Open Business Bank Accounts in the UK

Open Business Bank Accounts in the UK

When you start a business, it always helps to try and simplify things. You might set up an online calendar. So clients can easily book meetings with you or outsource administrative tasks by hiring a virtual assistant.

But when it comes to simplifying your money and business expenses. You have a business bank account is vital for success. Keeping your business funds apart from your personal account in a separate business account will make it easier and more straightforward to manage your business as it grows.

What is a business bank account?

Business current accounts have similar features to personal current accounts: you can pay money in, transfer money, use a debit card and manage your account online. Certain business accounts have extra features, such as invoicing, payment cards for other employees and integration with accounting software.

The main difference between a business bank account and personal bank account is who the money belongs to. This has important tax implications.

If you’re a sole trader, you and your business are the same – your business income is your income. So you will have to pay income tax on it. But if you run a limited company, your company is legally separate from you. This means your company’s income is taxed differently and separately from the money you ‘receive’ or pay yourself as income or dividends from the business.

As limited liability partnerships (LLPs) are also separate legal entities. LLP business bank accounts should be separate from their partners’ finances.

There are business current accounts available for sole traders, limited companies, LLPs, business partnerships, charities and other organisations, though not all providers offer accounts to all types of businesses.

Differences between Business and Personal Accounts

Business and Personal Accounts

The difference between the two is that a business account is set up for your business – it shouldn’t be used for personal transactions. Likewise, you should not use your personal account for business-related activities, unless you are a sole trader.

Mixing up the two means that it is more difficult to keep your business and personal finances separate. Something you are required to do if you run a limited company. It can also be a good idea to keep these separate. If you are a sole trader, as it can help you organise your transactions when it comes to filling in your self-assessment tax return.

Do I need a business bank account?

Whether you are a sole trader, freelancer, a contractor, running a limited company or in a partnership, you’ll need to keep your finances organised. One way to make this easier is to open a separate bank account for your business.

With a business account, you will keep work transactions separate from your personal money. So it may be easier to do your accounting and tax returns. And by managing a business account, you will build a business credit score for your business, which will be useful in future if you need to take out a business loan or get a company credit card.

How does a business bank account work?

Business accounts and personal accounts have similar features, so you can use a business bank account as you would use a personal current account. This means you can use it for your day-to-day banking needs, such as making transfers, setting up direct debits, and paying for goods in store or online.

You can manage a business bank account online, over the phone, via an app or in a branch, depending on the provider and the type of account you choose.

How to open a business bank account

To open a business bank account. you can usually apply in one of the following ways:

  • in branch
  • online via the provider’s website
  • through a provider’s mobile app

Who Can Open a Business Bank Account?

If you are a sole trader or run a limited company, you can normally open a business bank account. Partnerships, including limited partnerships and limited liability partnerships, may also be eligible.

Charities, clubs and societies can open certain types of business bank accounts – it’s worth checking with providers if you want to open an account for one of these.

Some business bank accounts have strict eligibility criteria, such as minimum or maximum turnover or trading history. Providers may also have restrictions on which business structures and industries can open an account, so it’s a good idea to look through the terms of an account to make sure you’re eligible before applying.

How do I open a business bank account?

To open a business account, you will need to show proof of your identity and give the name and UK-based address of your business. Providers may also need other information, such as your industry, how many employees you have and your estimated annual turnover.

First and foremost, your chosen bank will need to identify who you are and where you live, to carry out credit and security checks. 

Along with photo ID (UK or foreign passport, national identity photocard, driving licence) you will need to prove your UK address using at least one of the following: 

  • bank or credit card statement (less than three months old and not printed from the internet).
  • mortgage statement (less than 12 months old and not printed from the internet).
  • council tax bill, payment book or exemption certificate (less than 12 months old).
  • letter or bill from a utility company (less than six months old and some banks will not accept a mobile phone bill). 

They may also need to make these checks. If anyone else will be authorised to operate your account or owns a significant share of the business. 

How Long Does It Take to Open a Business Bank Account?

It can take anything from just a few minutes to a few weeks to open a business current account. It depends on the provider you apply to, and how long it takes to complete its checks. There is a range of different business bank accounts available, including current accounts and savings accounts. What’s more, you can choose to bank online or instead opt for a bank with a high street presence.

