What is an easy access business savings account?
Instant access or easy access business savings accounts are one type of savings vehicle available to companies.
Typically, these products have no limitations on how you can access the money. However, that doesn’t necessarily apply to all accounts of this type. Some may limit you to a certain number of withdrawals each year, so check the terms and conditions carefully. Others may have a minimum withdrawal amount, such as £500.
The added flexibility of instant access business savings accounts does come at a price. You’ll earn less interest than you would with fixed-term savings.
However, these products are great if you think you might need to release some of your spare cash for emergencies. Or you want the security of knowing that you can dip in and out whenever you want.
Easy access savings accounts are typically available to all types of businesses, whether you’re a sole trader, a limited company or even a charity.
Some accounts will let you start saving from just £1, while others will have higher minimum deposits such as £1,000. Generally, to get the very best rates you need to save at least £1,000.
Meanwhile, some accounts will pay interest monthly, while others pay annually or on the anniversary of you opening the account. If you plan to make lots of withdrawals, monthly interest might suit you better.
Will I pay tax on my savings?
Yes, you have to pay tax on the interest you earn in business savings accounts.
Limited companies will pay corporation tax on any interest they earn, while sole traders pay income tax.
The headline rate you are offered is gross, so you will need to deduct tax from this. You’ll calculate how much you owe when you do your company financial accounts or annual self-assessment.
Are my savings protected by the FSCS?
The Financial Services Compensation Scheme (FSCS) protects UK savers if their bank or building society goes bust. However, protection for businesses is more complex. To qualify, you need to meet certain requirements.
The scheme says it “generally protects companies’ deposits”, meaning that easy access savings should be covered for eligible claims. It assesses eligibility under the Prudential Regulation Authority’s Depositor Protection Rules, in particular rule 2.
If a UK-authorised bank, building society or credit union fails, the FSCS will automatically compensate each eligible company depositor up to the £85,000 limit.
If your savings are greater than £85,000, you should consider splitting the money among different savings accounts for maximum protection.
Are there other alternative options?
Yes, there are several alternative options you might wish to consider. Usually, it makes sense to have a variety of accounts, some with easy access for emergencies, and others where your money is locked away in return for a better rate.
Notice business savings accounts: These accounts allow you to withdraw your money, but you must give an agreed amount of notice, such as 30, 60 or 90 days. While they’re less flexible than instant access options, they tend to pay more interest.
Fixed term savings accounts or business saving bonds: These accounts lock your money away for a set term, often 30, 60 or 90 days. In return, they pay you a significantly higher interest rate. However, the penalties for withdrawing money can be harsh. So you should only use this type of account if you’re sure you won’t need the money.
Pensions: Paying into your pension is a great way to save for your financial future, and there are significant tax advantages. Sole traders saving into a pension will get tax relief at their usual income tax rate. If you run a limited company and the business pays into your pension, you’ll save on corporation tax. Don’t forget pensions cannot usually be accessed till aged 55 – rising to 57 in 2028 – so only put money in your pension if you won’t need it until then.
Easy access business savings accounts offer maximum flexibility for companies that want to earn interest on surplus cash. However, these accounts tend to offer lower interest rates than fixed term products. You should shop around and compare products to find the best interest rate possible.
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