Best Bank Accounts for Sole Traders & Self-Employed

As BRICS grows in strength and the British economy spiralling, sole traders need to take their expenses and business management into their own hands. 

Even a few years back, a GOV UK survey found over five million people in the United Kingdom were either entirely or partially supported by the online or gig economy.

While most people can make do with their personal checking account, having a separate business checking account may make managing your money much simpler.

A business checking account is not required by law but might be useful for sole proprietors. Separating your company and personal finances allows you to better track your income and expenses.

Finding the best account with the least expensive fees and overdraft charges for your small company might be difficult, but we have done the legwork for you.

With CompareBanks, compare the top UK high street and online business banks to get the best bank account for single traders and one-person firms.

At a Glance, Pros and Cons

Here’s your fast summary of the pros and cons of sole trader bank accounts.

Pros

✔️ Your company establishes a credit history —  Successfully maintaining a business bank account today will help you establish a solid credit profile for when you seek for a loan or credit card in the future. If you simply have a personal account, you may not be able to use any of the commercial or investment services.

✔️ You do not go against your bank's regulations —  Personal bank accounts often prohibit its holders from using them for commercial purposes in the endless fine print. If, for example, you are a freelance writer who has their pay deposited into the account, you probably will not encounter this. However, if you run a food truck and plan to conduct a high volume of cash transactions, the bank may shut your personal account or insist that you create a business account with them instead.

✔️ Time and effort spent on administration are reduced — (To an extent; see the second “con” below). When filing your tax return with HMRC, it will be easier if you have kept accurate records of your business's revenue and spending. Instead of digging through your personal finances to determine if that expensive restaurant meal was a company cost or just a group of friends out for brunch, all the relevant data and transactions can be seen in a single account. To elaborate, this is useful in case the HMRC conducts an audit of your company's accounts. If they do, everything is in one place and easily accessible without having to go into your own money as well.

Cons

❌️ More expensive at times — Compared to the ease with which you may open a cost-free individual account, they may end up costing you money. Most business accounts have a monthly cost, often approximately £5, however a new breed of digital accounts without fees has recently emerged. You may also be charged fees for making a deposit or withdrawal, as well as for some other types of activities.

❌️ Your two accounts mean double the administration — More cards, more statements, and more passwords means more work for you. But, as we said up above, the point is to take care of the paperwork now so that you do not have to worry about it as much when it comes time to file your taxes.

Best sole trader bank accounts — Reviews

Without further ado, let's discuss the most popular bank accounts for sole traders. All are accessible to people living in the UK and are governed by organisations like the Financial Services Compensation Scheme.

1. Revolut Business — Tailor-made business account for sole traders

You can simply open a Revolut Pro account inside the Revolut Retail app to handle your small company or side hustle.

There’s a lot of crossover between Revolut Pro and their “Revolut Business” offering. If you already have a Revolut Personal account, you may use it to access Revolut Pro, however our Revolut Business product requires a new account and is accessible via a new app and platform (the “Dashboard”).

Visit Revolut Business

If you already have a Revolut Personal account, you won't notice any substantial differences with your new Revolut Pro account.

Sign up for Revolut Pro if you are:

• a Revolut Personal user;
• are a sole trader (as opposed to a corporation) working alone;
• will only ever do business on your Revolut Pro account; and
• go through the first vetting process.

After upgrading to Revolut Pro, you must maintain these habits. They may have to shut shop if you don't. In cases where you have never used a certain Revolut Pro feature previously, they need to perform some extra verification steps before enabling it for you. 

A Revolut Pro account can be created and maintained without cost. If you already have a Personal account and are eligible for Pro, you can also upgrade at no cost.

The costs associated with your Pro account are identical to those of your Personal account. Your account type determines the exact costs associated with a Personal account.

If it costs you a pound, euro, or dollar (or the equivalent in your local currency) to make a certain sort of payment using your Personal account, sending that same payment using your Pro account will cost you the same amount. 

Your Pro account activity will count against your Personal account limit in the same way.

