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Business bank accounts

Picking the right account for your small business can be a minefield, but we've made it easy for you to find the best perks, the lowest fees and the cheapest overdraft charges.

In this article
What is a business bank account?  Who offers business bank accounts? Can I use my personal account for business? Compare business bank accounts Business bank account fees and overdraft charges explained  Business banking apps: Starling, Monzo, Tide and Coconut
Business banking at the Post Office How do I open a business bank account? Can I switch my business bank account? Are business accounts FSCS-protected? Can I apply for a business savings account? 

What is a business bank account? 

Business bank accounts are aimed at both start-ups and established businesses. Banks usually charge business customers a monthly or annual fee, although many offer a fee-free period of up to two years for new customers and startups.   

As with personal bank accounts, you can make deposits and withdrawals, use a debit card for purchases, and apply for an overdraft. 

The difference is that most banks will charge you per business transaction so you may have to pay a small fee every time you deposit cash, issue a cheque, set up direct debits and standing orders, or make a bank transfer. 

This guide explains how business bank accounts work, how charges are applied, and helps you compare the full range of accounts currently available. 

 

Who offers business bank accounts?

Most of the big high street names offer a range of business bank accounts.

These include: Bank of Scotland, Barclays, Clydesdale Bank, HSBC, Lloyds Bank, Metro Bank, NatWest, Royal Bank of Scotland, Santander, the Co-operative Bank, TSB and Yorkshire Bank.

Challenger banks Starling and Monzo are also competing in this market, along with e-money providers Coconut and Tide. 

Nationwide set plans in motion for a self-described ‘market-leading, digitally enabled account', expected in early 2020.

However, the  building society later returned a £50m grant from the Banking Competition Remedies (BCR), and announced that its business plan was "no longer viable”.

Can I use my personal account for business?

It depends on the type of business you run, and how lenient your bank is.

Limited companies are required to have a business bank account, as they are separate legal entities from the owner or directors. 

Sole traders can theoretically use a personal current account for business transactions because HMRC treats their personal and business income as one.

In reality, most banks state in their terms and conditions that individual accounts can only be used for personal use and not for business purposes.

That said, they are likely to be less concerned about a self-employed copywriter than a shop owner making lots of business-related transactions.

What are the benefits of a business bank account?

While using a personal account for very basic business transactions will be the cheapest option, having distinct accounts is much easier for tax purposes and working out tax-deductible business expenses.

It will appear more professional if customers or clients can make payments to the business name, instead of your personal name.

You can also cash-in cheques made out to the business and build up credit history so that it’s easier to apply for a business loan or credit card.

Banks may offer business customers extra support, such as a local ‘relationship manager’ and online tools to help with accounting and invoicing. 

    Compare business bank accounts

    Here, we’ve rounded up the leading business bank accounts for sole traders and limited companies with no minimum annual turnover requirements.

    Other fees will apply e.g. for foreign transactions, bulk deposits and CHAPS payments.

    We’ve excluded some of the digital-only options as they don't have the same levels of protection. But you can read about those below

    Bank Account name Account fee Automated payments in/out Cash payments in/out Cheques in/out
    Bank of Scotland 

     

    More info

    Transaction fees waived for start-ups for 12 months (must stay in credit or within agreed limits).

    Business Current Account £7/month Free

    £1 per £100 up to £1.5k then £0.90 per £100

    £0.85
    Barclays

     

    More info

    Transaction fees waived for start-ups for 12 months. Loyalty discounts apply after one year. 

    e-Payments Plan £6.50/month Free £1.50 per £100 £1.50
    Barclays

     

    More info

    Transaction fees waived for start-ups for 12 months. Loyalty discounts apply after one year. 

    Mixed Payments Plan £6/month £0.35 £0.90 per £100 £0.65
    Clydesdale Bank

     

    More info

    Account fee and transaction fees waived for 25 months if start-up or switcher, subject to a cash limit (paid in, paid out or exchanged) of £250,000 per year.

