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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, 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 bank Starling is also competing in this market, along with e-money providers Coconut and Tide. 

Although Nationwide doesn’t offer a business current account yet, it says plans are in motion for a self-described ‘market-leading, digitally enabled account', early in 2020.

The building society has been awarded a £50m grant by the Banking Competition Remedies (BCR), matched with £50m of its own money. 

Digital bank Monzo is also starting a small trial of business accounts and says it will roll out more accounts slowly this year. You can register interest in opening a Monzo business account here

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 legally 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.

    If you’ve recently started trading, or you’re switching from one business bank account to another, many providers offer a sweetener in the form of free business banking for a limited period. 

    Our table shows you which banks are offering incentives to new customers, along with details of the annual fee payable after any introductory offer and the main transaction charges for automated payments, manual payments, cheques and exchanging coins/notes. 

    Use the dropdown option to find a table of overdraft charges. 

    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 Free banking offered? Annual account fee Automated payments in/out Cash payments in/out Cheques in/out Notes/coins
    Bank of Scotland 

     

    More info

    18 months fee-free banking for startups; 6 months free for switchers.

    Business Current Account 6 to 18 months £78 Free £1 up to £1.5k then £0.80 £0.65 £1.65
    Barclays

     

    More info

    Account includes 12 months fee-free banking for startups including individuals setting up their first business bank account within the first 12 months of trading. Loyalty discount 5% to 50% on charges tiered based on time banking with Barclays and annual turnover.

    e-Payments Plan 12 months £78 Free £1.50 £1.50 £1.65
    Barclays

     

    More info

    Account includes 12 months fee-free banking for startups including individuals setting up their first business bank account within the first 12 months of trading. Loyalty discount 5% to 50% on charges tiered based on time banking with Barclays and annual turnover. There is no fee for ATM deposits.

    Mixed Payments Plan 12 months £72 £0.35 £0.90 £0.65 £1.65
    Clydesdale Bank

     

    More info

    25 months fee-free banking for switchers with a turnover under £2m and startups within their first 12 months of trading.

    There is no fee for ATM deposits.

    Business Current Account 25 months £60 £0.30 £0.65 £0.30 Free up to £100; then £1.30
    HSBC

     

    More info

    18 months fee-free banking for start-ups with a projected turnover below £2m. After 18 months, available at fixed price of £5.50 per month for 12 months (can deposit up to £3K cash per month fee-free, then pay 50p per £100 cash deposited). After fixed-price period, move to the Small Business or Electronic Banking Tariff. Automated fees: 19p per credit, 23p per internet bill payment, 35p per direct debit, 58p per standing order. Branch cash in 0.60% of the value deposited, branch cash out 0.75% of the value withdrawn. Additional fee of £0.68 per branch withdrawal. £0.30 per cheque collected, £0.68 per cheque paid.

    Small Business Tariff 18 months £66 £0.19 to £0.58 £0.60 to £0.75 £0.30 to £0.68 Free under £100; then 1.50%
    HSBC

     

    More info

    For start-ups with a projected turnover below £2m. After 18 months, available at fixed price of £5.50 per month for 12 months (can deposit up to £3K cash per month fee-free, then pay 50p per £100 cash deposited). After fixed-price period, move to the Small Business or Electronic Banking Tariff. Branch cash in costs 1% of the value deposited, branch cash out 1% of the value withdrawn. Additional fee of £0.90 per branch withdrawal. It costs £0.40 per cheque collected, £0.80 per cheque paid.

    Electronic Banking Tariff 18 months £66 Free £1 £0.40 to £0.80 Free under £100; then 1.50%
    Lloyds Bank

     

    More info

    18 months fee-free banking for startups; 6 months free for switchers.

    Business Current Account 6 to 18 months £78 Free £1 up to £1.5k then £0.80 £0.65 £1.65
    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 If balance is over £5k for a month. £60 £0.30 £0.50 £0.30 £0.50
    NatWest

     

    More info

    Free banking applies to businesses trading for less than one year and with an annual turnover less than £1m. After 18 months transferred to Standard Tariff.

    Business Current/Foundation Account  18 months £60 £0.35 £0.70 £0.70 £0.70
    Royal Bank of Scotland

     

    More info

    Free banking applies to businesses trading for less than one year and with an annual turnover less than £1m. After 18 months transferred to Standard Tariff.

