also work better if you have a complicated business structure and you’ll benefit from talking over this with an in-branch banking adviser.
An online-only or app-based bank doesn’t have branches, but it may have other benefits such as it could have lower fees, be quicker to open and include other perks including accounting software or cheaper foreign exchange fees.
Business bank account fees
There may be fees attached to a business bank account, for things like monthly or annual usage, withdrawing and depositing money, and for making transfers to other bank accounts – especially those abroad. You may have some things included for free too, even with the most basic fee-free accounts, such as accounting or design software, foreign transactions, and money transfers. You can see what’s included in our guide to the best free business bank accounts.
Access and support
The size and nature of your business will determine what kind of support you might need from your business bank account. If you employ other people who need access to the finances, for example, you may need separate cards for them and permissions to allow them to access money from the account.
Compliance features
For sole traders earning £50,000 or over, you will need to make sure the account is compliant with Making Tax Digital (MTD). For those who earn less than this amount in profit – this is something to think about for the future when the earnings limit changes.
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How to open a business bank account
Once you’ve chosen the right business bank account, you will need to apply for it. This requires giving certain documents and information so the bank can look at what type of business you own.
- You can open a business bank account online, in a bank branch, or sometimes by phone.
- You will usually need to apply to open the account, filling out a form and giving certain details and documents.
- If the account has things like an overdraft included, a credit check may be required too.
- If you’re accepted by the bank, you should receive a debit card in the post and your account will be opened within a few days (or sooner if you’re doing it online).
What do you need to open a business bank account?
You will need to be at least 18, a UK resident and either a sole trader or have a limited company to open a business bank account. You will usually need to provide the following too (although every bank is different so always check with your provider):
- Your name, contact details and your home and business address
- Your business name and the date you started trading
- Details about how your business operates and a plan if it’s new or expanding
- Financial details about your business including turnover, taxes, existing accounts and debts
- You may need to give your Companies House documents if you have them and information on company directors
How to set up a business bank account
Once your account is open, you’re then free to start using it to deposit and send money. If you have other members of staff who need to access the account, you’ll need to tell your bank and give them their details. This may be company directors, for example, who may need access to the account and their own card.
Are business bank accounts worth it?
Business bank accounts are needed if you’re a limited company and they’re very handy if you’re a sole trader too. They’re a great way to keep your business finances separate from anything personal which can make the administration involved with being a small business a lot simpler.
There are lots of accounts to choose from, so it can be overwhelming, but making a list of exactly what you need from a business bank account is a good starting place. You can then look for accounts which align to your business needs before applying for one.
Our guides highlight some of the best business accounts to choose from – and always remember to check the features included and any fees that might apply.
Best free business accounts
Business Bank Accounts
Customer rating
4.9/5
- Monthly fee£0
- Cash deposit fee£1 per deposit
- Fee for transfers in/out£0
- Access Online or via app
- Cash deposits £1 per deposit at any UK PayPoint or Post Office
- FSCS Protected? Yes
- Cash withdrawals Withdraw up to £1,000 per day
- Integration with accounting tools Not available - Integration only available with Monzo Pro and above
- Invoicing tools No
- Eligible companies Sole traders and registered limited companies
Tide Free Business Account
Customer rating
4.7/5
- Monthly fee£0
- Cash deposit fee0.5% (min £2.50) at Post Office, 3% at PayPoint
- Fee for transfers in/outFree transfers in/out for 12 months
- Access Online or via app
- FSCS Protected? Yes
- Cash withdrawals £1 per withdrawal
- Transfers Transfers cost 20p per transfer after a 12 month promotional period
- Integration with accounting tools Connect your own accounting software or export transactions to share with your accountant for free
- Invoicing tools Yes - send 3 per month free
- Offer details Get £100 in cash when you open a Tide Business Account and spend £1,000 within 60 days of account opening. Use the code BCA100 when you sign up.
