However, having all of your income and expenditure related to the business in a separate account makes it much easier when it's time to complete your tax return or simply assess how well your company is performing.
This might sound like an unnecessary expense but many banks now offer a free business current account, especially if you have been in operation for less than one year. We take a look at how to get a free business account and the restrictions that might apply.
Bank accounts for new businesses
By far the easiest way to qualify for fee free business banking is if you are a new company. Many providers offer no fee business bank accounts for those who have been in operation for less than 12 months.
There are often other stipulations too, such as your turnover must be below a certain limit - typically no more than £1 million although some providers won't allow more than £250,000 if you're looking for a free account online.
Many accounts also come with an automatic cancellation clause if you exceed your credit limits, meaning you will be immediately slapped with charges. It's therefore essential to make sure you run a tight ship.
Remember, you aren't restricted as to what bank you can apply to; you can hold a personal account with one provider and your business account with another. In fact this is a real advantage as it means you can compare free business bank accounts to get the one that suits you the most.
The fee-free period often runs between 1-2 years after which time you could be automatically switched to a fee-paying account. If you don't want this, you need to make sure you cancel the account and find another provider in time.
When "free" business banking costs more
At the time of writing, there is only one provider offering a free business bank account for life. This comes from the Co-operative Bank and to qualify you must be a member of the Federation of Small Businesses (FSB).
However, there is a substantial fee to join the FSB so unless you want to make use of the other benefits, joining the FSB purely to gain access to free banking would work out as a more expensive option!
It's not just new businesses that can find cheap introductory offers; there's plenty of providers offering deals. If you carry out a free business accounts comparison you will be able to see exactly what's available.
Although when you are looking for a business bank account,fees are certainly an attractive feature, there are many other factors which should also be taken into account. What rate is the overdraft facility charged at? Is there a cap on the deposits which can be made into the account before a fee is charged?
The Co-operative account which is free currently charges 40p per £100 for cash deposits in excess of the allowance (£4000 in cash per month). Every business will be different and it may be that other benefits offer better value than escaping a small account management fee.
One feature that is almost an essential for every small business owner is online access. Getting a account online offers not just great value for money but also the chance to sort out your finances right around the clock if you need to.
Finding the right business account for you
Free business current accounts are certainly the Holy Grail for most companies and getting a fee-free deal for as long as possible is top of the wish-list.
However, don't forget to take all factors into consideration - cost of transactions, ease of making deposits, ATM fees plus availability of charge or debit cards - to make sure you end up with one which is as cheap as possible for the way you run your business.
About our current accounts comparison
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We have commercial agreements with some of the companies in this comparison and get paid commission if we help you take out one of their products or services. Find out more here.
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