Business Bank Accounts - Business Banking

A business bank account typically consists of a series of monthly and transaction fees, overdraft interest rates and credit interest rates. You can usually access your funds, make payments and transfers through internet banking, apps, by phone or in branch.

• Monthly fees (standing charges) range from free to £30, with a market average fee of £6 per month.
• Transaction fees may be applied for paying in and withdrawing cash or cheques, making or receiving electronic payments and debit card purchases.
• Overdraft rates are shown as Equivalent Annual Rate or EAR, which allows you to compare the interest cost of going overdrawn. There are usually differing rates for arranged and unarranged overdrafts.
• Credit interest rates do apply on some business bank accounts, but rates are usually not as good as a business savings account.
• Nearly all business bank accounts allow online banking, while there are a range of banks who also offer phone and branch operation too and some allow transactions to be made via Post Offices.

Some banks will charge you a fee every month or quarter for banking with them. This standing charge may replace transaction charges, or it may be in addition to them. So, when comparing accounts, bear in mind how you will use the account and look at any standing charges alongside the transaction fees.

For example, if you will be making a lot of physical transactions by cash or cheque each month, an account with a standing charge but no transaction fees may be better.

Transaction charges are the fees the bank charges for handling money going in (credits) and coming out (debits). These charges may be made on physical transactions, such as paying in cash or processing a cheque payment, but also for automated payments (direct debits and standing orders) – although the charges for these transactions may be cheaper.

When selecting an account, you need to weigh up the transaction charges with the standing charges (as above). You also need to think about whether you will make a lot of physical transactions or automated ones, as the charges on each may affect your decision.

Aside from the obvious (shopping around to find the lowest charge), here are a few ways you may be able to minimise your transaction charges:

• Don't exceed your overdraft limit.
• Try to minimise your physical transactions (cash and cheques).

Automate as many regular transactions as possible with standing orders and direct debits. Making one-off payments using online banking can help keep costs down, too

A lot of banks will offer new business bank account customers free banking for a set period. This could significantly reduce your costs if you are a new start-up. However, while these offers may undoubtedly be cheaper in the near-term, take care when the introductory period ends. Although these introductory offers are ‘nice to have’, when selecting your account you should be thinking of more mundane things, such as the costs and charges after the introductory period ends, as well as the level of customer service. Several banks offer similar deals for established businesses who switch their account, so it may be worth considering switching banks to keep ongoing costs low.

• It makes it easier to complete tax returns as your business transactions and income are not tied up with your personal affairs.
• Some business accounts offer switching incentives and cashback.
• New businesses can benefit from reduced monthly fees on some accounts.
• If you employ staff, then you can use the account to process and make salary payments.
• The option to make international payments in a range of currencies.

To open a business bank account, you will need to check the account is available to your type of business, prove your identity as a director and give some basic information about your business, such as Companies House registration details and turnover. In summary:

1. Check the account is available for your type of business, for example some accounts will only accept limited companies, sole traders or charities.
2. Get your personal ID ready for all company directors – for example, a passport or drivers’ licence.
3. Find your Companies House registration or Registered Charity number; depending on your business structure you may need to provide a partnership agreement, certificate of incorporation, trust deed or constitution (for clubs, charities, etc.).
4. Have two to three years of audited accounts available; for new businesses have your business plan and forecast cashflow available – you may also need to share your personal banking statements.
5. Understand your company credit history.
6. If you are switching your business bank account, bring your current bank statements.

Small businesses, charities and trusts can switch their business bank account in seven days; thanks to the Current Account Switch Guarantee service. Just make sure the bank you are opening an account with is a member of the scheme.

The length of time it can take to open an account will vary by provider and can range from same day to several weeks – many banks publish service quality data that can give an indication of timescales.

Businesses can keep the process as swift as possible by preparing all the required documentation for when they start the account opening process. 

Every year, the impartial experts at Moneyfacts assess the flexibility, features and benefits of business bank accounts to identify the very best available in the market. Those that are top-rated receive a five-star award. In 2019, the business bank accounts that received a five-star rating were:

• Allied Irish Bank (GB) – Business Plus
• Bank of Ireland UK - Business Current (NI) - Agri Package
• Bank of Ireland UK - Business Current (NI) - Small Business Growth
• Bank of Ireland UK - Business Current (NI) - Small Business Start Up
• Bank of Scotland - Business Current Account
• Barclays Bank - Business Current Account -e-Payments Plan
• Barclays Bank - Business Current Account - Mixed Payments Plan
• Clydesdale Bank - Business Current Account - Business Tariff
• Cumberland BS - Business Current - Option B
• Danske Bank - Danske Small Business Digital
• First Trust Bank (NI) - Standard Business Current Account
• HSBC - Community Account - Churches, Executors, Administrators and Trustees
• HSBC - Business Current Account - Electronic Banking Tariff
• HSBC - Business Current Account - Small Business Tariff
• Lloyds Bank - Business Current Account
• NatWest - Community Account
• NatWest - Business Current Account - Standard Tariff
• NatWest - Business Foundation Account - Standard Tariff
• Royal Bank of Scotland - Community Account
• Royal Bank of Scotland - Business Current Account - Standard Tariff
• Royal Bank of Scotland - Business Foundation Account – Foundation
• Santander - 123 Business Current Account
• Santander - Business Current Account
• The Co-operative Bank - FSB Business Banking
• The Co-operative Bank - Business Directplus
• The Co-operative Bank - Business Current Account - Cash Tariff
• TSB - Business Account - Electronic Business Tariff
• TSB - Business Account - Business Extra Tariff
• Ulster Bank - Business Current Account
• Unity Trust Bank - Unity Current Account
• Unity Trust Bank - Unity Custom Account
• Yorkshire Bank - Business Current Account - Business Tariff

Most banks will include a condition in their personal account terms and conditions that the account is only for personal use and not for businesses. If you want to be 100% certain that you will not breach these conditions, then you should open a business bank account.

It is not a requirement of HMRC that businesses should have a separate business bank account, but they do require business owners to separate business and personal transactions.

While a limited company or partnership is a legal entity in its own right, if their directors have a poor credit history, then the ability to open a business bank account could be limited. However, there are guaranteed business bank accounts that do not run credit checks. Some examples of these include:

• Revolut Business Bank Account
• Cashplus Business Account
• CardOneMoney Account