Whether you're a sole trader or the director of a limited company, splitting your firm's financial affairs from your personal income is a smart move.
An easy to open business bank account means you can be up and running in as little as 15 minutes — with plenty of advantages.
As well as streamlining the process of paying staff and suppliers, many financial institutions offer time-saving invoicing tools, lines of credit, and support for international transactions.
Here, we'll walk you through the process from start to finish.
What is a Business Bank Account?
Just like a personal current account allows you to manage your everyday expenditure — from groceries to mortgage payments — business bank accounts are specifically designed to help you keep track of your venture's turnover and outgoings.
If you've set up a limited company with Companies House, it's a legal requirement for you to establish a dedicated bank account. Individuals who haven't incorporated can also access these services, and take some of the stress out of the accounting process.
Importance of Opening a Business Bank Account
Beyond preventing personal and business finances from becoming commingled, opening a dedicated account will look more professional in the eyes of your customers.
It'll help your venture to establish creditworthiness too, potentially making it easier for your venture to borrow funds and expand in the future.
As your business grows, you'll also find that these specialist accounts are better suited to handling a large number of transactions — with higher daily spending limits than consumer-facing alternatives.
What Do You Need to Open a Bank Account?
The requirements during the application process can vary slightly, but all business bank account providers will need to verify your identity in order to comply with the Know Your Customer and Anti-Money Laundering checks required by law.
For limited companies, personal details of all named directors must be supplied. This will include their full name, a scan of a valid passport or driving licence, and their home addresses for the past three years or so. The registration number from Companies House is also required.
The documents you need to open a bank account will vary slightly for other business types — such as if you're a sole trader, in a partnership, or opening an account on behalf of a club or charity.
Banks will also want to learn a little bit more about which industry your business is in, along with details about your estimated annual turnover. This helps ensure that you'll get an account that meets your firm's needs. Do bear in mind that some financial institutions are unwilling to provide their services to specific sectors like gambling and adult entertainment.
How to Open a Business Account in 3 Steps
There are perks when you open a bank account online, with immediate decisions and no danger of encountering long queues within a branch. Here's what you'll need to do.
1. Compare providers
Unlike personal current accounts, a monthly fee may be charged by business banking providers. Because of this, it's crucial to perform in-depth research and make sure you're getting your money's worth — or search for brands that offer a free bank account online if you're on a budget.
Check out independent reviews from other customers, and write down the features that matter most to you. Want competitive foreign exchange rates? Integrations with accounting software? The ability to accept contactless payments? An overdraft facility? Creating a wishlist now means you'll end up applying to a bank that'll meet your needs.
2. Fill out the application form
Once you've picked a provider and got all of your documents ready, you'll be able to complete an application form — either online, through the bank's mobile app, or personally in the branch. This process can take less than half an hour, but some of your paperwork may need to be verified by a member of staff, and that might take a few hours or days.
3. Wait for your login details
Once everything is finalised, the bank will post a debit card and PIN code to your address — and you'll receive login details for online banking. After receiving your sort code and account number, customers will be able to start making payments directly into your account too.
Who Can Open a Business Account in the UK?
The main requirement is that you're over 18 years of age and a resident of the UK. Some accounts may only be available to limited companies, and you may need to meet a minimum level of annual turnover to be eligible.
Proof that your business is operational — either through official bills or an online presence — are often requested during the application process, too.
How Long Does it Take to Open a Business Bank Account?
Straightforward applications involving sole traders, and limited companies where there is only one named director, typically take no longer than 30 minutes. Challenger banks often provide instant decisions on whether you're approved — but if further information is required, it may take 48 hours to receive confirmation.
If you're in a rush, make sure you apply to a financial institution that uses digital verification, meaning passports and other documents can be checked securely online.
How to Choose the Right Business Account for Your Needs
The choice of business bank accounts out there can be pretty overwhelming, but here are some top tips when comparing the products on offer:
- Understand their fees: As well as a monthly charge, you may need to pay a commission whenever you're sending and receiving funds.
- Check their track record: Businesses need reliability from their banking provider, so examine whether your preferred brand has suffered any outages recently.
- Verify transaction limits: Some banks cap the amount of money that can be transferred out of an account in a single day, and that might be problematic if you've got a higher turnover.
- Ask about their cash policy: If you regularly receive banknotes from customers, you'll want a secure and inexpensive way of depositing them into your account.
- Read customer service reviews: Banks that have a reputation for offering speedy assistance when something goes wrong come recommended.
How to Manage Your Business Bank Account
The amount of maintenance your business bank account will require depends on how big your company is. Keeping things organised will save you time when tax returns are due.
- Keep track of expenses: Take photographs of receipts and make sure each transaction is categorised.
- Request multiple debit cards: Some banks allow you to assign dedicated budgets to certain team members and departments.
- Watch out for unauthorised transactions: On a regular basis, make sure you scrutinise bank statements to check if there are any unapproved payments.
- Make your money work for you: Consider opening a business savings account so you can earn interest on surplus funds.
- Hire an accountant: Specialists will be able to give you advice on how to make your company as tax efficient as possible. Given corporation tax rates have now risen to up to 25%, this matters.
The Best Business Bank Accounts
| Provider | Score | Details |
|---|---|---|
| 1. Tide | ★★★★★ | Learn more |
| 2. Revolut Business | ★★★★★ | Learn more |
| 3. Barclays | ★★★★★ | Learn more |
| 4. Tide (Pro) | ★★★★★ | Learn more |
| 5. Metro Bank | ★★★★★ | Learn more |
Frequently Asked Questions
What is the minimum amount required to open a business bank account?
Some banks have no requirements when it comes to the amount of money that needs to be deposited when you open an account. However, you might need to offer details about how much revenue your business generates per year.
How do you set up a business bank account?
Choose the bank that meets your needs and follow their application process. Remember that there's some paperwork you'll need at the ready.
Why is it so difficult to open a business bank account in the UK?
Banks have to complete Know Your Customer and Anti-Money Laundering checks to make sure a business bank account is legitimate. While this may slow down the application process slightly, you'll only need to do this once.