    Business Current/Foundation Account  18 months £60 £0.35 £0.70 £0.70 £0.70
    Santander

     

    More info

    Cashback on turnover is 1% if less than £200k (max £100/year); 2% if £200k+ (max £200/year); 3% if £300k+ (max £300/year). Bank pays 0.10% AER monthly interest on credit balances. Free cash withdrawals limited to £500 per day, then pay from £10 (up to £2k) up to £0.45 per £100 (£3k-£5k). Free cash deposits limited to £1,000 per month, then £0.70 per £100.

    123 Business Current Account No, but up to £300 cashback offered £150 Free Free (see 'More info) Free £1.65
    Santander

     

    More info

    Free cash withdrawals limited to £500 per day, then pay from £10 (up to £2k) up to £0.45 per £100 (£3k-£5k). Free cash deposits limited to £1,000 per month, then £0.70 per £100.

    Business Current Account None £90 Free Free (see 'More info') Free £1.65
    Starling Bank

     

    More info

    For cash payments, the cost of using the Post Office Counter Service: £3 for deposits up to £1k then 0.3% of amount. No fee for ATM withdrawals and £0.50 per withdrawal at the Post Office.

    Business Current Account Account is free £0 Free £0.50 to £3 N/A N/A
    The Co-operative Bank

     

    More info

    In order to qualify for free banking, you must maintain £1k balance and fee-free transactions limited to 100 cheques and £2k cash deposits plus 30 cheques per month. Auto credits are free, auto debits £0.25 if credit balance is above £1k or £0.70 if balance below this. Cash deposits are free up to £2k per charging period then £0.75 per £100. Cheques in: 100 free per month and 25p each thereafter. Cheques out: £0.30 per item if balance is £1k+ or £0.70 if balance is under £1k in that month.

    Business Directplus 18 months £60 £0.25 to £0.70 Free (see 'More info') £0.25 to £0.70 £1.60
    The Co-operative Bank

     

    More info

    £25 loyalty bonus paid every year to FSB Members who maintain an active account. Cash deposits are free up to £2k per charging period then £0.75 per £100.

    FSB Business Banking Account is free £0 Free Free (see 'More info') Free None
    TSB

     

    More info

    Fee-free banking offered to start-ups and switchers. Free Square Reader with no fees payable on first £1K of transactions. You're charged £0.15 for internet banking and Faster Payments, £0.40 for standing orders and direct debits. Cash paid in costs £0.57 per £100, cash paid out at TSB counter £0.62 per £100. Cheques in cost £0.28, cheques out £0.65.

    Business Extra Tariff 18 months £60 £0.15 to £0.40 £0.57 to £0.62 £0.28 to £0.65 £1.65
    TSB

     

    More info

    Fee-free banking offered to start-ups and switchers. Free Square Reader with no fees payable on first £1K of transactions. Cheques in cost £0.30, cheques out £0.65.

    Electronic Business Tariff 18 months £60 Free £0.89 £0.30 to £0.65 £1.65
    Yorkshire Bank 

     

    More info

    Free banking applies to start-ups and switchers. No fee for ATM deposits.

    Business Current Account 25 months £60 £0.30 £0.65 £0.30 Free up to £100; then £1.30

     

    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*: ranging from 5.75% to 13.56% 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*: ranging from 15% to 33.83% 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, 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. 

    For now, Starling’s business account is only available if you are a sole trader who already has a Starling personal account; or an owner of a limited company and you are the only person with significant control over it. 

    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 is a UK-regulated bank, so deposits are eligible for Financial Services Compensation Scheme (FSCS) deposit protection (up to £85,000) if it 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 Tide Coconut 
    Account fee Free Free ‘Start’ is free and ‘Glow’ is £5 per month
    Bank transfers Free £0.20 Free
    Cash withdrawals No fee ATM; £0.50 at the Post Office £1 per ATM withdrawal £1 per ATM withdrawal
    Cash deposits £3 for deposits under £1k at the Post Office (then 0.3%) £1 per deposit at the Post Office and 3% via PayPoint Not available yet
    Non-sterling purchases Free Free 2% for ‘Start’ users
    Instant notifications of card use/card freezing Yes Yes Yes
    Create invoices No Yes Yes
    Integrate with accounting software Yes Yes No
    Extra features Cheques can be paid in via post. None A tax estimate tool, based on your earnings. 
    FSCS protection 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. Read more about this in our investigative news story

    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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