Do I need a business account?

Whether you're self-employed, a sole trader or a limited company, discover if you need to open a business bank account in the UK.

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In general terms, the answer is no for various reasons, but different rules do apply to sole traders and limited companies.

Do I need a business bank account if I am self-employed?

This will depend on if, as someone who is self-employed, you have set yourself up as a sole trader or a limited company.

If you are a sole trader, there is no legal requirement to set up a business bank account. However, be aware that while some personal bank accounts will let you process work-related payments on a small scale, others stipulate in their small print that you cannot use them for business purposes at all. In that case, you would be breaking the terms and conditions of your personal account, so it is worth checking with your banking provider, and that outcome may mean you need to set up a separate business account.

There are of course other advantages to having a business account as a sole trader. In particular, being able to keep your personal and business finances separate, making it easier to calculate your expenses and your tax bill at the end of the year. Plus many business accounts now come with handy digital tools to help you manage your everyday cashflow.

If you are self-employed and have set yourself up as a limited company, then it is a legal requirement to have a business account if you are using banking services. We explain more on this below.

Do I need a business account for a limited company?

If you are the owner of a registered limited company, and your business is using banking services, then you legally need to have business account that is separate from your personal account.

This is because a limited company is a separate legal entity. And this rule applies whether you are a single self-employed person trading as a limited company, or you are part of a bigger limited company where you are one of several owners.

Compare business bank accounts

Data indicated here is updated regularly
Name Product Account fee Bank transfers Accounting integrations Non-Sterling transactions Overdraft Account management Key benefits
Tide
Free
£0.20
Free if both accounts are with Tide
Xero, QuickBooks, FreeAgent, ReckonOne, Kashflow, Sage
Free
App, Online
Register your limited company for free (usually £12) and open a Tide account in one go: choose 'Register a company' from the Tide homepage menu
Starling Business Account
Free
Free
Xero, FreeAgent
Free

Min. 18 months trading to apply
App, Online
Add the new Business Toolkit onto your free Starling account, and get the first month free of charge (RRP £7pcm)
Mettle
Free
Free
Free agent, Xero
Unable to make international payments
App
Comes with a suite of free accounting software to integrate with
Amaiz
£9.99 per month
Free in first month
Free Starter plan available
£0.20
FreeAgent, Xero, Sage, Reckon One, Kashflow, QuickBooks
1%
0.5% in Europe, 1% elsewhere
App, Online
Get your first month FREE
HSBC Kinetic

No monthly account fees during early access*
Free
Xero, Quickbooks, Sage

International payments unavailable

Up to £30,000 subject to eligibility and application
App, Online
*No monthly account fees for 18 months, thereafter a monthly charge of £6.50 applies
Cashplus business
Free
£0.20
First 10 payments sent each month FREE
FreeAgent, Xero, Sage, Kashflow, Quickbooks, Clearbooks
2.99%

On invitation
App, Online
ANNA
Free
Free up to a max. balance of £5,000 (or up to £500 paid in per month)
Free
2 free transfers per month and unlimited free transfers to Anna accounts
Coming soon
Free
App
Earn 1% cashback for paying with your ANNA card in selected categories. Enjoy premium benefits free for the first 6 months.
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Pros and cons of having a business bank account

Pros

  • If you’re a limited company, then legally you will need one in order to do your business banking.
  • If you’re a sole trader, it helps keep your personal and business finances separate when it comes to your bookkeeping and tax bills.
  • Many come with digital features such as invoice creation, expense management and spending analysis.
  • It would open up the option of business credit cards or business loans if your provider offers these.
  • Some business accounts come with fee-free introductory banking periods.

Cons

  • There are monthly and/or transaction fees payable with the majority of business accounts.

Verdict

As a sole trader you don’t legally need a business bank account, although you will have to open one if you are a limited company. But whether you legally require one of not, business bank accounts do come with other advantages, such as keeping personal and business finances separate (which helps with tax reporting at year end), and the use of digital tools around invoicing, expense management and spending overviews.

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