How to open a business bank account

If you’ve just started your own business, or are researching how to become your own boss, you might be wondering what you need to open a business bank account.

Separating your personal and business banking

Your first question is probably ‘What is a business bank account?’. Quite simply, it’s an account set up in the name of your trade business.

You – and anyone else you want – can have access to running it. That includes making payments and changing bank account details.

The second question is probably ‘Do I need a business bank account?’. The best business account for small business depends on how your trade business is set up.

Bear in mind, though, that mixing personal and business banking can create an administrative headache. Having a separate business bank account makes it much easier to keep on top of your business’s bookkeeping and accounts.

Do I need a business bank account as a sole trader?

Sole traders can usually use the same bank account for personal and business transactions.

Check that your bank’s terms and conditions allow this. However, some banks don’t allow personal current accounts to be used for business transactions, so check your T&Cs to be sure.

Similarly, if you qualify for a government grant, a business account may be required to access the funding.

Business bank accounts for limited companies

By law, limited companies must have a separate business bank account for company transactions.

How to open a business bank account

Starting your own business is hugely rewarding, but it does require you to wear many hats, one of which is ‘finance’.

When you think about how to set up a business bank account, look at the bigger picture.

These are much easier with a separate business bank account:

• Managing cash flow
• Paying tax
• Paying VAT for tradespeople
• Recording financial transactions (bookkeeping)

Before opening a business account, do your research to make sure you select the right one for your business needs.

If you’re ever unhappy with your bank, speak with the Financial Ombudsman. They help settle complaints and resolve disputes.

Getting an online business bank account

To open a business bank account online, check what documents you’ll need for your application.

Next, from our checklist, make a list of must-have things as part of your business bank account as well as nice-to-have things.

Each provider offers something slightly different from the next. This will therefore help you to make the best choice for your business.

As with a personal account, you’ll need to provide a few documents to open a business bank account.

What do I need to open a business bank account?

Make sure you have these documents to hand:

• Proof of ID (a passport or driving licence)
• Proof of address (as a UK resident)
• Proof of residency (if you’re from outside the EU)

Opening a bank account for a limited company? You’ll also need to provide your registered business name, address, number, and date of incorporation.

Don’t forget to include the personal details of anyone else on the application. You may also need your tax and VAT registration details.

You may be asked a few questions about your business, too. This may include:

• Your estimated annual turnover
• Monthly transaction expectations
• Which countries you do business with

Getting all of the relevant information together beforehand will make the process of opening a business bank account even easier.

How long does it take to open a business bank account?

Opening an online business bank account takes just minutes, so long as you have the right details and documents to hand.

If you’re applying for a high street bank business account, you may need an in-branch or phone appointment to complete your application.

What’s the best business bank account for small business?

The best business bank accounts are not necessarily the ones with free business banking (usually with a 12-24-month limit).

Such introductory offers are to attract new customers, meaning you’ll need to start paying a monthly fee once it expires. This can be between £5 – £15 per month.

Look past the offers and assess which accounts offer your business the best value in the long term.

How much do I need to open a business account?

If you’re wondering how much you need to open a business account, it’s best to check with individual providers.

Most business bank accounts have account fees, either as:

• A fixed monthly fee for using the account, regardless of how many transactions you make
• Fees for transactions, for example, making a cheque deposit, ATM withdrawals, or transfers to other bank accounts
• A mixture of both. Make sure you read the small print to make the right choice for your business needs

Initial deposits and minimum balances will vary by bank and account type.

Want to start taking card payments for your business?

Many tradespeople rely on having a small business card reader. Taking card payments with a card reader can help boost profits and save on hassle.

Using a business bank credit card

If you decide to use a business credit card, make sure you understand how you’ll be charged for it. Banks usually charge what’s called an annual percentage rate (APR).

This is the yearly interest rate you pay on outstanding balances. It is usually charged monthly and can be quite high. The amount you owe can build up quite quickly.

Clearing any business credit card balances before the amount is due helps you avoid paying higher interest rate charges.

Here’s an example of calculating monthly APR:

• Balance outstanding on your business credit card: £500
• Bank APR: 16%
• Divide 16% by 12 (months): 1.33% per month
• The amount you owe on the outstanding balance: £500 x 1.33% = £6.65
• If you pay off nothing, then your new balance will be: £506.65
• The next monthly charge will be £506.65 x 1.33% = £6.73
• The amount you owe: £ 513.38

To work out a daily APR, divide the APR by 365 days.

Business bank account checklist:

• Will you be charged fees for having the account, paying in cheques, depositing cash, and using an overdraft facility?
• Are there transaction limits, and would this affect your business?
• Would you have access to an overdraft facility if you need one?
• Can you link the business account to your accounting software?
• If you’re looking for online banking, does that bank’s app have good ratings on the App Store or Google Play?
• Do you need physical access to a branch? If so, does the bank have a branch near you?

And don’t forget to check the customer reviews before taking the plunge.

What is the best free business bank account (in the UK)?

It depends on your business needs.

Are your business transactions mostly digital? If you receive payment by bank transfer, and need to integrate accounting software, Starling Bank, Monzo and Tide are good options.

Do you need to deposit cash and cheques regularly? Consider choosing a high street bank with a branch near you, for example, TSB, Royal Bank of Scotland or NatWest.

Always do your own research before opening a business bank account.

Trade and credit accounts

Other types of financial arrangements can help boost your business. Opening a trade account is handy for obtaining goods on credit from your suppliers.

Joining a trade organisation also has advantages for tradespeople. This includes winning more work and saving money.

In addition to that, Checkatrade members receive our help with new enquiries.

There are lots of other benefits of Checkatrade membership too. They include:

• Dedicated membership advice team
• Work guarantee up to £1,000
• Exclusive offers and discounts
• Up to 20% off Public Liability Insurance
• Reduced cost of workwear and branding
• Savings on other business essentials such as vans and materials

FAQs

Do I need a business bank account?

If you’re a sole trader, you probably don’t. But it usually helps to separate personal from business finances. If you run a limited company, you must open a business bank account.

Which bank account is best for small business?

The best bank account for small businesses in the UK should provide the best value and service for your particular needs. If your transactions are mostly digital, consider an account that integrates with accounting software. If you need to make regular cash and cheque deposits, choose an account with low fees for deposits.

Can I open a business account by myself?

You can open a business account by yourself if you are a sole trader. Some high street banks require an appointment in a branch or over the phone to complete the application.

What do I need to open up a business account?

You will need to provide proof of address and proof of ID to open a bank account as a sole trader. If you’re a limited company, you’ll also need proof of company registration, business name and the date your company was incorporated. You may also need to provide tax and VAT registration documents.

Content disclaimer: This content has been created for general information purposes and should not be taken as formal advice. Read our full disclaimer here.