Do you need a business bank account? Which one is right for you?

Do you need a business bank account and what are the right questions to ask when choosing one?

While it may be tempting to start your new business venture without looking at the need for a business bank account dedicated to your enterprise, this might not be the best of ideas.

As your business grows and expands, it’s important to separate your business finances from your personal, day-to-day living.

New start-ups and part-time business owners have a habit of co-mingling their finances with their personal money, and while it may be the easiest, most convenient, and cheapest way of operating, it can have its drawbacks – especially further down the line.

‘Not having a separate business bank account means also storing up a lot of hassle for yourself in the future’

Any prospective business owner should treat their business as a business, regardless of whether it’s a part-time venture or not; while setting up a separate business bank account means additional bank fees and expenses, not having one means also storing up a lot of hassle for yourself in the future.

Many people already in business will vouch that keeping your business spending separate to your personal account ensures better manageability.

While many business current accounts available charge you for their services, there are others which waiver the charge as long as you pay in more than a certain amount each month.

Make sure to shop around for the best options to take advantage of the best deals – don’t assume that your personal bank will be the smartest choice for business use.

Of course, you do not have to sign up for a business bank account if you are either a sole trader or part of a partnership.

However, if you have a limited company you will need to have a dedicated business current account as it legally a separate entity and will need to be run separately.

Why you need a business bank account

If you’re still convinced that incorporating your business finances with your personal money is a good idea, here are some reasons why you should think again:

Having a hobby business

It’d be extremely difficult to prove to the Government that you are trying to run a legitimate business if your finances don’t reflect this.

It’s a rule that only true businesses can deduct business expenses – running your business with your personal account may seem as though it’s more of a hobby business (i.e., not-for-profit), and you may have to prove otherwise.

Filing your tax return

Trying to get your taxes in order can be a pain at the best of times, let alone when you’re trying to navigate your way through your personal finance statements to find the business-related expenses.

Personal transactions must remain completely separate from business ones, which is bound to be more complicated if you’ve combined them.

It would also be easy to miss deductions if you’re searching through your personal current account.

Whether it’s you, or an accountant, who completes your tax return, tidier, well-kept records will ensure that you can claim back every penny.

If you operate from a separate business bank account, you’ll be able to provide a clear audit trail, too.

Professionalism

If your business operates from its own separate business account you will be demonstrating complete professionalism – definitely a plus point when working with clients and attracting new business.

Remember, your business is a business, no matter how big it is, and treating it as such will give it the best chance of flourishing.

What is a business bank account?

Most banks offer the option to open a dedicated business bank account. You’ll have access to business-related financial products – such as loans, credit cards and overdrafts – to help you as your business needs change, whether that’s paying for everyday running costs or investing in your scale-up plans.

As well as keeping your business finances separate from your personal finances, a business bank account might include additional services such as:

  • Budgeting tools
  • Automated expense categorisation
  • Account management
  • Integration with accounting software

8 questions to ask when you’re looking for a business bank account

#1 – Does it offer free banking for joiners?

From high street to online-only banking, research the full range of business bank account options available and compare introductory offers.

Normally, new businesses get charge-free periods (e.g. first 12 or 18 months), possibly followed by discounted standard charges or fees for a fixed period. Less generous introductory deals are also available to businesses that want to switch banks.


What are the best business bank accounts in the UK? Make the right decision about your small business bank account, whether you’re just starting out or you’re more established


#2 – Does it offer an overdraft facility?

Having an overdraft facility can be incredibly useful – cash flow is the number one reason why businesses go under. However, this is not always available – especially with digital-only banks.

#3 – Will you have a business relationship manager?

Having somebody on the end of a phone or an email who understands your business, and preferably can make lending decisions themselves, is also helpful. Better that than an anonymous call centre and “computer says no.”

#4 – What is the quality of its mobile banking and online service?

One effect of the pandemic has been to drive us all to online and mobile banking. However, the user experience of high-street banking apps varies wildly.

According to the most recent Competition and Markets Authority February 2023 survey, Starling Bank was the top-ranked online and mobile business bank account.

#5 – Is it online only or does it have branches?

Digital banks have no branches at all, which can be frustrating if you have cash or cheques to pay in. Metro Bank, on the other hand, takes the opposite view and has grand foyers to encourage walk-ins. Indeed, Metro Bank ranked first for branch service in the latest CMA business banking survey.

Compare Metro Bank business banking on NerdWallet

#6 – Does it offer wider ‘how-to’ support?

Yorkshire Bank, for example, includes “how to” guides, online training modules, videos, tools and calculators. The tools and calculators include a start-up costs calculator, a break-even calculator, and a SWOT (strength, weaknesses, opportunities and threats) analysis template

#7 – How long does it take to open an account?

It usually takes between one and four weeks to open a business account, as the bank will need to carry out checks to confirm your identity, business and any directors registered to your company.

Several factors can speed up the process, such as:

  • If you’re already registered at the bank with a regular current account
  • If you’re a sole trader as opposed to an incorporated company
  • Certain banks provide a faster service – some banks provide their estimated processing periods online

#8 – Does it offer unlimited transactions?

Some business bank accounts only allow you to make a number of transactions each day. Other banks only allow one or two methods of making deposits or withdrawals. Best to go for a bank that allows unlimited transactions, as well as online and in-person credits and withdrawals.

What happens when my free banking period is over?

Businesses normally pay monthly bank account fees of anything between £5 and £12.50 for high-street banks once introductory periods are over.

Banks may also make a small charge every time your small business:

  • Withdraws cash
  • Pays by cheque
  • Pays in a cheque
  • Pays cash in
  • Pays by bank transfer
  • Uses or goes over its overdraft limit
  • Receives a card payment
  • Receives foreign currency payments from overseas

When researching which business bank account to open, find what the bank will charge you for and when. Some high-street banks offer smaller fees for online transactions, reflecting the absence of individual service involved.

What is the best business bank account?

According to the latest CMA business banking survey, Monzo and Starling Bank tied for first place as the banks most likely to be recommended by small business owners to other SMEs.

As we have seen, Starling Bank narrowly pipped Monzo to the post when it comes to online and mobile banking services.

However, Swedish bank Handelsbanken was voted best bank when it comes to arranging an overdraft or a business loan. And Handelsbanken also won top place for account management and how the bank communicates with customers.

More on business banking

Benefits of switching to the right business bank accountWe’ve teamed up with the Current Account Switch Service to explain the benefits of switching your business bank account

Get a business bank account quote today – click here.


Important Information – Some of the products promoted are from our banking and affiliate partners from whom we receive compensation. While we aim to feature some of the best products available, we cannot review every product on the market.


Ben Lobel

Delphine Hintz

Ben Lobel was the editor of SmallBusiness.co.uk from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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Business Bank Accounts

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