Setting up a business bank account
Tools & Resources
Key learnings
- A business bank account should only be used for business transactions.
- Although there is no legal requirement to have one, it is strongly recommended –and some banks insist you have one.
- A business bank account allows you to keep your personal finances separate from your business finances, and it helps when filing tax returns.
- Each bank offers different benefits and terms and conditions, so do your research to make sure you choose one that works for your business.
Setting up a bank account for your business is very much like setting up a regular bank account. The key difference is that a business account should be used exclusively for business purposes, whether paying for supplies or receiving payment from customers. Most high street banks offer business banking facilities. However, features and benefits will vary from bank to bank, so it’s important to shop around. Here, we talk through some of the key benefits of business banking and explain why it is a must for your business.
As the saying goes, ‘don’t mix business with pleasure’, so it's important to keep your business finances separate from your personal finances. And that’s just one of the reasons you should think about opening a business bank account.
Some of the other things a business bank account can do are:
- Build a business credit rating
- Keep all your business finances in one place
- Make accounting/tax return processes more efficient
- Help you achieve a level of professionalism
- Help you show commitment and longevity
- Will be simpler for setting up payroll
- Professional lending and credit facilities
1
How do I choose the best bank account?
Banks offer a variety of business banking services. When choosing a bank, you may want to think about:
- Whether you want the support of a small business/relationship manager within the bank?
- What the various charges are related to the account: standing charges (monthly or quarterly banking fees), transaction charges (charges for money going in and out of the account, such as cheque processing, converting currency to sterling, paying in cash), online banking fees etc.
- Practicalities of location: if you work with cash, you’re likely to need access to an actual branch to deposit this.
- What payment facilities do your customers want/expect?
Ultimately, the choice is down to you. You may wish to start with the bank you use for your personal banking, or you may find an attractive introductory offer elsewhere.
2
Can I use my personal bank account for my business?
It is strongly recommended that you have a separate business bank account, however, there is no legal requirement stating that you must have one.
3
Self-employed
If you are self-employed, it is recommended you have a separate account for your business, as it will make bookkeeping easier when you need to complete your self-assessment return (as opposed to sifting out individual transactions from your personal account).
Please note, some banks will insist on opening a ‘business’ account, rather than an additional personal account. This is up to the bank's own terms of business.
4
Limited Company
If you are running a limited company, from an accountancy perspective, it is strongly recommended that you open a business bank account to maintain professionalism with your customers. It may also be a requirement with your bank or other financial lenders. However, there is no law that says you must have a separate bank account.
Business Banking Tips
- Make sure you are comfortable not visiting a physical branch if you choose to go with an online-only business banking provider.
- If you are choosing a physical high street bank, introduce yourself to your business bank account manager to ensure you are tapping into all the features and benefits of your new business bank account.
- Ensure that you are using your account for business transactions only.
- Consider if you want all partners/directors to be signatories on the account.
- Make yourself aware of fees and charges attached to your business account, to prevent you from being caught out or being in financial deficit.
- If you intend to trade abroad, make sure your account has the facility to do so. Also, make yourself aware of charges attached to this type of service.
- Make sure all your requirements will be met. If you need business lending, does the bank offer these facilities (eg credit cards/overdrafts)?
Next steps...
- All major banks offer business banking, so draw up a list of your requirements and see which one is best suited to your business using this tool
- Consider whether you will need a business loan, credit card or overdraft facility attached to your account.
- Once you’ve identified a bank and set up your account, take advantage of the expertise of your bank/relationship manager.
- Remember to keep your business account for business expenses and payments only.
- Sat Nav users who sign up to a Tide business bank account (powered by Clearbank) through UMi can get £50 cashback and free bank transfers for a year.