2. Cashplus Bank — Popular alternative UK sole trader bank accounts for those with poor credit

Cashplus is an alternative to standard bank accounts for businesses for your savings and earnings.

Cashplus is a digital-only challenger bank in the United Kingdom that has quickly become a market leader in the provision of banking and lending services to both individuals and businesses. 

Visit Cashplus Bank

The Financial Conduct Authority and the Prudential Regulation Authority have both approved Advanced Payment Solutions Ltd (APS), doing business as Cashplus Bank, to operate.

In the UK, Cashplus launched the first prepaid card for public use in 2005 and the first online business account with immediate approval in 2013. Cashplus received a full UK bank licence in February 2021 and claims to have serviced over 1.6 million clients as of the most recent count. 

Business Go and Business Extra are the two types of accounts provided by Cashplus for commercial use. Both may be synced with popular bookkeeping programs like Xero, QuickBooks, and Sage to automatically classify your expenditures and provide reports.

The Cashplus business account is useful for every company, regardless of its credit history, since it does not need a credit check. Business Creditbuilder is a feature of the premium Business Extra plan that helps you establish a credit history with little effort.

You must meet both of these requirements to create a Cashplus business account: (1) be a UK resident and (2) have a UK-based company and (3) be above the age of 18.

Cashplus accounts may be opened by sole proprietors, partnerships, limited liability companies, trustees, and other recognized company structures. Even if you or your company have a spotty credit history, you are welcome to apply.

3. Starling Bank — Award-winning UK sole trader bank accounts

Starling Bank offers a safe, free sole trader account, which is designed to help those who are self-employed or operate a business on the side save time and money.

You can apply for a free digital business account inside the app, link it to your accounting software, or buy a Sole Trader Toolkit to manage your finances online. A Starling Bank account might be yours if your company qualifies and your application is approved.

Visit Starling Bank

A free checking account for single proprietors is yours in a matter of minutes thanks to the bank's streamlined application procedure. There are no long lines to wait in or branches to visit (not that Starling has any). You can get down to work right away with our straightforward in-app registration and zero ongoing costs.

When you need help, Starling Bank's UK team is available around the clock. Use the app or the phone to communicate with a human staff that is headquartered in the United Kingdom. We are also working if you are.

And there are no additional charges, such as for international transactions, ATM withdrawals, or monthly maintenance. The fees and costs associated with using Starling Bank are clear and simple.

All in all, Starling simplifies the process of changing financial institutions. You may let Starling know you are ready to relocate with only a few clicks in the app, and we will do the rest. Their switching service is easy to use, takes no more than seven business days, and comes with a money-back guarantee in case anything goes wrong.

4. Monzo — Next-best sole trader bank account

Monzo company is a banking platform that streamlines the process of opening a company checking account and managing day-to-day finances.

This popular challenger bank has a lot to offer in terms of commercial banking services, including connectivity with accounting software and Tax Pots. Keep in mind that the complete set of capabilities is only available to those who pay the service's monthly Pro price.

Visit Monzo

Monzo, which will release its first business account in 2020, is a new player in the commercial banking sector. Deposits made by sole proprietors and limited liability businesses are insured by the Financial Services Compensation Scheme (FSCS) and may be used to purchase its products.

There are presently two varieties of Monzo's business account available. Monzo Business Lite is a free account with basic banking services, whereas Monzo Business Pro costs money but has many more options.

Monzo's free service is feature-rich and convenient for beginners. Monzo's company Lite checking account eliminates the cost of maintaining a separate checking account for company transactions. Regular purchases, recurring payments, and international use of the card are all free of charge.

You must be a lone proprietor or legally recognized business entity to open a Monzo business account. Partnerships (including limited liability partnerships) and nonprofits are two examples of company structures that Monzo does not accept. Monzo also does not work with businesses in the arms, gambling, and building sectors because of the increased risk involved. 

5. Tide — Established British sole trader bank accounts

Online financial management is made easier with a Tide Business Account for sole proprietors and limited liability corporations.

Tide is a mobile app, one of the many that are eating up the struggling traditional branches, that enables you to pay bills, submit invoices, and monitor your spending all from the convenience of your own pocket.

