Some accounts will suit your business’ needs better than others. We’ve carried out research (July 2022) and identified five of what we consider to be the top business bank accounts. Bear in mind however that offers can change and each individual has differing priorities, so compare providers when you are ready to apply to ensure the account meets your needs.
Do I need a business bank account?
Whether or not you need a business account depends on your individual circumstances.
- Limited companies
If you are running a limited business or Limited Liability Partnership (LLP), you must have a separate bank account for the business by law.
- Sole traders and freelancers
Sole traders and freelancers are not legally required to have a business bank account, but it could still be worth opening one. Having a business account allows you to keep personal and work-related finances separate, and make it easier to fill in your tax return, since your transactions will be associated with a single account.
Having a separate bank account for your business also looks more professional, since when your customers transfer you money, they’ll see the name of your business rather than your own name.
How do business bank accounts differ from personal bank accounts?
Business bank accounts and personal bank accounts share many similarities. Both are used to manage day-to-day finances such as making purchases and sending or receiving money.
Two key differences are what each account is used for, and how it is priced.
As the name suggests, personal bank accounts are designed to handle personal spending. This is also the bank account your personal salary should be paid into, regardless of whether you’re employed by someone else or running your own business.
A business bank account handles business expenses, such as purchasing equipment and supplies, paying employees, and receiving payment from customers.
Personal bank accounts are often completely free of charge — although you can choose an account with monthly fees in exchange for perks such as travel insurance or breakdown cover.
In contrast, you’ll usually have to pay to use a business bank account, whether through a fixed monthly fee or for individual transactions.
Who can open a business bank account?
Different business bank accounts come with different eligibility criteria, so check you’re eligible for any account you’re interested in before starting an application.
Generally, you will need to be aged over 18, resident in the UK, and be able to provide contact details for your business. If you’re running a limited business, you will also need your Companies House certificate of incorporation.
Certain business bank accounts will only consider applications from limited companies.
Can I open a joint business bank account?
If you have a business partner, you might choose to open a joint business account with them, rather than select just one of you as the account holder.
These joint accounts function in exactly the same way as other business bank accounts, but may be more convenient since both partners have full access.
Some business accounts, including the Virgin M Account for Business, allow both members of a partnership to fully operate an account opened under the name of the business.
How do I open a business bank account?
The process of applying for a business bank account varies depending on the provider.
Some banks allow you to apply online, and the application may only take a matter of minutes, while others require an appointment at a branch.
Whatever the process, it will involve providing identifying information about yourself and your business. If you run a limited business, you will need to provide your certificate of incorporation.
If you’re approved for the account, you will be sent your account details, followed by your debit card. The process can take between one and four weeks.
What do business bank accounts cost?
The cost of using a business bank account varies depending on the provider and type of account you choose.
Many charge a monthly fee, which covers the cost of services such as processing transactions, setting up additional cards, and cash withdrawals.
Others — including a few of the accounts above — come with no monthly fee, but charge for individual services on a pay-as-you-go basis. For instance, you might be charged a fee of 20p or 30p for each bank transfer you make, or £1 to £2 when you withdraw cash from an ATM.
Other services — such as setting up direct debits and standing orders, or making debit card purchases — are typically free of charge.
A pay-as-you-go account may cost less if your business is very small and you expect to make relatively few transactions. However, as the company grows, a flat annual fee may work out cheaper.
Whatever the cost of your business bank account, any fees you accrue are usually tax deductible. You can usually claim them as ‘financial costs’ when completing a tax return.
Do business bank accounts come with overdrafts?
Some business bank accounts come with an overdraft facility, but this is not a standard feature. And you are likely to need to apply for an overdraft separately once you’ve opened the account.
As with all borrowing, whether you are granted an overdraft and how much you can borrow depends on your credit history. This is the same when it comes to applying for a business loan or business credit card.
Should I choose an online-only business bank account?
Some business bank accounts are offered by traditional banks with physical branches, while others come from online-only providers. The one you choose is largely down to personal preference.
It may not be a case of all or nothing, though. For example, while online accounts are more likely to offer a better app function, some still allow you to make physical cash deposits at Post Office branches. Always compare features to find the best business account for you.
Can I switch business bank accounts?
Yes — you can switch business bank accounts at any time. The majority of business bank accounts are covered by the Current Account Switch Service, which automatically moves your incoming and outgoing payments over to the new account and closes the old one.
Regularly switching your business bank account helps ensure you are getting the best deal.