    Business Current Account £6.50/month (free for 25 months if start-up or switcher) £0.30 £0.65 per £100 £0.70 (in) / £0.30 (out)
    HSBC

     

    More info

    Transaction fees waived for switchers (12 months) and start-ups (18 months) followed by fixed-price discounts for a year. Automated payment fees range from £0.23 for BACS to £0.40 for standing orders. This account also charges £0.25 per debit card payment and 0.45% + £0.25 per ATM withdrawal). Bulk fee charges may differ (cash and cheques). 

    Small Business Tariff £6.50/month

    £0.19 (in) / £0.23 to £0.40 (out)

    Branch: 0.70% + £0.90 (in) and 0.85% + £0.70 (out) / Post Office: 0.70% + £0.25 (in) and 0.85% + £0.25 (out)

    £0.40/cheque + £0.90 (in) / £0.80/cheque (out)

    HSBC

     

    More info

    Transaction fees waived for switchers (12 months) and start-ups (18 months) followed by fixed-price discounts for a year. This account also charges 0.60% per ATM withdrawal).  Bulk fee charges may differ (cash and cheques).

    Electronic Banking Tariff £6.50/month Free

    Branch: 1.10% + £1 / Post Office: 1.10% + £0.25

    £0.50/cheque + £1 per credit (in) / £0.90/cheque (out)

    Lloyds Bank

     

    More info

    Transaction fees waived for start-ups (12 months).

    Business Current Account £7/month Free £1 per £100 up to £1.5k then £0.90 per £100 £0.85
    Metro Bank

     

    More info

    Account fee waived if your balance stays above £5k for any whole month. 50 free transactions also offered. 

    Business Bank Account £5/month (free if balance at £5k+ for a month) £0.30 0.70% £0.30
    Monzo

     

    More info

    No overdraft available to business customers. Monzo also offers a 'Pro' business account for £5 per month (extra features include 'Tax Pots', accounting integrations, multi-user access for limited company directors, and invoices). 

    Lite £0 Free Up to £1,000 every 6 months at PayPoint (£1 fee) Free
    NatWest

     

    More info

    Transaction fees waived for start-ups (18 months). ATM withdrawals are charged as
    automated debits at £0.35.

    Business Current/Foundation Account  £0 £0.35 £0.70 £0.70
    Royal Bank of Scotland

     

    More info

    Transaction fees waived for start-ups (18 months). ATM withdrawals are charged as
    automated debits at £0.35.

    Business Current/Foundation Account  £0 £0.35 £0.70 £0.70
    Santander

     

    More info

    Earn tiered cashback on turnover (max £300 a year). Also pays 0.10% AER monthly interest on credit balances.

    123 Business Current Account £12.50/month (£5 for 18 months if start-up, £5 for a year if switcher) Free Free up to £1,000/ month then 70p per £100 Free
    Santander

     

    More info

    No cashback available

    Business Current Account £7.50/month (18 months free for start-ups) Free Free up to £1,000/ month then 70p per £100 Free

    Recommended provider

    Starling Bank

     

    More info

    Deposits can be made at Post Office counters (cash withdrawals are free at ATMs except Post Office which costs £0.50 per withdrawal). 

    Business Current Account £0 Free

    £3 up to £1k then 0.3%

    Free
    The Co-operative Bank

     

    More info

    Account fee and transaction fees waived for 30 months for new customers who maintain a balance of £1k (limited to 30 free cheques per month, then 50p each). Debit card purchases cost £0.35 (£0.70 if balance falls below £1k). Cheques issued cost £0.50 rising to £0.70 if balance falls below £1k. 

    Business Directplus £7/month (free for 30 months for new customers) £0.25 to £0.70 Free up to £2,000/month then £0.75 per £100
     

    Free up to 100/month then £0.25 (in) / £0.50 to £0.70 (out) 

     

    The Co-operative Bank

     

    More info

    £25 loyalty bonus paid every year to FSB Members who maintain an active account.