Visit Tide

Founded in 2015, Tide is a business banking service. It is a mobile-friendly digital fintech platform that seeks to streamline the account-opening and management processes for businesses in comparison to more conventional financial institutions.

Tide, which has over 450,000 subscribers as of this writing, provides business accounts to single proprietors, independent contractors, and limited liability corporations. Business owners may start with a free account and then upgrade to a premium plan with additional features as their needs change.

There is now a free business account, plus Tide Plus, Tide Pro, and Tide Cashback that cost money. Depending on the package you choose, you will have access to a range of useful extras.

The FCA oversees Tide, a digital business account provider whose ClearBank accounts may be covered by the FSCS. Please be aware that Tide does not provide FSCS protection for E-money accounts (for certain current clients).

Business owners may open a Tide account with or without a monthly charge, and there may also be transaction fees. Tide may be able to provide small businesses with financial options including business loans.

A business account with Tide may be created online. You will need to get the Tide app on your phone in order to apply. To create a Tide business account, download the app, enter your business and personal information, upload identification documentation, and wait for approval.

6. Metro Bank — Trustworthy sole trader bank account that UK people love

Having been nearly 150 years since a new main street bank opened in the UK, to challenge the likes of HSBC, Metro Bank has come out swinging.

No monthly account charge at Metro Bank if your balance is above £5,000, making it one of the most competitive options on the high street. If you maintain this level or above, you will also get 50 free transactions each month.

Visit Metro Bank

If your monthly deposits are less than £5,000, you will be charged £5 in addition to a transaction fee of £0.30 for each ATM withdrawal, automated credit, bill payment, check, direct card payment, direct debit, quicker payment, or standing order. This page provides a handy summary of Metro's fees, making them clear and understandable.

In an independent CMA assessment of business banking providers, 69% of SMEs rated Metro Bank as either very good or excellent, placing Metro Bank in second place.

Businesses that deal heavily with cash will appreciate the availability of banking services seven days a week. You can do all your banking online securely or on the go with Metro, and they even have a product called Business Insights that can help you analyse your financial flow.

Metro's costs are not only incredibly competitive, but they are also entirely clear, unlike the fees associated with other corporate bank accounts which may be complicated and take extensive deciphering. As long as your monthly amount is above £5,000, you will not be charged a fee for using your card up to the first 50 times.

This is the best business bank to use if your company has a modest number of transactions. However, at £0.30p per transaction, this account's fees might quickly mount up if you tend to make a lot of withdrawals and deposits.

7. Co-operative Bank — Top sole trader bank account for flexible pricing

If you keep £1,000 or more in your Business Directplus Current Account for the whole month, you will not be charged a monthly fee for the first 30 months of using the account.

If your balance is more than this threshold, your automatic credits, debits, and debit card transactions will all be free of charge.

Visit Co-operative Bank

For balances under £1,000, there is a monthly fee of £5 in addition to other fees for most withdrawals and deposits. This article summarises the co-op's fees in a way that is simple to grasp.

There is no maintenance charge or minimum balance required for the FSB Business Current Account. Deposits of more than £2,000 per month in cash are subject to a monthly fee of 75 pence per £100. A yearly cash rebate of £25 is offered to members of the Federation of Small Businesses.

Based on responses from 48 percent of small and medium-sized enterprises (SMEs), Co-op rated eleventh in an independent CMA assessment of business banking providers. Co-op has a flexible pricing system, so you may tailor your banking services to the needs of your company.

The Co-operative Bank has a strict moral code and will not engage in activities that are harmful to the environment or the community. It has also publicly pledged to defend animal welfare, advance social progress in Britain, and stand up for human rights. Since no other bank in this evaluation shares your beliefs, you may want to consider opening an account with them.

The FSB Business Current Account is a checking account tailored to the needs of small enterprises. This account is free for sole proprietors to use on a monthly basis, however there are fees associated with some types of transactions.

Despite adding restrictions to its agreements with fine print, the Co-operative Bank has won several accolades, including “Best Service from a Business Bank” from Business Moneyfacts.