- Eligible businesses Registered limited companies or sole traders
Customer rating
4.9/5
- Monthly fee£0
- Cash deposit fee0.7% (min £3)
- Fee for transfers in/out£0
- Access Online or via app
- FSCS Protected? Yes
- Cash withdrawals 6 free withdrawals per day up to a maximum of £300
- Integration with accounting tools Can be connected to accounting software
- Invoicing tools Yes
- Eligible companies Limited companies, Limited Liability Partnerships or sole traders
Mettle Business Bank Account
Customer rating
4.8/5
- Monthly fee£0
- Cash deposit fee£0
- Fee for transfers in/out£0
- Access Online or via app
- FSCS Protected? Yes
- Cash withdrawals Free
- Integration with accounting tools Access to FreeAgent and connect to other accounting software
- Invoicing tools Yes
- Eligible businesses Sole traders and limited companies with no more than two owners
Customer rating
4.3/5
- Monthly fee£0
- Cash deposit feeNot available
- Fee for transfers in/out£0
- FSCS Protected? No
- Integration with accounting tools Sync automatically with Xero and Quickbooks. Other external tools or software can be integrated via API
- Invoicing tools None
- Withdrawals £2 + 2%
- Eligible businesses For businesses of any size or industry
- Access Online or via app
Customer rating
4.8/5
- Monthly fee£0
- Cash deposit fee0.55% (min £4)
- Fee for transfers in/outFree to receive, send for free three times each month, 35p afterwards
- Access Online or via app
- FSCS Protected? Yes
- Cash withdrawals £2 per withdrawal
- Card issuing fee £9.95 one-off fee
- Integration with accounting tools Connect your chosen accounting software
- Invoicing tools Yes
- Eligible businesses Sole traders and limited companies
Virgin Money M Account for Business
Customer rating
3.7/5
- Monthly fee£0
- Cash deposit fee£0.90 fee per £100
- Fee for transfers in/out£0
- Access Online or via app
- FSCS Protected? Yes
- Cash withdrawals £0.90 fee per £100 withdrawn. Withdraw up to £700 per day.
- Integration with accounting tools Can be connected to accounting software
- Invoicing tools No
- Cashback 0.25% cashback on debit card purchases
- Offer details You can get 3 months of Xero or Quickbooks for free with a Virgin Money business account.
- Eligible companies For businesses with an annual turnover of less than £1m
SumUp Business Account
Customer rating
2.7/5
- Monthly fee£0
- Cash deposit feeNot available
- Fee for transfers in/out£0
- Access Online or via app
- FSCS Protected? Yes
- Cash withdrawals 3 free per month, 2% thereafter
- Integration with accounting tools Can be connected to accounting sotware
- Invoicing tools Yes
- Eligible companies Sole traders or limited companies
Customer rating
4.6/5
- Monthly fee£0
- Cash deposit fee0.95% fee on cash deposits
- Fee for transfers in/out0.95% fee on money paid in (except from your own accounts)
- Access Online or via app
- FSCS Protected? No
- Cash withdrawals Unlimited free withdrawals
- Integration with accounting tools Share access with your accountant or sync with accounting software
- Invoicing tools Yes
- Eligible companies Registered limited companies, Limited Liability Partnerships or sole traders
Countingup Business Bank Account
Customer rating
4.7/5
- Monthly fee£3-£18 per month
- Cash deposit feePost Office: 0.5% (£2 min) / PayPoint: 3%
- Fee for transfers in/out30p
- Access Via app
- FSCS Protected? No
- Cash withdrawals £1 per withdrawal
- Integration with accounting tools Fully integrated accounting tools
- Invoicing tools Yes
- Eligible businesses Sole traders or registered limited companies
- Fee details After the 3 month free trial, you'll pay a monthly fee depending on how much you deposit each month. Deposits up to £750: £3 per month; Deposits up to £7,500: £9 per month; Deposits over £7,500: £18 per month