    FSB Business Banking £0 Free Free up to £2,000/month then £0.75 per £100 Free
    TSB

     

    More info

    Transaction fees waived for six months if start-up or switcher. Free Square Reader plus no fees on first £1,000 of sales.

    Business Plus £5/month (free if £10k+ average balance) Free £0.70 per £100 £0.70
    Yorkshire Bank

     

    More info

    Account fee and transaction fees waived for 25 months if start-up or switcher, subject to a cash limit (paid in, paid out or exchanged) of £250,000 per year.

    Business Current Account £6.50/month (free for 25 months if start-up or switcher) £0.30 £0.65 per £100 £0.70 (in) / £0.30 (out)

     

    Correct at January 2021. Which? Recommended Provider (WRP) status based on survey of personal current account customers (not business).

    Business bank account fees and overdraft charges explained 

    Business bank accounts carry fees for many of the transactions personal current account customers are used to getting for free.

    Broadly, these are the main categories to think about when you’re looking at the list of fees and charges in the terms and conditions:

     

    Automated payments (in or out)

     

    e.g. Faster Payments, bill payments, direct debits, standing orders, online/mobile/telephone banking, and ATM withdrawals. 

     

    Cash payments (in or out)

     

    e.g. deposits and withdrawals via a bank branch and transactions at a Post Office counter.  

     

     

    Manual payments (in or out)

     

    e.g. cheques written and deposited, deposits made by paying in slip or debit card, plus any other non-automated credits. 

     

    Additional payments and services

     

    e.g.  CHAPS (for high-value same-day payments), issuing a banker's cheque, audit replies (e.g. certificate of balance), banker’s reference. 

     

     

    International transactions

     

    e.g. non-Sterling card transactions, SEPA payments (cross-border Euro bank transfers), SWIFT payments (international). 

     

     

    Overdraft charges

     

    Whether authorised (arranged with the bank) or unauthorised (exceeding your authorised limit). 

    Although this is not a sensible option for long-term borrowing (a business loan is much cheaper for this), business customers can generally borrow much larger sums than personal customers. 

    Most banks offer up to £25,000 or even £50,000, subject to credit approval but compare all of the following before making your decision:

    • Authorised overdraft EAR*: for use of an overdraft agreed with your bank in advance up to a specific limit, which will be reviewed on a regular basis
    • Authorised usage fee: added to the EAR for using the arranged overdraft, though in our table only Lloyds and Bank of Scotland charge this.
    • Arrangement fee: payable upfront when your bank agrees to a formal overdraft in advance.
    • Review fee: when your bank reviews your overdraft limit, typically at the same rate as the original arrangement fee (though a handful of banks don’t charge this or may offer a discount).
    • Unauthorised overdraft EAR*: for exceeding your arranged/authorised overdraft limit.
    • Unauthorised overdraft usage fees: added to the EAR for using the unarranged overdraft. Some banks don’t charge for this (e.g. Metro and NatWest) but others could slap on daily fees up to £25.
    • Unpaid item fees: when you don’t have funds to cover a cheque, direct debit or standing order payment and the bank has to return it unpaid.

    *The representative EAR is the rate that the majority of customers will receive, offered to at least 51% of applicants. Other customers may get a different rate based on their individual circumstances and credit history. 

    Business banking apps: Starling, Monzo, Tide and Coconut

    These apps are packed full with features designed to help with the day-to-day running of your business. All three accounts provide a full UK account number and sort code plus a Mastercard debit card. 

    You must already hold a personal current account with Monzo or Starling to apply for their business accounts. 

    Start-up Coconut has designed a current account with freelancers in mind, making it easier to estimate tax-deductible expenses and send professional invoices. The fee-free ‘Start’ account is limited to three invoices per month, while the £5-per-month ‘Grow’ version lets you send unlimited invoices.

    Are business banking apps safe to use?

    Starling and Monzo are UK-regulated banks, so deposits are eligible for Financial Services Compensation Scheme (FSCS) deposit protection (up to £85,000) if they went bust. 

