Choosing A Business Bank Account

Choosing A Business Bank Account
Syd Barhey

Syd Barhey


March 2021


November 2021

Choosing and setting up a business bank account is an important first step when setting up your business, so it pays to take care when deciding which bank to go with and the kind of account to open. With a plethora of on-line and high street banks now out there, it can be time consuming to research and make sense of what is on offer from the various different providers

The right bank and bank account for your business will mean lower charges, reduce the hassle in day to day administration tasks and provide essential support in terms of funding and advice as your business grows. If you are using accounting software to manage your business’ book-keeping, linking your bank account to your software so that transactions automatically feed through from your bank  can be a major time saver and will result in fewer errors in your books – making sure your bank links through to your chosen software is therefore an important consideration too

Avoid letting your business and personal finances mix

Starting out in business, it can be tempting to simply use your personal bank account to manage your business affairs. For some it feels like less hassle because they have one less account to keep an eye on – for others, it can be question of cost as business bank accounts are not always free. Whilst there is no legal requirement for sole traders to have a separate business bank accounts, most banks tend to frown upon the use of personal accounts for business purposes and it is rarely a good choice to manage your business’ finance through your own account. Furthermore, If you happen to have set your business up as a limited company, the Company is legally separate from you (even though you own it) and it’s money must therefore be kept entirely separate.

As a sole trader or contractor, keeping your business finances separate from your personal finances makes it much easier for you to run your business well. For a start, the business bank account will always show you what cash the business does or doesn’t have, enabling you to better keep track of who owes you money or whom you need to pay. But in addition, it also makes it easier for you to claim expenses from your business and complete your tax returns at the end of the year. As your business expands and grows, separating your business finances from your own will be even more important and will form part of projecting a professional image to those that you do business with. Furthermore, a separate business bank account allows your business to build up a credit rating for itself, crucial should you decide to seek finance for growing your business in the future. And finally, when it comes to putting your accounts together at the end of the year, do you really want your accountant trawling through your personal financial affairs ?

What to Look Out For and Why When Choosing a Business Bank Account

  • Specialist small business advisors who you can contact directly – Someone with the knowledge and expertise of start-up businesses can prove invaluable in those all-important early days when your business is in its infancy
  • Free banking for an introductory period – Although business banking isn’t normally free, many banks have offered introductory free periods of 12-24 months as an incentive to sign up with then. Whilst the onset of Covid has made these deals few and far between, it’s still worth seeking out these deals as for most new-start ups, every penny counts. However, its also worth making sure you compare charges and facilities for after the introductory period ends too.
  • Online banking – Just about all banks are online these days but you may wish to check out the check out the on-line experience of your shortlisted banks as it will not always be the same. Some offer app based banking but the quality of the apps can vary, so it’s well worth taking a look to see if you like the look of what you see.
  • Connectivity to accounting software – not all bank accounts seamlessly connect to all accounting software so its worth checking to see if your account will connect to your chosen software. Packages like Xero and Quickbooks will link in to just about all the high street banks but connectivity amongst the smaller online banks only can be variable.  
  • Fee free overdraft facility – An overdraft facility can prove extremely useful (and in some cases lifesaving) to start-up businesses whilst they’re getting off the ground.  Be aware though that many banks will ask for a personal guarantee for this.  This is fine if you are operating as a sole trader but negates the benefits of operating as a limited company if that is the route you have chosen.

Your business bank account needs to be flexible, easy to manage and hopefully have low charges but avoid choosing the lowest charges over a bank with which you feel you could build a good relationship.  A solid relationship with your business bank will help to open doors by offering invaluable support with the management and expansion of your business.

Comparing bank accounts can be tricky so we’ve done most of the heavy lifting for you

We know that starting up a new business means a million and one things to think about and do, so we’ve done the bank account research for you.  The tables below allow you to compare the best business bank accounts currently available to start-up businesses, giving you all the information that you need in order to make an informed choice and ensure that you get the right bank account for your business.

Traditional Banks

Bank Eligibility Free banking period Account fee thereafter Cash transaction limit
HSBC Businesses with up to £2 million turnover 18 months (12 months for switching businesses) £6.50 a month (for the free banking period) Up to £3,000 cash per month. 0.50 per cent per £100 exceeding that limit
Santander Trading for less than 12 months and business is opening first business account with Santander 18 months £7.50 a month £1,000 per month with 70p per £100 exceeding the limit
TSB Open to sole traders, partners and directors 25 months £5 (waived if your average balance in the month is £10,000 or more) N/A
RBS / Natwest Over 18s who have a right to be self-employed in the UK 18 months Cost per transaction on Standard Tariff (see below) N/A
Lloyds / Bank of Scotland New businesses who have an anticipated turnover of up to £3 million for the Business Current Account 18 months (6 months for those switching from another business account) £6.50 N/A
Barclays Suitable for most businesses with a turnover of up to £6.5 million. Specific criteria for businesses in certain sectors e.g. agriculture, social housing 12 months £6 a month (Mixed Payments Plan) £6.50 a month (e-Payments Plan) N/A
Yorkshire Bank Businesses must have a turnover of under £2 million and have opened their account within 12 months of starting 25 months £6.50 a month (Business Banking Tariff) £250,000 per year
Clydesdale Bank Businesses must have a turnover of under £2 million and have opened their account within 12 months of starting 25 months £6.50 a month (Business Banking Tariff) £250,000 per year
Metro Bank Businesses must have a turnover under £2 million N/A £0 on account balances over £5,000 and £5 a month for balances under £5,000 (see below) N/A

Digital Platforms

Bank Features Pricing
ANNA Smart invoicing, automatically chase outstanding payments Free if your monthly income is under £500 £5 a month if your monthly income is £500-£2,000 £9.90 a month if your monthly income is £2,000-£20,000 £19.90 a month if your monthly income is £20,000-£500,000
Revolut Hold, exchange and transfer currencies with real exchange rate, issue free corporate cards to employees, perks from commercial partners Companies pay between £0 – £100 a month, depending on the account (or they can speak to Revolut and get a bespoke deal) Freelancers pay £0 for the free account, £7 a month for the Professional account and £25 a month for the Ultimate account
Starling Bank No monthly fees, categorised transactions, integration with Xero, FreeAgent and Quickbooks, overdraft facility No monthly fee Can add a monthly £7 ‘business toolkit’ for extra functionality
Tide No fees on card payments in UK or abroad, free transfers between Tide accounts, Tide Mastercard, instant invoicing, integration with FreeAgent, Sage and Xero Free (£0) Plus (£9.99) Plus Cashback (£49.99)
Monzo Integrations with Xero, FreeAgent and QuickBooks; set aside a percentage of your earnings to put towards tax every time you’re paid Lite: Free Pro: £5