They say you should never mix business with pleasure, yet the owners of new start-ups are often guilty of holding company cash in their personal current account.
It is easy to understand why.
Money can be tight in the early stages of running a business so setting up a dedicated account for your enterprise would mean additional bank fees and expenses.
Unlike personal bank accounts, which are typically free of costs if you are in credit, business accounts usually charge per transaction on top of a monthly account fee.
Keeping your business banking separate from your personal account means it will be far easier for you to manage cashflow, as well as work out your tax liability at the end of the year
However, even if you are not legally obliged to, keeping the two separate makes it easier to manage cash flow and calculate tax liabilities at the end of each tax year.
At their simplest, business accounts offer a cheque and paying-in book. But many offer addition perks like interest-free in credit balance or 18 months free banking, to secure your custom.
When comparing accounts it is important to look at both the rewards and charges while bearing in mind how you will use it to pick one that is right for you.
To help you on your way, This is Money lists the best small business accounts in market. Here’s how they compare.
Check the table for the brief details and read our full round-up of each accounts’ features below.
|Santander||HSBC||NatWest||Barclays||Yorkshire Bank/Clydesdale Bank||Metro Bank||*Starling Bank||**Tide|
|Monthly account charge||£7.50 and £40 depending on monthly cash deposit withdrawal limits||£5.50||£5 minimum||£6 for ‘Mixed Payments’ plan and £6.50 for ‘e-Payments’ plan||£5||£0 for balance > £5,000 £5 for balances below £5,000.||£0||£0|
|Cash & cheque deposits||Yes||Yes||Yes||Yes||Yes||Yes||No||No|
|FSCS Deposit protection||Yes||Yes||Yes||Yes||Yes||Yes||Yes||No|
|UK ATM fees||Included in monthly fee||Separate charge||Separate charge||Included in monthly fee||Included in monthly fee||Yes||N/A||N/A|
|*The account is only available through a mobile app.
**The account is available through Tide’s website and mobile app.
Business banking basics
Do I need a business account?
Owners of limited companies are required to have a business account by law.
If you are a sole trader then you can use your personal account for both business and non-business transactions, or set up a second personal bank account for business purposes.
Read our five of the best bank accounts round-up to check the best of these.
However, not all banks allow this, so it is important to have a look at the fine print of your account details.
If there is a lot money running through your account, your bank may threaten to close your account and tell you to open a business account.
Why open a business account
There are two major reasons why you’d want to open a business account.
Firstly, allowable expenses – such as some travel costs – are tax deductible but making accurate calculations for these for your tax returns can be difficult if they are mingled with personal costs.
Secondly, a dedicated bank account can make your start-up appear more professional, as customers can make payments to an account held in your business name rather than your own name.
Some people can be finicky about paying into non-business accounts.
What do I need to open a business bank account?
You can only open a business account if you are aged 18 or even. You’ll typically be asked to prove your identity and address and provide other documents depending on what type of business yours is.
How much can I pay into my business account?
The minimum and maximum balance varies from bank to bank. You may be charged a fee if your balance gets too high or low.
How long does it take to get a business account?
Online applications should take no longer than 10 days to process.
How do I switch my business account?
You can switch your business account within 7 working days through the Current Account Switch Services between participating banks or building societies.
To do so, you must have fewer than 50 employees and an annual turnover not exceeding £6.5 million.
The owners of larger businesses can ask their new bank to arrange this.
Are deposits protected by the FSCS?
Financial Services Compensation Scheme (FSCS) protects consumers when financial services firms fail.
The small business threshold for FSCS is an annual turnover of less than £1million.
FSCS does not apply to all business types – check the FSCS website for eligibility.
Not all banks trading in the UK and offering business bank accounts are members of the FSCS and hold a ‘compensation licence’.
All banks listed in this article, with the exception of Tide, subscribe to the FSCS safety net.
Santander Start-up Business Current Account
Monthly account charge: Four different monthly fees between £7.50 and £40 depending on monthly cash deposit withdrawal limits (you can choose from £1,000 to £10,000).
- Up to 18 months of free day-to-day banking.
- 0.1 per cent gross AER on any credit balances.
- Arranged overdraft of up to £25,000.
The account offers up to 18 months of free banking to customers in their first year of trading – as long as they have no more than two directors, owners or partners.
While 12 months free comes as standard, account holders who become a 1|2|3 World or Santander Select customer will get an extra six months of free banking.
The account can be managed at Santander cash machines and participating Post Offices branches nationwide, as well as through online and mobile banking.
Interest is paid at 0.1 per cent gross AER on any credit balances.
