Jonathan Halloway

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Products Updated September 2, 2019

Business Bank Accounts

Compare bank accounts for UK business owners. Accounts for all business types inlcuding sole traders, limited companies and partnerships.

 

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What Is A Business Account?

Whether you are a freelancer with a small start-up or a seasoned entrepreneur with an impressive business portfolio, you will need a way to keep your finances in order. Every business requires some kind of system to manage its money, and a business bank account is an easy and simple solution.

Applying for a business account is one of the first things to do when you start a new business, and with so many options available it can be difficult knowing exactly what you need. This guide explains what a business account is, how they work and who needs one.

What Is A Business Account?

A business current account is a type of bank account that is used for the everyday banking needs of any business. This includes any regular payments such as bills and utilities, as well as ad hoc payments that go both in and out of the business.

A business account works in essentially the same way as a personal current account. However, there are different features available that are specifically for businesses to benefit from. Business bank accounts are available from most banks and building societies as well as specialist providers.

Unlike a personal bank account, which usually don’t charge fees for transactions while you are in-credit, a business account usually charges additional fees. Depending on the provider, these fees could include transactional fees as well as monthly account fees.

Before you apply for a business account, be sure to find out exactly what fees are involved. Ask about monthly account fees as well as additional transactional fees and compare all your options to find the best deal for your business.

Who Needs A Business Account?

Whether you need a business account or not really depends on the type of business you are running. If you have a limited company or partnership, then you are legally required to have a separate business bank account. This is because all of the company’s finances must be kept independently from your own as the business is an entirely separate entity.

Sole traders are not legally required to have a separate business bank account and can use their own personal account if they prefer. If you are a sole trader, it is often worth setting up a separate current account, either business or personal, in order to keep all the business finances separated from your personal funds.

Even if you are not required by law to have a business account, there are many benefits to keeping your business finances in a separate account. One of the main advantages is that you can easily keep track of your business income for HMRC.

What Do Business Accounts Offer?

Business bank accounts come with many of the same features as a personal current account. However, there are some additional features designed specifically for businesses.

In addition to all the usual bank account features such as card payments, foreign exchange, bank transfers and standing orders, business accounts can also offer:

  • Overdrafts for borrowing money short term
  • Interest for gaining money on a positive bank balance
  • Credit and debit card payments
  • Payroll management for up to a set number of employees
  • Electronic payment processing
  • Access to accounting and legal advice specifically for businesses
  • Guides, course and seminars that cover a wide range of business practices
  • Dedicated and personal account management
  • Reward schemes and cashback on various purchases
  • Discounts and offers on travel and meeting facilities
  • Facilities for running credit checks on suppliers.

The offering of any business account will vary between providers and all the benefits included should be carefully considered before a final decision is made.

What Are The Types Of Business Accounts?

Business bank accounts cover various different types of account, and while the most common is a business current account, there are other options available. Most providers will offer slightly different business accounts depending on the size of the business.

The most common types of business account are:

  • Business Current Account: A business current account is very similar to a personal current account and is designed specifically for small businesses. In most cases, they are ideal for companies up to 10 employees or up to £1million in annual turnover. These levels will vary slightly between banks and business account providers.
  • Commercial Bank Accounts: Larger businesses, usually considered small and medium-size enterprises, or SMEs, are offered commercial bank accounts. These are designed for companies with a turnover of £25million and less than 250 employees.
  • Corporate Banking: When it comes to larger businesses and private and publicly listed companies, then corporate banking is used. This is much more specialised and geared up to handle the needs of a large enterprise.

As well as all major banks and building societies offering business bank accounts, you can also find specialist business account providers. These are often designed for specific reasons such as local organisations, credit unions and market challengers.

How Much Does A Business Account Cost?

Business bank accounts often come with a price tag, unlike many personal bank accounts. It is important that you are aware of all the charges included with your business bank account so that you can keep track of what you are paying for. The charges you could incur on a business bank account include:

  • Overdraft fees
  • A transaction fee for paying in cash or cheques
  • Fees for issuing cheques
  • Bank transfer fees for sending money to other accounts
  • Fees for withdrawing cash from an ATM or branch
  • Charges for sending money overseas
  • Charges for receiving payments by card
  • Fees for swapping notes for coins in the branch
  • Monthly account fees for having the business account.

Many providers offer special offers and promotions such as two years of no account fees when you first open the account. It is important to be aware of these promotions and what it will mean for your business when that promotion period ends.


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