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A business bank account is similar to a personal bank account, but it is meant for business transactions by sole traders, partnerships, companies, clubs, societies or charities. Business bank accounts are a legal requirement if you want to set up a limited company in the UK.
Having a business bank account also lets you apply for a business credit card, and should make it easier to apply for business loans.
Some banks may charge you a fee for having a business current account with them. There are also providers who offer a free banking period which can vary from 12 months to 30 months. The account’s price tag could be worth it if the bank account matches your needs. So, pay close attention to the account’s features and if they’ll be useful for you
A perk you can get with your business bank account is accounting software, this can help with managing your company’s finances and save you money, as you won’t have to buy it separately
Some providers may require your business to make a certain amount of profit. It’s important to make sure your company’s earnings meet what the provider is asking for
If your business has many customers abroad then being able to make international payments is essential, make sure the current account you get will support this
A valid passport or driving licence for all company directors
You’ll have to provide your address to prove you are a UK resident
If different from your home address. More common with limited companies
Including registered business name and number and date of incorporation
Keeps business income and expenditure separate from personal finances
Can help prevent you from personal legal liability
Can build a credit rating for your business – helpful if you need a business loan
There can be fees for having a business account
It’ll be in addition to your personal account so more admin
It may not pay interest on in-credit balances
Many business current accounts charge monthly fees, while some also impose fees for different types of transactions
Can be useful if you have tight cashflow and need the occasional buffer. Check to see how much an overdraft might cost before applying
If you are regularly transferring large sums, you’ll need an account that won’t cap the limit below your needs
Some accounts let you earn interest on the money that sits in your business account balance, which is good if you’re always in the black
Most banking is done digitally, so make sure you’re happy with the website or app. If you regularly pay in cash and cheques consider if the account is right
Some accounts offer access to business and tax advisers or can be linked to accountancy platforms
Switching your business bank account is similar to switching your personal current account. Most banks and building societies are part of the Current Account Switch Service.
Here’s what to expect:
Starting the switch: First you need to close your old account. Make sure your new provider is signed up to the Current Account Switch Service, then you can begin switching your business account
Your new account is set up: Seven working days before your switch date, your provider will start setting up your new business bank account. You shouldn’t set up new payments while this happening, as they won’t be moved over
Redirect upcoming payments: You need to make sure future payments will go to your new business account. You may have to redirect payments for a specific timeframe depending on your provider’s terms and conditions
If you’re self-employed a business bank account keeps your business and personal finances separate. You’ll be required to open a business bank account if you run a limited company – but it’s up to you if you’re a freelancer or sole trader. Business bank accounts work a lot like normal current accounts, but you can also connect them to accounting software to make invoicing, expenses and tax returns much easier."
You are legally obliged to have a business bank account if you have a limited company. That’s because a limited company, or a Limited Liability Partnership, is a separate legal entity from you as an individual, and as such it needs a separate business account.
As a sole trader, or self-employed person, you’re not legally obliged to have a business bank account. Your business and personal income are treated in the same way by the tax office, so you can use your personal bank account for business transactions. Partnerships, which are effectively two or more sole traders, may also choose to operate through a joint personal account.
However, many sole traders and partnerships prefer to keep their business finances separate by opening a business bank account. Advantages can include being able to deposit money under your trading name and having access to more detailed transactional data.
A personal bank account allows you to receive and pay out money in your name. Many personal bank accounts therefore offer features to help you manage your personal finances.
A business bank account allows you to receive and pay out money in your company’s name. The account features will be designed with business use in mind – such as payroll and invoicing – and will often have fees attached. Many business current accounts also have monthly fees.
If you have a bad credit history then you’ll probably find it more difficult to open a business bank account, especially if you’ve been bankrupt in the past five years or have a County Court Judgement (CCJ). If this is the case, you might find it easier to open a business account with your current account provider.
Taking steps such as paying back any credit you owe on time and making sure you’re registered on the electoral roll can help to improve your credit score, which can increase your chances of being approved for a business account in the future.
Yes, depending on the account you choose you could pay a:
Cash withdrawal charge
Cash deposit charge
Bank transfer fee
It will depend on your provider’s terms and conditions.
It normally takes one to four weeks to open a business bank account. You can quicken the process by:
Being already registered at the bank with a regular current account
If you’re a sole trader as opposed to an incorporated company
Seek out banks that say they provide a quick service – some banks provide their estimated processing periods online
Switching current accounts to take advantage of better interest rates and rewards is easy with MoneySuperMarket, where you can compare online accounts by the interest rates they pay, the overdraft rates they charge, the rewards they offer, and level of customer service they provide.
Just use our comparison service to find the right bank account for you, then fill in the information required by the account provider (name, date of birth, etc.) and supply the necessary documents to confirm your identity and address.
The switching process should take no more than seven working days with the Current Account Switch Service, and all the fiddly bits like switching across your direct debits should be taken care of by your new account provider.