Business Current Accounts

A business currentaccount allows you to keep your personal and business finances and transactions separate. They are available to all types of businesses, including limited companies, partnerships and for people who are self-employed. They are available to business start-ups, through to more mature businesses.

They are like personal bank accounts, providing debit cards for purchases, allowing you to pay money in and make withdrawals. You can also apply for a business overdraft if you need short-term help with your cashflow.

However, their main difference is in their charging structure. Traditionally, business bank accounts came with a set of monthly and transactional fees, for example every time you paid in cash, issued a cheque or made a bank transfer a fee would be applied. However, in recent times, new competition has entered the market with more online business bank accounts now available. Many of these offer no or lower monthly fees and lower costs to operate your account. And, unlike many traditional business bank accounts, they also require no credit check, making them almost universally available and quick to open – albeit there will be no overdraft facility with these.

Your choice of business current account will depend on the accounts your business is eligible for (usually based on your business type), what you need the account to do and how much it will cost your business. You will also need to decide if you want to open an account from a high street bank or from an online provider of business bank accounts.

1. Check eligibility.
2. Review the key features and check the account can do what you need.
3. Check the costs of the account and find the most economical.
4. Make sure you can access your account when and where you need to.

Make sure the account does what you need – review the key features and services
Business bank accounts have a range of services available:

• Integration with accounting software and apps – this helps you to save time when managing your VAT returns or your expenses.
• Overdrafts – this lets you borrow money on a temporary basis, but they can come with costly fees and interest rates.
• Online banking services – this is available through your provider’s website or app.
• Branch and phone banking, which is usually available from high street banks so you can pay in cash and make withdrawals over the counter.
• Post Office banking service – if your bank is not near to you, then a Post Office might be, allowing you to pay cash or cheques into your business bank account.
• Cheque books – these allow you to make payments, and, although they are used less and less, they can be useful for larger payments or payments sent by post where an online transfer is not possible.
• Debit cards and prepaid cards – these allow you and your employees to spend money, and some cards allow you to set spending limits helping you to control expenses.
• Interest rates – these can be negative or positive depending on whether your business account is in credit or debit.

A business bank account typically consists of a series of monthly and transaction fees, overdraft interest rates and credit interest rates.
Monthly fees or standing charges range from £0 to £30, with a market average fee of high street banks at £6 per month.
Transaction fees for bank accounts are often charged for:

• Withdrawing cash
• Cheque payments or debits
• Receiving or making electronic payments
• Debit card purchases
• Receiving income from card payments
• Overdraft usage.

The charging structure of business bank accounts can also include tiered rates based on the level of income your deposit into the account each month and the number of payment cards you need for employees.
You can compare the cost of overdrafts by looking at the Equivalent Annual Rate (EAR). This is the percentage interest rate cost applied to any borrowing on your business overdraft.

Business bank accounts may offer different accounts to different business types:

• Sole trader
• Partnership
• Limited liability partnership
• Limited company
• Public limited company
• Not for profit organisation.

You can usually access your funds, make payments and transfers through internet banking, apps, by phone or in branch. Some of the accounts that are from online providers only will restrict you to accessing your account online only.

New online challengers have entered the business bank account market offering exclusively online banking services only for businesses, often through apps. They are responding to the needs of smaller businesses looking for easier and lower-cost ways to manage their business banking. The choice between a high street bank or an online business bank account will depend on the costs of their services, the importance of accessing a physical branch, the range of services you need, whether access to an overdraft is required and the importance of integrating with accountancy apps. How the two types of provider are regulated is also different, and this is also an important consideration when making your choice between the two.

The right bank account can make all the difference to the small business owner, but that doesn’t mean it’s easy to make the right decision. It’s important to consider things like fees and overdraft charges, as well as practical considerations such as app functionality and how seamlessly it can integrate into your business.

For a small business owner, things like fees and functionality will likely be key drivers behind your decision, which is why an account such as Starling may be worth considering. There are no monthly fees for a standard business account, but it comes with an option to add a Business Toolkit (with features such as instant invoicing, automated expense categorisation and VAT returns) for an extra monthly charge to help streamline your bookkeeping process.

Yet the very best business account for a small business will likely come down to your unique business requirements, which is why it’s so important to thoroughly compare the options. Our table above is a good place to start.

Find our more about starting a small business.

There are two different types of providers offering business banking apps: those that offer a prepaid business card and those offering broader services more like a traditional business bank account. The former is useful for helping to manage the day-to-day expenses of your business and often integrate with accountancy apps for business, making your invoicing and bookkeeping easier.

It’s also important to know that these types of online providers are regulated in a different way to the high street banks. For example, money held with these providers is not covered by the Financial Services Compensation Scheme (FSCS). Traditional banks will have this cover for most non-financial businesses. We explain more in our guide FSCS for businesses and charities. Those providers offering payment services such as direct debits and standing orders are required by UK regulation to keep all the monies of their accounts in a safeguarded account separate to the provider’s accounts. This means the money should be safe if the firm goes bust. These organisations may also not be based in the UK, but usually they will then have some form of agreement to operate in the UK using the registered status in their home nation. You may also find that if you have a complaint about the provider, you can not escalate this to the Financial Services Ombudsman.

• 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 or business owners 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.

Our comparison table above shows which accounts can be opened online. Most of the information can be completed online if the business bank account provider has its application forms integrated with Companies House and use credit reference agencies to check identities. However, you may also be asked for copies of ID and documents to prove the addresses of directors or business owners and copies of company contracts or website links if your business is a start-up.

Even established businesses that have used the same bank account for years can benefit from switching their bank account and reducing their overall banking costs. Some banks also sweeten the deal with switching invectives.
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.

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

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 with a high street bank could be limited. A guaranteed business bank account means you will be accepted no matter what your previous credit history. You will still need to meet their identity requirements and won’t be able to obtain a line of credit from the provider.
Read more in our guide to opening a business account with bad credit.

Business bank accounts can be managed in branch, by phone, online or by app. You can compare these choices on our best buy chart above or by searching our full table.

Many business bank accounts have a maximum balance in your account and, if this is exceeded, then you may be charged a fee.

Some business accounts allow international payments, but you will need to check the product features for this. You may find that using this increases your monthly account fee or there are additional transactional charges. You may find a specialist international money exchange company can offer better rates if you need to make payments abroad frequently.

Your account will need an International Bank Account Number (IBAN) to make international payments.

Every year, the impartial experts at Moneyfacts assess the flexibility, features and benefits of business bank accounts available from high street banks to identify the very best available in the market.

Find out who got the top business bank account ratings.

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.