The small print
After this free business banking period, you’ll automatically see your account revert to the ‘Business Bank Account’, which has a £7.50 monthly charge.
This will allow you to deposit up to £1,000 in cash per month and includes all your standard day-to-day banking. If you go over your monthly cash deposit limit, you’ll pay 50p per £100 cash deposited.
Each monthly fee also includes all other standard transactions, which are unlimited, such as cheque deposits, Bacs direct credits, debit card payments, standing orders, direct debits, bill payments, and cash withdrawals (at Santander or LINK network machines) which are limited to £500 per day.
You can apply for a business overdraft with the account and – if accepted – borrow from £500 to £25,000. An arranged overdraft comes with an annual fee of 1 per cent, with a minimum fee of £50.
Santander, which has Jessica Ennis as a brand ambassador, offers up to 18 months of free banking to customers in their first year of trading
HSBC Business Bank Account
Monthly account charge: £5.50
- 18 months’ free day-to-day banking.
- ‘Best Tariff Promise’ for businesses with up to £2million turnover with a business current account.
This account is available to businesses with turnover of less than £500,000. It offers 18 months of free banking, so there’s no maintenance fee or charges applicable to its standard tariff to pay.
After the free 18 months, account holders move to a fixed price period, which costs £5.50 per month for 12 months.
There is a free knowledge centre which offers tips and advice for growing your business.
There is a choice between two tariff options, ‘Small Business’ and ‘Electronic Banking’ once the free-period is up, and a ‘Best Tariff Promise’ which means the bank reviews your account each year to make sure you are are on the cheapest tariff.
The small print
In the fixed price year, you will be able to deposit a maximum of £3,000 in cash per month, with a charge of 50p per £100 levied after that.
When the fixed price period ends, you’ll move onto the tariff that you choose when you open your account and pay an account maintenance fee of £5.50 per month plus charges depending on the services you use.
The ‘Electronic Banking’ plan is for businesses that prefer to use telephone or internet banking. It also costs £5.50 per month.
When the fixed price period is up, the two tariffs still cost £5.50 a month, but more of the services under the ‘Small Business’ tariff come with a fee, such as withdrawing cash at branch or from an ATM.
The cash paid in through a branch costs 0.60 per cent under the ‘Small Business’ tariff and one per cent of value deposited with the ‘Electronic Banking’ tariff.
Depositing cheques through branches costs 30p and 40p respectively.
ATM cash withdrawals are free of charge under the ‘Electronic Banking’ tariff, but the bank levies a fee of 0.45 per cent on the amount withdrawn.
Those with a ‘Small Business’ tariff are charged 25p per withdrawal on top of 0.45 per cent of the value withdrawn.
NatWest Business Current Account – Startup package
Monthly account charge: Minimum charge of £5
- 18 months’ free day-to-day banking
- Arranged fee-free £500 overdraft
The account offers 18 month free banking for firms in their first year of trading with a projected or existing annual turnover not exceeding £1 million.
If you applied for a £500 overdraft limit and were successful, there wouldn’t be an arrangement fee for the first 12 months. Typically this would be £50. Unarranged borrowing through the current account will incur a fee.
Customers can also get NatWest’s Business Credit Card fee free for the first 12 months (normally £32 per card issued).
The offer is open to those who make a NatWest Business Credit Card application within six months of opening the business current account.
The small print
A minimum monthly charge of £5.
Automated payments like direct debits, standing orders and ATM withdrawals come with a charge of 35p per item, while cash payments (cash paid in at branches and manual payments (cheques and other debits paid in branch) are levied at 70p per £100 and 70p per item respectively.
Barclays Start-up Business Account
Monthly account charge: £6 for ‘Mixed Payments’ plan and £6.50 for ‘e-Payments’ plan
- 12 months free day-to-day business banking.
- Loyalty reward.
Barclays offers free banking for the first year to businesses less than a year old. This is less than others offer but its account comes with some interesting loyalty perks and a choice of fee structures depending on how you use it.
The ‘Loyalty Reward’ offers an increasing proportion of your charges back each month depending on how long you have held your account.
Customers of Barclay’s business account receive an increasing proportion of their charges back each month depending on how long they’ve held their account
For example those with an annual turnover under £100,000 get 5 per cent back in years one to five, 10 per cent in years five to 15 and 15 back for anything over 15 years. The amounts also increase depending on the size of your business.
It comes with either a ‘Mixed Payments’ plan (£6) – for businesses that mainly use cash and cheques and an ‘e-Payments’ plan (£6.50) – for those more likely to do most of their banking online with electronic payments.
