Why should you open a business bank account?

As a sole trader, you might want to open a separate current account for a number of reasons:

• Your existing personal current account might not be suitable for business use. Your bank may specify that the account is for personal use only and they may threaten to close the account if they detect a large number of business bank transactions.
• Separate your business costs from your personal ones. You will need to inform HMRC how much your business has made and it can be difficult to keep track of which transactions are personal and which are made for your business.
• Having a dedicated business bank account makes your business look more professional to your clients and suppliers.

What do you need to open a business account in the UK?

If you want to open a new account for your business banking you will need:

• If you are eligible for the account: Check the terms and conditions of the account you have chosen.
• Proof of your identity: Whether you are a sole trader or a company director you will need to prove who you are. Documents such as a passport, national ID card or photo driving licence are usually acceptable.
• Proof of your address: Usually a utility bill, a recent bank statement or council tax statement are sufficient.

You will also need:

• Your business address and postcode.
• Contact details including phone number and email address, particularly for online banking.
• If you are a limited company or a partnership you will need proof of registration with Company’s House.
• Your estimated annual turnover.
• You will need to prove that you have registered with HMRC.
• You may need your current personal account details.
• In some cases you will need evidence of your own personal banking history. Provide details of your financial situation and credit score.

What should you look for in a business account in the UK?

Research your options on line and shop around for the kind of account you need. Look at the different benefits that business accounts offer. Choose an account that will work to your best advantage. Here are some factors to consider when selecting UK business bank accounts:

• The overdraft limit: If you are likely to need a business overdraft, check the limit is sufficient for your needs. You may also be penalised for unarranged overdrafts.
• The availability of free banking: Many current accounts offer the first year free of charges and then charge an annual fee in subsequent years.
• The minimum monthly fee: Some current accounts charge a minimum fee, even if you don’t make any transactions.
• Fees for extra services. Some business accounts charge for cashing cheques for example.
• Online banking, banking apps integration with accounting software.

There are lots of banking comparison websites, like Moneyfacts, where you can compare different small business bank accounts. Think about what features you need the most and whether you want to pay extra for certain day-to-day banking services.

Can you open a business bank account online?

While many banks will allow you to make the initial application for a new account online, and many now offer Internet Banking, opening a business account may require you to have a meeting in person. This means you might need to consider the location of the bank’s branches. With fewer banks in the high street, you might want to choose a bank with a local branch or one that allows you to make a deposit through the post office, particularly if you are likely to pay in quantities of cash or cheques. Regular trading hours for high street banks might not be convenient to a freelancer with non standard hours. If you are running an online business you may prefer to do your banking via an app or website. Consider your day-to-day needs and look for a bank that will work for you. Some business accounts might offer advantages for startups or self employed people.

Which bank should you choose for your small business banking?

The big four, the largest banks in the UK, all offer various business bank accounts. There are also lots of other banks that might meet your banking needs. Consider a specialist account for freelancers if you are operating as a sole trader. Some current accounts have come on the market especially catering to the needs of freelancers, sole traders and small businesses. These specialist accounts offer options for directly submitting your self-assessment tax return and help with accounting.