8. Barclays — Top sole trader bank accounts provider for new startups

The “Start-up business account” from Barclays is designed for new companies that have been operating for less than a year.

After the first year is over, the monthly fees for the mixed transaction pricing are £6 and the e-Payments tariff is £6.50.

Barclays, established in 1690, is a major financial institution in the United Kingdom.

Visit Barclays

This is one of the most well-established financial institutions in the UK, and it offers a wide variety of business banking options suitable for every size company, from single proprietorships to multinational conglomerates.

Some industries (including agriculture and social housing) are not eligible, and neither are established single proprietors with a yearly income of up to £400,000. Additionally, in 2017, 2018, and 2019, Barclays was named “Business Start-up Bank of the Year”.

According to an independent CMA study of business banking providers, 59% of SMEs would refer Barclays to another firm. Barclays' Business Direct team is available from 7 a.m. to 8 p.m. (GMT -08:00), Monday through Friday, to give advice and assistance to small companies.

Both Barclays' online and mobile banking platforms are completely functional. Its product appeals to startups and young SMEs since it provides free day-to-day banking for a whole year. Barclays offers a special “loyalty reward” that reimburses a percentage of your fees based on your banking volume and tenure with the company.

If your annual revenue is £100,000, for instance, you will get a 5% refund the first year and a 10% refund the second through fifth year.

There are two possible tax rates for long-running one-man operations. For solo proprietors who accept a wide variety of payment kinds, the mixed tariff's reasonable costs on cash and other transaction types may be the best option. The e-Payments tariff is worth looking at if you process most of your payments online.

9. TSB — Top sole trader bank accounts for post office integrations

TSB is a British bank that is a subsidiary of the Spanish financial behemoth Sabadell. TSB offers one of the more unconventional packages in the study, with free card readers and business help from Enterprise Nation, a small company community that normally costs £10 per month, to name just a few of the unusual perks.

There are no transaction costs for 25 months, and that includes payments made using cash, checks, standing orders, and direct debits.

Visit TSB

TSB offers a substantial 25-month free banking term to new companies and Switchers. If you stay within your daily limit and do not go into an unplanned overdraft, it is completely free. After the first 25 months, the monthly fee is £5 unless your average monthly balance is above £10,000.

Square will provide you with a free portable card reader so you may accept credit card payments. Additionally, the first £1,000 in sales are processed free of charge.

Enterprise Nation and Funding Options are excellent sources of expert business assistance. Using your TSB debit card will cost you nothing. Get protection against fraud and a promise of compensation if you are the unwitting target of a scam.

TSB is a fantastic option for single proprietors that like branch service because of its convenient network of over 500 locations and access through Post Offices. You can still do banking transactions, even if you are unable to visit a branch, by using the telephone or the Internet.

10. Santander — Top business sole trader bank account with good fees

Give trusted coworkers or accountants access to your online banking account with a special managerial delegation option. Your firm will get 18 months of free business banking if it has been open for less than 12 months, followed by £7.50 monthly fees.

Established firms may open a Santander 1|2|3 Business Current Account for only £5 per month and get cashback based on their sales (£100 for sales under £200,000, £200 for sales between £200,000 and £300,000, and £300,000 and above).

Visit Santander

Santander is a relatively new brand on the high street, but the banks it has acquired in the UK — Abbey National, Bradford & Bingley, and Alliance & Leicester — give it a lengthy history there.

Despite it being named the Best Business Current Account Provider by one large banking review site, the bank has been assessed by the J. as having among the poorest customer service records of any UK bank.

Satisfaction with Retail Banking Services in the United Kingdom, 2007-2011, by D. Power. However, the bank seems to have improved its product and customer service approach, as it was ranked seventh for customer service in a 2019 Which? Survey of customers for monetary considerations.

All in all, Santander provides a conventional option for business banking on the main street. If your business has been open for less than 12 months, you will get 18 months free. Santander is a reliable option for most single proprietors due to its cheap pricing.

