Understand why you need a business account

By law, limited companies have to have a business bank account. Sole traders are allowed to use personal ones. However, it’s often best to keep your own finances separate to your business ones for various reasons, including saving you time and effort when it comes to filing tax returns.

Business accounts also come with added features such as higher transaction limits, multiple cards for different team members and integration with accounts software.

Work out your banking needs and compare accounts

Some businesses will be more likely to take cash, requiring physical branches, while those who are online might only take card payments. It’s also worth considering the level of support you’ll need, or extra features such as account software integration.

Consider your growth plans too. A basic account might work now, but if you're planning to expand, you'll want features like multiple user access and higher transaction limits.

Features you might get from premium accounts could include:

Multiple debit cards
Higher transaction limits
Free software integration
Dedicated relationship managers
Lower foreign exchange rates

You should also check reviews, including ones about the banking app itself. It’s worth remembering that you might be using it every day to make payments, manage income, and keep track of business performance so you want it to be easy to use and make life simpler not more complicated.

Some industries might also need to accept money from overseas, hold deposits and process a higher number of transactions.

Watch out for fees

Extra features can cost more, so work out the extra monthly or yearly costs to see if the account you're looking at really does offer value. Fees to look out for include ones for:

Cash deposits
Card payments
Transfers
Being overdrawn.
Cash deposit fees

Online-only banks will often have lower fees but limited branch access.

Read the small print

Before signing up, read the small print, and make a note of all the charges. Business overdrafts might be tempting, but can often come with much higher interest rates than business loans.

Some business bank accounts might also limit the number or types of transactions, require set levels of activity, or ask you to keep a minimum deposit.

Applying for an account

To apply for a business bank account, you’ll need various documents to prove your identity and business legitimacy:

Proof of identity
Proof of address for you and your business
Business registration documents
Articles of association
And sometimes a business plan

Once you apply, you should be accepted within a few days or weeks.

Set up your banking properly

Once you’ve opened your account, it’s important to get it ready for use. That means setting up Direct Debits, and redirecting any rent or utility payments.

You might also want to connect your account to accounting software or an AI business app to help you manage things.

Monitor fees and performance

It’s important to keep track of how much the account is costing you each month. Switching is easy, and the Current Account Switch Service transfers Direct Debits and standing orders automatically.

Smaller and specialist business banking providers will often offer better service and with lower fees, so don’t feel like you must stick to the main high street banks.

Banking

Setting up online payments

Guide to payment processing fees

Understanding merchant services

How to choose a business bank account