Switching business bank accounts can give you access to cheaper fees and better features. But you might also be able to bag a switching bonus – essentially free cash for moving your account.
Why you should switch your business bank account
Switching business bank accounts might not be a priority when you’re busy juggling the day-to-day running of your business. But doing so could make your life easier in the long run. As well as potentially saving your business money, a new account could help you manage your finances more efficiently. Some of the reasons for making the move include:
Lower fees. Many businesses are feeling the squeeze right now, but switching bank accounts could save you some cash. If your current bank charges a high monthly fee, providers such as Tide offer accounts without one. You might also be able to save on transaction fees, with some accounts offering a set number of free transactions each month.
Better accounting features. Switching your account could give you access to better invoicing tools, accounting software or expense management. This is particularly helpful if you’re one of the 605,000 sole traders who now needs to be MTD-compliant.
Linked savings accounts and pots. Many accounts offer linked business savings accounts that pay interest on your balance. Providers such as Tide and Monzo also offer tax pots, allowing you to set aside money for your tax bill so you’re less likely to be caught short when it’s due. I do this, and trust me, it works.
Better customer service. If you’re frustrated with your bank’s customer service or support, another provider might offer more suitable options.
Your business has changed. As your business grows, you might need higher transaction limits, more users or different banking facilities.
Business switching offers Some banks offer incentives for making the switch to a new account. Tide, for example, is currently offering £200 cash, plus 6 months free of its accounting tool, Admin Extra.
Can you use the Current Account Switch Service (CASS)?
If you’re worried about the hassle of switching bank accounts, the good news is that as with personal bank accounts, you can use the Current Account Switch Service (CASS) when moving business bank accounts – provided you qualify.
This means your new bank will handle all the admin of the switch, moving over all your direct debits and standing orders, as well as your balance on your behalf. You don’t need to inform your existing bank you’re leaving, and the switch should be completed within 7 working days.
The process is backed by the Current Account Switch Guarantee, so any interest or bank charges caused by a switching error will be fully refunded.
More than 50 banks and building societies are part of CASS, including Barclays, Tide, Monzo, Allica Bank, HSBC, Nationwide, and Starling.
How the switching process works
Check you’re eligible Not all businesses are eligible to use CASS. To qualify you must have an annual turnover of below £6.5 million and no more than 50 employees.
Compare business accounts and apply Compare business bank accounts and once you’ve found one to switch to, check both your new and current bank are part of CASS. If they are, go ahead and apply. You’ll be asked if you want to use CASS during the application process.
Choose a switch date The next step is to select your switch date. This must be at least 7 working days in advance and won’t include weekends and bank holidays. Your new bank will usually give you a selection of dates to pick from.
Sign the forms Complete the switch agreement and closure instruction provided by your new bank. It will then start the process of moving over your balance and payments from your old account, and keep you updated on the progress. On the date of the switch, you can use your new account.
What CASS won’t do for your business
While using CASS can take some of the hassle out of switching business bank accounts, it’s important to keep a few things in mind:
You may need to download old statements
When you switch bank accounts, you will lose access to your old account statements and other records once the account is closed. If you need them, download or print copies, or ask your current bank how you can access them before the switch completes. This is particularly important when you’re running a business, as you may need these documents when completing your tax return.
Check everything has moved across
Once your new account is up and running, check everything has moved across correctly and update your new bank details wherever necessary.
While direct debits and standing orders should be transferred across automatically, you might still want to check that they have been set up correctly. Also update your accountant, suppliers and customers with your new bank details.
If you pay employees from your business account, you should check your payroll arrangements and update them if needed.
Switching bonuses provided by business account providers
From time to time, business bank account providers offer switching bonuses as an incentive to switch. These can range from sign-up bonuses to free accounting software or a limited trial period. A popular choice for a lot of business owners currently is Tide. It is currently offering a £200 cashback plus 6-month free accounting welcome bonus.
Frequently asked questions
How do I know if I’m paying too much in bank fees?
The best way to find out if you’re paying too much in bank fees is to use a comparison site to check what other accounts charge. Check both monthly fees and transaction charges, then consider how they compare to what you’re already paying. If you find a better deal, get switching.
Are online-only banks safe for my business?
Yes, online-only banks are safe for your business, provided they are properly licensed and regulated. Check that your bank is regulated by the Financial Conduct Authority, as this means it must follow strict rules for how it operates. Also check your eligible business deposits are protected by the Financial Services Compensation Scheme (FSCS). Online banks should also have security measures in place to help protect your business from fraud, such as two-factor authentication, transaction alerts and controls on payments.
Can I switch if I’m overdrawn?
Yes, you can usually switch business accounts if you’re overdrawn, but your new bank will need to agree to provide an overdraft facility if you want to transfer borrowing across.
If it doesn’t offer an overdraft, or it won’t lend you the amount you currently owe, you will need to pay off your outstanding balance before you can complete the switch.
Can I switch if I’ve only just started trading?
Yes, you can switch if you’ve only just started trading – in fact, some accounts are designed specifically for newbies.
For example, if you’re setting up a limited company, open an account with Tide and it can help you register your company with Companies House for £14.99, rather than paying the standard £100 fee.
Can a sole trader switch from a personal account to a business account?
Yes, as a sole trader, you can move from a personal account to a business account. But you won’t be able to use the Current Account Switch Service to do so.
Instead, you’ll need to apply separately for a dedicated business account, but these days, that’s pretty quick to do. Plus, you can keep your personal account open for personal banking, while using your business account for business transactions.
It took me long enough to do this, but it makes it much easier to keep track of business finances, so it’s worth taking the time to do it. Many accounts can be up and running the same day.
Can I cancel a switch once it’s started?
To cancel a switch, you’ll need to do so before the 7-working-day countdown begins – the earlier, the better. Once the 7-working-day process starts, you won’t be able to stop it.
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Rachel Wait is a freelance journalist and has been writing about personal finance for more than a decade, covering everything from insurance to mortgages. She has written for a range of personal finance websites and national newspapers, including The Observer, The Mail on Sunday, The Sun and the Evening Standard. Rachel is a keen baker in her spare time.
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A practical guide for finance leaders interested in managing your cashflow, protecting business cash liquidity, and earning a decent return on company reserves.
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