Business Current Account

Business current accounts operate in a similar way to personal current accounts. Generally, you can withdraw or deposit cash and make payments using a debit card, whether you’re shopping online or in store. You can also accept incoming payments, transfer money to others, and set up standing orders or direct debits.

Business Saving Account

A business savings account lets you put aside spare cash and store it for a later date, while earning interest on it. There are different types of business savings account:

  • Easy access: There are few or no restrictions on when you can deposit or withdraw money.
  • Notice: You must give the bank notice before you want to withdraw money (you choose a notice period when you open the account).
  • Fixed rate: You ‘lock away’ your money for a certain amount of time and get a fixed interest rate for the whole term.

Which savings account you get depends on your specific circumstances. If you’re unsure, it’s worth talking to a financial adviser or asking your bank for more information.

Business Saving Account

When choosing your business bank account.

Choosing the best small business bank account can feel like a minefield, and with so many different options to choose from it’s hard to find your bank of choice. Before making any decisions, have a clear idea of what you need from your business bank account:

  • Are you an international business, or solely UK-based? 
  • Are you looking for the most cost-effective business banking option?
  • Are you in need of good customer service?
  • Do you require a business loan to get you started, or are you already established?
  • Do you need to keep close track of expenses?

These are the all important questions you should know the answer to before choosing your account.

Online Business Accounts

You can get a business bank account which can be managed largely or solely online. This includes accounts from challenger banks or digital-only providers, as well as traditional banks which have diversified their offering.

If you like to manage your money on the go, via an app or through internet banking, this could be an option for you. If you prefer to bank in a branch, an online business account may not suit you.

Free Business Bank Accounts

Some business bank accounts are described as ‘free’. This usually means that you don’t have to pay a monthly fee, but you may have to pay for other services and per transaction instead. Or it could mean that there is an introductory offer where you don’t pay for everyday services for a period of time.

You may be able to choose between a free or paid version of a business bank account, each with different features or a separate pricing structure. You could compare these to see which is more suitable for your business needs.

You should check the terms of your business account to find out more about ‘free’ business banking and what fees a provider may charge.

Merchant Account

A merchant account manages incoming transactions made by debit or credit card. This can be set up with a payment processing service.

With a merchant account, transactions are processed and any fees for using a card terminal or other processing system are deducted before you receive the money.

If you sell goods and take payments online, by phone or in person using debit or credit cards, you may need a merchant account.

Form your company and pick a business bank account

As part of our company registration process, there are few banks offer free introductions to a number of business bank account. This means, if you choose to set up your company with us, you have the option to select what banks you’re interested in at the same time as forming your company.

Most of the UK-based customers can choose from the below banks:

  • Anna
  • Barclays
  • Countingup
  • Cashplus
  • NatWest
  • Monzo
  • Starling
  • Mettle

The best opportunity for non-UK based customers has the option to open a UK business account with Wise (formerly TransferWise).

Whilst there are not guarantee that any business owner applies to open a business bank account. Each bank has different opening criteria – you will find that above list of bank name for simplifies process and search for the right bank.

What’s the best business account from other banks?

Keen to try a new way of banking? “Challenger” and online banks are becoming more and more mainstream, and often make entrepreneurship and small business management part of their core offering.

A challenger bank is usually a smaller retail bank, set up with the aim of competing with large, long-established national banks like the ones mentioned above.

There’s been a rise in the popularity of online-only and mobile-first banks in recent years and it’s interesting to note that Starling Bank topped the overall rankings as well as two sub-categories.

Here are two more challenger banks you could take a look at for your business:

  • Tide has a dedicated mobile-first business current account with three different price plans, depending on your needs – from free to £49.99 a month
  • Coconut is a business-only bank, which lets you connect all your accounts and card to the app to see everything easily, or take out a current account directly

There’s also been a rise in the number of sustainable banks, such as Triodos, which only finances projects and organisations that have a positive impact on society, culture, and the environment.

But as it’s free to apply for lots of these services, it might be worth trying an online only bank to see whether it can help you keep better track of your business’s money.