Compare bank accounts for sole traders
Opening a bank account for your business is often a good idea. Discover the right account to manage your finances better.
Updated . What changed?
So whether you are a sole trader or doing a side-hustle, it is often recommended to create a separate bank account to manage your finances. A number of providers have created bank accounts that have been designed for those who are sole traders.
Compare bank accounts for sole traders
What's in this guide?
- Compare bank accounts for sole traders
- Can I use my personal bank account as a sole trader?
- Should I get a business bank account as a sole trader?
- How to set up a business bank account as a sole trader
- How much do business bank accounts for sole traders cost?
- Pros and cons of setting up a business account as a sole trader
- Our verdict
Can I use my personal bank account as a sole trader?
Unlike for limited companies, there’s no legal requirement for a sole trader to open a business bank account.
However, legal aspect aside, most banking providers don’t allow personal current accounts to be used extensively for business purposes.
So, if you’re a sole trader, it shouldn’t be a problem to accept payments for the work you have carried out. But if a high volume of business-related payments are noted going in and out of your personal account, then your bank may contact you and ask you to set up a business account.
Should I get a business bank account as a sole trader?
If you’re going to be doing a huge amount of business banking, we’ve already established that even as a sole trader you probably won’t be allowed to use your personal current account for that.
But apart from that point, there are lots of other advantages that come with setting up a business bank account.
For one, it makes it a lot easier to keep your personal and business finances separate, especially when it comes to the end of the financial year and you need to work out your tax bill.
And then there’s the fact that some business accounts come with great features to help you manage your cashflow and bookkeeping.
Depending on which account you sign up for, you could benefit from an invoice creation service, expenses management, spending categorisation, budgeting tools, and tax and VAT calculators. If you already use a different accounting software package, such as QuickBooks or Xero, these accounts can often integrate directly with those too.
And with a raft of new digital account providers on the market, you can usually manage all of this on-the-go through a click mobile banking app.
How to set up a business bank account as a sole trader
Some banking providers have specific accounts designed for sole traders, while with other banks you can just apply to open their standard business account. The application process varies by provider, but most can be completed online now.
In general, when you open a business account as a sole trader, you’ll be asked for proof of ID, proof of address and your contact details (plus your business name and address, if you have chosen to set these up as separate to your own). You might be asked for some details about your business, and a credit check may also be carried out.
How much do business bank accounts for sole traders cost?
This varies depending on which banking provider you go with, but unlike personal current accounts (which many of us are used to getting for free), it is far more common to be charged for using a business account.
Some business accounts come with a monthly fee, typically between around £5 and £10, while others are free to set up and operate.
There will often be small charges for individual transactions, such as setting up direct debits, making or receiving payments, or for depositing cash into the account.
With some accounts you get a certain number of transactions for free each month, or you may have the option of choosing a plan that reflects your payments mix. For example, if you know you’re going to be paying in a lot of cash, you could choose the plan with cheaper cash transactions charges, as opposed to one with cheaper electronic payment charges.
Make sure you take all of this into consideration when you select your account, as tiny individual charges can run up to a big total if you’re carrying out a lot of transactions.
And remember to look out for any free introductory offers – some banks will offer free everyday banking for the first few months or even the first year or two (although you will have to pay any business banking fees after that).
Pros and cons of setting up a business account as a sole trader
- Keeps your personal and business finances separate
- Easier to work out your tax and expenses
- Some business accounts come with tools to help with invoicing, expense management and tax calculations
- Business bank accounts usually come with monthly and/or transaction fees
- A sole trader with small-scale banking requirements may not need one
More guides on Finder
Methodology for business banking ratings
You’ll find customer satisfaction star ratings on some of our business banking reviews. Here’s how we came up with them.
Over a quarter of Brits now have an account with a digital-only bank
Currently over a quarter of Brits (27%) say they have at least one bank account with a digital-only bank. This is a percentage increase of 16% from last year when 23% of Brits said they had an account with a digital bank. It is also over 3 times the amount of Brits who had one in January 2019 (9%).
Business bank accounts for non-UK residents
We’ve put together some tips and information on how to open a business bank account in the UK as a non-resident.
Business bank accounts for contractors
Contractors usually need a business bank account, so we’ve put together a guide on how to find one that works for you.
Business bank accounts with overdrafts
Business overdrafts can be a useful safety net, but be aware of fees and charges.
Can you run a business from home?
Looking to set up your own business but not quite ready to get a proper office? You can definitely run your company from home, once you’ve taken care of a few details.
Revolut Plus review
Revolut Plus is the latest current account to be offered by digital banking brand Revolut – we take a look at its features and fees.
Finder’s 2021 Bitcoin Price Predictions Report
We asked 47 experts for their cryptocurrency price predictions and took a deep dive into the Bitcoin price rally.
The most talked about shows of 2020 on social media: Love Island accounted for almost HALF of posts
The most talked about shows of 2020 have been revealed, with Love Island accounting for almost half (48%) of all tweets posted by Brits. It generated almost 10 times more posts than the second most popular show, I’m A Celebrity…Get Me Out Of Here.
How to improve your business’ cash flow
Cash flow can be hard to deal with, but the right business practices can make it easier to keep your company’s finances in good health throughout the year.
Ask an Expert