11. NatWest — Well-recognised sole trader bank accounts

Since March of 2000, the RBS group has included the well-known British high street bank NatWest. At first glance, this may have appeared like any other business banking offer from a major high street bank. There are, however, a few significant distinctions.

To begin, the monthly fee charged by NatWest is subject to a minimum of £5. The monthly fee will cover any transaction costs up to £5. Check the NatWest account fees against the cost of a set banking fee to determine whether this is a cost-saving move for your company.

Visit NatWest

You may choose between two NatWest products based on when you first opened your account. The ‘Start-Up' package offers new sole proprietors 18 months of free basic banking services if their annual revenue is less than £1 million. An everyday account is available to established companies for a minimum of £5 per month.

Each account comes with a NatWest business credit card for 12 months at no additional cost (normally £30). FreeAgent, a highly regarded online accounting service, will be made available to you. For about £20 per month, this service may streamline your tax filing, invoicing, and record-keeping as a single proprietor.

Second, NatWest offers several perks that it shares with its consumers. With the help of the acclaimed FreeAgent software, filing taxes as a single proprietor will be a breeze. If you are looking to go global with your business, you will be happy to know that DHL will be offering you a 60% discount on international shipping for a whole year.

Best sole trader bank accounts — Buying Guide

In this section, we will go into the more pragmatic aspects of sole trading bank accounts. If you are cognizant of the debt component and are looking for ways to reduce or get rid of it, the next section may be of assistance.

What is a sole trader account?

Since a single proprietor is not considered to be distinct from their firm, there is no legal obligation for them to have a separate business checking account. There are, nevertheless, benefits to separating company and personal funds.

If you are a sole proprietor operating out of a personal checking account, you will need to be more specific when documenting company and personal expenditures. Time and effort will be required to adjust how financial transactions are recorded.

It will save you time and effort when it comes time to file your yearly accounts and Self Assessment Tax Return if you maintain a separate bank account for your company.

What are the costs?

There may be monthly and per-transaction costs associated with single proprietor bank accounts, just as there are with other types of corporate bank accounts. While the exact amount varies from account to account, ordinary transaction costs are typically around £1 and monthly maintenance fees range from £3 to £12.50.

While many traditional banks do provide free banking periods, some only charge for the services you actually use, and others, like Starling, are fully free forever.

Many company accounts are designed specifically for solitary proprietors, while most can accommodate them. These often have balance requirements or other restrictions. Accounts for sole proprietors often only allow for one user, since there is no need for numerous users.

• Related Guide: ISAs

Tell me the process of opening a sole trader bank account

Business checking accounts are available to both new and existing companies. Banks often charge a monthly or yearly fee for their business clientele, however many will waive these charges for up to two years for new clients and startups.

Similar to individual bank accounts, business checking accounts allow for deposits, savings, withdrawals, debit card transactions, and overdraft protection. 

Most financial institutions will assess a fee for each business transaction you conduct, including cash deposits, cheque issuance, direct debits, standing orders, and wire transfers. 

As a single proprietor, you are not required by law to have a separate bank account for your firm. If you are a lone proprietor, opening a business bank account is often easy and may be done fast online. 

The following information is required for most accounts:

• A government-issued photo ID, such as a driver's licence or passport.
• A recent utility bill or bank statement should suffice as proof of residence.
• Details about your company, including what you sell and whether or not you have a storefront.

Ten easy steps to making a budget for your company…

Imagine who you could be, then aim single-mindedly at that. Jordan Peterson

You will need to make yearly and quarterly budgets someday, but for now, a simple monthly plan will do. Create a keystone habit (one that aids in the development of other habits) by making a monthly budget a part of your routine. This is the most painless approach to achieving your objective of financial mastery.

An example corporate budget is as follows:

#1. Separate your company and personal finances.

When company and personal cash are combined, things inevitably get complicated. You can maintain more order in your financial life by separating your personal and professional finances. Establishing a business account does not need incorporating or obtaining a tax identification number. Using only your SSN, you may register as a single owner and get a company bank account.

One piece of advice is to put all of your company money into a separate business account. Do not ever use this money for anything other than business purposes. And use it only for company costs.

