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.

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Free sole trader bank accounts

Tide logo
  • Free company registration
  • Free business account
  • Powerful features
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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

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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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

Pros

  • 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

Cons

  • Business bank accounts usually come with monthly and/or transaction fees
  • A sole trader with small-scale banking requirements may not need one

Our verdict

It’s not a legal requirement for a sole trader to set up a business account for their banking needs (like it is for limited companies), and business accounts do often come with fees attached. But there are several advantages to opening one, including making the management of your business finances easier, and being able to take advantage of any invoicing, cashflow and calculation tools that may come with it.

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