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Business bank accounts explained

What are business current accounts, and do I need one?

Ella Jukwey
Written by  Ella Jukwey
5 min read
Updated: 28 Sep 2023

Consider your business needs and find the right business bank account to manage your business transactions

What is a business bank account?

A business bank account is used by sole traders or commercial business owners to manage money acquired through the company. You’ll be able to keep track of the following: 

  • The cash balance

  • Any money that is owed to the business

  • Any creditors you owe money to

  • The employee payroll

Are business bank accounts free?

Business bank accounts can be free in the UK, but it depends on the provider. If you compare business current accounts through MoneySuperMarket, we’ll show you upfront whether there is a monthly fee to pay before you apply.  

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Do I need a business bank account?

It isn’t compulsory for you to sign up for a business bank account if you’re either a sole trader or part of a partnership. If, for example, you hold an umbrella company, you can use your existing personal current account to manage your transactions.  

There are benefits for a sole trader to open a business bank account though. The main one being it keeps business and personal transactions separate to make accounting easier.

Does a limited company need a business bank account?

If you run a limited company, you will need to have a dedicated business current account in place as it is legally a separate entity and needs to be managed separately.

What do I need to open a business account?

To open a business account you will need to meet a few requirements. Make sure you have the following information readily available before you sign up: 

  • Proof of identification for all company directors – a passport or driver’s licence will do

  • Proof of address such as a bank statement or utility bill

  • Your business details, including the registered address and contact details of your business as well as the Companies House registration (for limited companies and partnerships). You’ll also need to provide your expected yearly turnover and some lenders may ask for proof of a clean credit banking history

How to choose a business current account

When choosing a business account there are several factors you should consider before making a decision, including:

  • Standing charges: Certain business accounts charge a monthly or quarterly fee for banking with them

  • Transaction charges: These charges are made for the handling of money moving in and out of your current account. This usually includes physical transactions (paying in cash or making cheque payments) and automated payments which include direct debits and standing orders

  • Internet banking: While most business accounts provide internet banking, there are some exceptions so it’s best to make sure beforehand if it’s a deal breaker

  • Interest rates: Higher interest rates ensure greater returns on your savings

  • Introductory offers: Providers may offer short-term rewards for signing up with them (often lasting up to a year) such as competitive interest rates or free banking

  • Branches: Being able to visit the bank in person will give you a number of advantages including being able to easily deposit money from your business. Note that there are business bank accounts that have no physical branches so if this is a priority it may be worth finding alternative providers 

How long does it take to get a business account?

It’ll usually take one to four weeks to open a business account, as the bank will need to carry out a number of checks to confirm your identity, business and any directors registered to your company. Several factors can speed up the process such as:

  • If you’re already registered at the bank with a regular current account

  • If you’re a sole trader as opposed to an incorporated company

  • Certain banks provide a faster service – some banks provide their estimated processing periods online

How do I switch my business account?

Switch service: The current account switch service allows you to transfer all your payments from your existing current account to your new business account within seven working days. This includes any incoming payments such as salary, rental, or pension income, and expenditures such as direct debits and standing orders. 

Almost all of the UK's major current account providers are involved in the switch service so you’re likely able to take advantage of the switch service. 

Can I use my personal bank account for business? 

You might be able to use your personal account for business, but there are a number of drawbacks, including: 

  • It’ll be more difficult for you to notify HMRC about your business income 

  • It’s more difficult to track your business income and expenses and create a clear paper trail for your business 

Generally speaking, you won’t be able to use your personal account in place of a business account if you have either a limited company or an incorporated company.  

Benefits of business accounts

The advantages of opening business current accounts include:

  • Your business transactions are kept separate and allow you to keep your business accounting records organised

  • You’ll be able to process salary payments

  • You can receive credit and debit card payments

  • You’ll be able to carry out transactions using foreign currencies

  • You’ll be able to carry out credit checks on businesses and suppliers you work with

Do I need a minimum deposit for a business account?

While it’s unlikely you’ll need a minimum deposit to open a business bank account, you might be asked how much annual income your company is making when you apply. Some business bank account providers have minimum and maximum turnover limits in place when deciding whether to accept new customers.

Is it legal to transfer money from a business account to a personal account?

You can transfer money from a business account to a personal account in the UK, but it's essential to maintain clear financial records, report income correctly for tax purposes, and ensure compliance with relevant tax laws and regulations to avoid legal issues. Consulting with a financial advisor or accountant is advisable for proper guidance.

Compare business bank accounts
Compare business bank accounts