nigel woollsey

Nigel Woollsey

Online Writer
Published: 07/03/2019

At a glance

  • There are several different types of business bank account you can open. Consider which account best suits your individual circumstances before signing up.
  • A business account is not necessary for all types of business – sole traders could well manage with just using their existing bank account.
  • Nearly all business bank accounts will come with fees – both a monthly standard charge as well as additional costs for things like depositing cheques or cash.

Looking for a bank account to help grow your business? We’ll explain what to look for in a business account, as well as some of the benefits and drawbacks to be aware of.

How to choose a business current account

Every business can benefit from having a suitable business bank account, but it can be difficult to know which one is best for your situation. While we have an in-depth guide on how to choose the best business bank account, here we’ll suggest a few key considerations to help you decipher the best options for you. Note that while certain businesses such as sole traders would be able to use their personal current account for business transactions (unless you have large volumes of money flowing in and out, which your provider might not appreciate), this could make filing your business taxes much more complicated. Indeed, anyone who runs a business can benefit from working with a provider who understands what is required, with many offering services to help business customers make the most of their finances.

The main consideration when choosing an account, as with all financial products, will be cost. If you’ve already done a little research, you will have noticed that business banking providers tend to charge monthly fees. One of the most popular incentives offered by providers is an initial fee-free period, which can be especially enticing for start-ups.

Remember, however, that costs go beyond account fees. There are the costs of overdrafts and transfers to consider, as well as the amount of interest you can get (if any) by banking with a certain provider. And, if you are in a business that frequently deals with cash or cheques, you’ll want a provider with physical branches nearby so you don’t lose too much in time and fuel costs. If you’re a digital-oriented business on the other hand, you’ll want to know the provider offers a comprehensive online banking service.

Eligibility

Before you get too excited about selecting your business bank, you’ll want to make sure you are eligible. While providers will have different criteria, eligibility will generally depend on what kind of company you are (charities will often require a different type of account), your maximum annual turnover and the owners’ UK residency status, among other factors.

Given these varying eligibility criteria, it’s important to compare business bank accounts to find the one that is both suitable and open to your business. For instance, some accounts are specifically for start-ups, while if you’re a smaller business, you may want to look for a small business bank account provider who understands your specific needs.

What do I need to open a business bank account?

Depending on what provider you choose, there will likely be different opening requirements, but generally, when you open a business current account, consider the following documentation:

  • You’ll need to provide personal ID, usually one form of address ID such as a utility bill, and one piece of identification that proves you are who you say you are such as a passport or driving licence.
  • Depending on your business structure you may need to provide a partnership agreement, certificate of incorporation, trust deed or constitution (for clubs, charities, etc.).
  • If you’re a new start-up you’ll have to show your business plans and cashflow forecasts, and you may also have to show your personal bank statements for a set period. Businesses already running will have to provide two or three years’ audited accounts.
  • If you’re an existing business switching over, you’ll likely need to show bank statements from your existing business current account.

Assuming you’ve brought all the required documentation, opening a business account shouldn’t take much longer than a personal current account. Likewise, switching to a better business bank account should be pretty straightforward. Small businesses, charities and trusts can use the Current Account Switching Service, which guarantees accounts can be switched in seven days. Once the new provider approves your application, they should take care of the rest, and if they are part of the Current Account Switch Guarantee your new account should be ready to go in seven working days.

Advantages and disadvantages

  • They come with features that personal bank accounts do not have, such as the option for employees to have a company debit card, special overdrafts and the ability to receive customers’ payments via debit or credit card.
  • It is much easier than using your personal account for tax return purposes (if that is an option).
  • You should be able to pay in much more compared to a personal account, though keep an eye on the maximum allowed turnover, and the provider should be able to manage a much larger volume of money flowing in and out of the account.
  • Providers should be knowledgeable about how businesses work and therefore able to help with much more than the basics.
  • While some free business bank accounts are available, most will come with an annual or monthly fee.
  • Beware that some business accounts charge high fees for overdrafts and other usages.
  • Not many offer a decent rate of interest on the money you keep in the account.

Moneyfacts tip

Moneyfacts tip nigel woollsey

Once the introductory fee-free banking period has ended, you might want to consider switching to a different deal, depending on the provider’s charges.

What next?

If you’re still not sure what account to choose, why not have a look at our business banking guide.

Looking for a business savings account instead? We can help you compare the best savings accounts and the best fixed rate bonds for businesses, as well as charity and club savings accounts and client accounts.

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

man looking at laptop and holding phone

At a glance

  • There are several different types of business bank account you can open. Consider which account best suits your individual circumstances before signing up.
  • A business account is not necessary for all types of business – sole traders could well manage with just using their existing bank account.
  • Nearly all business bank accounts will come with fees – both a monthly standard charge as well as additional costs for things like depositing cheques or cash.

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