Last Updated on: 22nd November 2023, 07:00 am
To help you choose the best business bank account for your business, BusinessMole has compiled a list of the top accounts, taking into account the fees, interest rates, and tools for business owners that can make things easier. Our resident financial expert Beth Haven has provided the best accounts below with a rating so you can open one in a jiffy along with five very crucial questions to think about when making this important decision.
Let’s get started…
You will need a business bank account, whether a new start-up or an established company. These are precisely what they sound like; bank accounts for businesses. Start-ups and new customers often get a fee-free period when they open a business account, which can last for around two years.
Just like with regular accounts, you can withdraw, deposit, and use a debit card with these types of accounts. However, a key difference is that you may be charged a fee per business transaction.
You can open a business card with most high street banks. Lloyds Bank, Royal Bank of Scotland, Santander, and the Co-Operative Bank are just a few of the big names in the financial industry that offer this function.
However, there are also some newer names offering attractive options. For instance, challenger banks Starling and Monzo are two other options, while e-money providers, such as Tide, also provide this option for businesses.
The Best Banks For Businesses In The UK
5 Important Questions About Your Business Bank Account
Question 1 – Can’t I Use My Personal Account?
If your business is a limited company, it must have its own business account separate from its owners and directors. If you are a sole trader, you can use your personal account, but it’s not ideal as HMRC will then look at personal and business income as one.
There is also the difficulty of banks stating in their terms that individual accounts should not be used for business functions.
Besides, if you are running an SME, there are plenty of benefits to using a business account. For instance, it is easier to work out your tax-deductible expenses, and it is more professional when invoicing, and several banks offer business supports to their clients.
They also offer you a chance to build up your business-related credit, which may allow you to obtain finance for your company in the future.
Question 2 – How Do I Open A Business Bank Account?
You must show proof of identity and address to open a business bank account. This is so the financial institution opening your account can do the necessary credit and security checks.
In this instance, a photo ID (passport, driver’s license, etc.) and an approved bill or statement (credit card, utility company, council tax bill, mortgage statement, etc.) should suffice.
You will also need details of the business. For instance, you will be required to provide the business’s legal and trading names, the date it was started, and an address and contact details. You may also need to give details of how many employees the company has and the tax ID number of the firm. If you are a sole trader, your National Insurance number or ‘unique tax reference’ will suffice in this instance.
Switching your business account isn’t a complex process. If you are an SME, charity, or part of a trust and have an annual turnover of less than £6.5m, with less than 50 employees, you can usually switch your account within a week.
Question 3. Is your business bank account protected?
An important question that many business owners ask is whether or not they are protected by the Financial Services Compensation Scheme (FSCS). This is where individuals and small businesses are shielded from losses should an authorised bank or building society fail.
Most business bank accounts are protected for deposit claims (money held in savings and current accounts), and there is no size restriction for companies in this regard. The FSCS will cover a small company for investment claims, as defined in section 382 of the Companies Act 2006. And for most general insurance claims, annual turnover must not exceed £1m, while for long-term insurance claims, there is no size test for companies.
The issue becomes more complex regarding e-money bank accounts, so we advise you to check the organisation you are considering with an industry expert.
More and more apps are now offering business bank accounts as part of their service. Many of these apps now offer similar packages to high street banks, with full UK account numbers and debit cards being offered.
Regarding regulation, some are better than others, with the likes of Starling and Monzo being UK-regulated and protected by the aforementioned FSCS.
Question 4 – What Business Bank Account Fees And Charges Should I Look Out For
When you open a business account, you will be charged for transactions that are often free with personal accounts. For instance, you could be charged for certain automated and manual payments, including standing orders, ATM withdrawals, and branch transactions. There are also charges associated with cross-border transactions, such as when you are using SEPA and SWIFT payments.
Your business can either have an authorised, or unauthorised overdraft. There are certain charges associated with both.
They include an arrangement fee, which is a fee paid to the bank when the overdraft is initialised. There is also a review fee when a bank reviews your limit after a period of time. And you should also consider any effective annual interest rate before arranging this type of credit. You may also be charged for other services, for example, the issuing of a banker’s cheque, audit replies, and a banker’s reference.
Question 5 – Can I use the Post Office for my business banking?
Most banks allow The Post Office network to be used by business bank account holders for basic transactions. This includes cash and cheque deposits, withdrawals, and change-giving.
Before arriving at your local Post Office, you should check which services are available from your bank, as it differs between organisations. For instance, Bank of Scotland, Barclays, Lloyds, and Starling customers can’t use the Post Office change-giving service, whereas Metro Bank customers can’t make cash withdrawals over the counter.