    Coconut and Tide both offer e-money accounts provided by PrePay Technologies Ltd, trading as PrePay Solutions or PPS - your money isn’t covered by the FSCS. 

    However, PPS is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 and as a licensed e-money provider, your money must be kept in a safeguarding account (in this case, with Barclays) so that it can never be loaned out to other customers. 

      Starling Monzo  Tide Coconut 
    Account fee Free 'Lite' is free and 'Pro' is £5 per month Free ‘Start’ is free and ‘Glow’ is £5 per month
    Bank transfers Free Free £0.20 Free
    Cash withdrawals No fee ATM; £0.50 at the Post Office Free in EEA (outside of EEA you pay 3% on withdrawals over £200 every 30 days) £1 per ATM withdrawal £1 per ATM withdrawal
    Cash deposits £3 for deposits under £1k at the Post Office (then 0.3%) Up to £1,000 every 6 months at PayPoint (£1 fee) £1 per deposit at the Post Office and 3% via PayPoint Not available yet
    Deposit cheques Pay in via app or post Pay in via post No No
    Non-sterling purchases Free Free Free 2% for ‘Start’ users
    Instant notifications of card use/card freezing Yes Yes Yes Yes
    Create invoices No No for 'Lite' Yes for 'Pro' Yes Yes
    Integrate with accounting software Yes No for 'Lite' Yes for 'Pro' Yes No
    Managing account Desktop and app Desktop and app Desktop and app App only
    FSCS protection Yes Yes No No

    Business banking at the Post Office

    If you’re a business customer with any of the banks listed here, you can use the Post Office network for basic transactions such as cash and cheque deposits, withdrawals and change-giving.

    Not every service is available for every business customer, for example, Bank of Scotland, Barclays, Lloyds and Starling customers can’t use the Post Office change-giving service and Metro Bank customers can’t make cash withdrawals over the counter. 

    If you’re planning to rely on the Post Office for business banking, check that you can make the most of the services you’ll need.

    Bear in mind that an increasing number of post offices are situated inside newsagents and convenience stores, or limited to Outreach services which may only operate a few days a week.

    How do I open a business bank account?

    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. 

    What else do I need?

    UK Finance - the main trade association for the banking industry - has made a comprehensive list of information banks will want but this graphic covers some of the basic details you will be asked to provide. 

    Can I switch my business bank account?

    As long as you’re a small businesses, charity or trust with less than 50 employees and an annual turnover of less than £6.5m, you can switch your business account within seven working days through the free Current Account Switch Service, just as you would a personal account. 

    This means the switch is backed by the Current Account Switch Guarantee, so any missed payments or fees incurred as a result of your switch will be reimbursed.

    Check the list of participating banks and building societies to make sure you can switch.

    Are business accounts FSCS-protected?

    Yes, the Financial Services Compensation Scheme (FSCS) protects individuals and small businesses from losses, should an authorised bank or building society fail. 

    • For deposit claims (money held in savings and current accounts) there is no size restriction for companies.
    • For investment claims, the FSCS will protect a small company, as defined in section 382 of the Companies Act 2006.
    • For most general insurance claims, annual turnover must not exceed £1m and for long-term insurance claims, there is no size test for companies.

    Can I apply for a business savings account? 

    Business savings accounts tend to pay lower rates than personal savings accounts. 

    If you’re a sole trader, any money the business makes is in your name so the best option will be to move profits into the best personal savings account on the market.

    Use the Which? Money Compare tables to find the best savings rates. 

    If you have a limited company, the money legally belongs to the company so you can’t move that money into an account in your own name.

    Instead, you can open a business savings account from providers such as:

    • Aldermore
    • Al Rayan
    • Clydesdale Bank
    • Cynergy Bank
    • Hampshire Trust Bank 
    • Market Harborough BS 
    • Teachers BS
    • Virgin Money
    • Yorkshire Bank. 

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