Instead of using your own funds for work purposes, open a separate corporate checking account and use it instead. This will help you stay organised and will also reveal whether or not you are making a profit.

#2. Pick a method of financial planning.

Make a decision as to the format in which your budget will be stored, whether it is an app like EveryDollar, an Excel spreadsheet, or some other accounting program. And when your company expands, you should seek the advice of a tax expert. 

A profit and loss (P&L) statement may be generated for you by a tax preparer or certified public accountant. This is only a retrospective remark that allows you to assess the last few weeks, months, or years. However, a company budget will help you plan for the future despite the fact that it cannot predict what will occur.

#3. Know your projected monthly earnings.

To know where your earnings stand, all you need is a budget that predicts your revenue and expenditures. Income (or revenue) from the company is the starting point for every business budget, just as it is for a personal budget. Earnings from sales of goods or provision of services constitute revenue.

If your company has been profitable for some time, you may extrapolate future profits by reviewing past P&L statements. If you are just starting out, you will need to estimate how much money you will make this month.

#4. Know your expenses, organise into categories.

It is helpful to categorise your large list of costs after you have compiled it. If you break down your spending into manageable categories, you will not be as overwhelmed by all the money.

The following three buckets may be used to organise your spending:

1. Rent, insurance, and subscriptions are all examples of fixed expenditures that must be paid regularly.
2. Some expenditures, such as transportation and utility bills, fluctuate from one month to the next. It is also possible to incur extra costs due to the season, such as stocking up on extra supplies before the holidays.
3. Expenses that are not recurring include things like going to a conference or buying new equipment. Monthly budget planning will help you determine whether further savings are required.

#5. Make sure you know your net & gross profits.

Accounting, in its simplest form, is the process of keeping track of money coming in and going out of a business to determine whether or not a profit was made. Here's your opportunity to evaluate past expenditures to determine whether it was in line with your plans.

Therefore, you may better manage your company's finances by keeping meticulous financial records. (You can monitor your progress toward your targets with some basic Key Performance Indicators.)

To calculate net profit, add up all remaining monthly costs and deduct them from gross profit. The amount of money left over after paying all of your company' expenses is known as the net profit. Your net profit is like a report card that shows you how well your firm is doing.

#6. Group earnings.

At this stage, you will separate your total earnings into other sections:

• Taxes
• Short-term savings
• Future outlays and investments
• Paychecks
• Giving back 

This is where the fun begins. The greatest benefit of having a successful company is not receiving, but rather giving. Give away some of your goods, services, and earnings as you go. Demonstrate and promote a culture of giving at all times. That is the defining characteristic of happy, fulfilled individuals whose businesses they run from the heart.

#7. Keep a regular budget review schedule.

Making a plan is one thing, but seeing it through is another. If you want to make sure you are sticking to your monthly budget, it is a good idea to check in with yourself every day or week. Review your spending habits for the month and adjust as necessary based on whether you spent more or less than expected in any given area. Next month's budget is your chance to make changes!

#8. Keep it up.

It is frustrating to make mistakes, make educated guesses that turn out to be inaccurate, or spend an entire budget when you are just starting out. But keep trying. It will take a few months to iron out the wrinkles.

So, stick at it, maintain a tight rein on your finances, and keep checking back. Quickly, you will gain self-assurance and the ability to make mission-sustaining business choices when you are in charge of allocating funds.

Leading sole trader bank accounts for small businesses: The Verdict

Making payments, receiving payments, and using a debit card are all options with a business checking account, just as they are with a personal one. There are many benefits to creating a new account, but there are also some drawbacks to consider.

The major retail chains often provide many options for corporate checking and savings accounts. Some examples of these include Barclays, Bank of Scotland, HSBC, Clydesdale Bank, Metro Bank, Lloyds Bank, Royal Bank of Scotland, NatWest, the Co-operative Bank, Santander, TSB, and Yorkshire Bank.

E-money companies like Revolut or Tide and challenger banks like Monzo and Starling also compete in this space.

As always, self-awareness is key.

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