The small print
If you choose the ‘e-Payments’ option you won’t pay anything to make electronic payments but cash and cheque payments cost £1.50 per £100.
The mixed plan charges 90p per £100 for cash payments, 65p for cheques and 35p for electronic payments.
There is a useful calculator on the site to help you find out which will be most cost effective for your business. It will also review your account each year and notify you if switching plan could save you money.
Yorkshire Bank and Clydesdale Bank
Monthly account charge: £5
- 25 months’ free day-to-day banking.
- Overdraft of up to £250,000 – subject to status.
The account is offered by both Yorkshire Bank and Clydesdale Bank, which are both run by CYBG Group.
It is open to start ups in its first year of trading or new small businesses with a turnover of less than £2 million switching their main business current account.
During the first 25 months, there is no monthly account fee or service charges for direct debit or other automated transactions, cash deposits and withdrawals up to £250,000 per year.
After the 25-month offer period, the account reverts to the regular business banking tariff, which costs £5 per month.
From then on, cash paid in or out of your account will cost 65p per £100. Paying in a cheque costs 30p, while automated credits and debits will also set you back 30p each time.
The account offers an overdraft facility of up to £250,000 depending on your circumstances with an individual interest rate.
Metro Bank Business Current Account
Metro Bank’s branches are open seven days a week
Monthly account charge: £0 if balance stays above £5,000 for any whole month. £5 for balances below £5,000.
- No charge for non-sterling transactions or purchases in many European countries
- Business manager as a key point of contact.
- Branches open 7 days a week
This account is available to start-ups with an annual turnover or balance sheet value of up to £2 million for businesses.
It does not charge fees for non-sterling transactions or purchases in countries that are part of the Single European Payments Area including France, Germany and Italy.
Account holders will be given a business manager as a key point of contact and are able to go into their local Metro Bank branch to discuss their account seven days a week.
The small print
There’s no monthly charge for this account as long as the balance remains above £5,000 every day within the month, otherwise you will pay the monthly fee of £5.
Up to 50 selected transactions, including cash and cheque deposits as well as ATM withdrawals, are free each month. The bank levies 30p each thereafter.
The 30p charge applies to these transactions on balances below £5,000 from the offset.
Digital only start-up accounts from start-up banks
Monthly charge: £0
- No monthly charges
- Same day set up
- Accountancy software integration
The account, is the new kid on the block, having only launched in March this year, and is currently in testing phase.
It is restricted to limited company entrepreneurs who have a limited company and are the only person with significant control over it.
The bank says customers can download the app and apply for an account in minutes.
Micro businesses – those with 10 employees or less with turnover of less than £1.7million- are exempt from a monthly subscription charge.
Starling Bank also does not charge on electronic payments, domestic transfers, or ATM withdrawals.
The small print
Starling Bank has no branches and the account can only be opened through its smartphone app.
The account does not facilitate cash and cheques deposits at present, but there are plans to implement these features in the future.
To add funds to the account, users must transfer from another account.
Digital first: both Starling Bank and Tide allow customers to open a business account using their mobile phones within minutes
Customers whose business is larger than the definition of micro-enterprise will not be charged a monthly account keeping fee during the testing period, however will be charged a monthly fee in the future.
Arranged overdrafts are not available for this account but the firm said it might implement this in the future.
It charges 15 per cent on the overdrawn amount but waives interest charges less than 10p at the end of any given month.
Monthly charge: £0.
- Business loans of up to £150,000
- No additional charges for card use abroad
- Accountancy software integration
Tide is a purely digital banking app which claims to allow customers to open an account in less than five minutes using their mobile phones.
Like with the Starling Bank business account, users are required to transfer cash from another account to add funds.
Tide says many of its members deposit these funds into other accounts and transfer them to their Tide accounts.
It boasts integrations with accountancy solution firms Xero and FreeAgent and allows users to automatically tag all income and expenditure with labels of their choice.
Tide customers can also get access to up to £150,000 from online lender iwoca through the account by answering three questions.
The small print
Like Starling Bank, Tide does not have any branches but you can open an account through its website or smartphone app.
Tide does not accept cash or cheques deposits at present but it aims to facilitate cash deposits in the ‘near future.’
The company does not have a banking licence and is not covered by the FSCS. However, account balances are kept in a protected ‘Safeguarding’ account – meaning that they can never be loaned out to other customers.
The account charges 20p per transfer and £1 for cash withdrawals at ATMs.
The maximum account balance is £25,000 for sole traders and £100,000 for limited businesses.
Small Business Essentials