What is a business instant access savings account?
Hopefully your business makes enough money to stay afloat - and if it makes a little more, even better. Managing your business' cash reserves is vital if you're to stay in the game.
Simply putting those profits into a business current account probably won't earn you much interest, if any at all, but it does allow you to retain access to the funds.
On the other hand a business savings account will see those funds earning money, even if you're putting them aside 'just in case', but they'll be untouchable for a period.
Access accounts occupy a middle-ground. For known, shorter term goals such as an upcoming purchase or tax bills, a business savings account with access will keep your funds earning interest until you need them - then you can simply dip into those savings penalty-free.
Are business savings accounts instant access suitable for you?
A lot of the accounts you'll find are designed for small businesses and may come with restrictions based on your turnover, assets value or size (e.g. number of employees), so bear this in mind to make sure your company is eligible for each and every account you're interested in.
What else to consider
There should be lots of accounts to choose from, so you'll need to narrow them down by looking into the following:
You may be able to open and manage your savings account by post, telephone, internet, or in a branch, so make sure you go with whatever suits you most. Being more flexible on this will give you a greater choice of available accounts.
Should you need to regularly add and remove funds from the account, you'll need an account that gives you access to your funds. The general rule is that the greater the access allowed, the lower your rates will be; hence instant access business savings rates are generally lower than if you're prepared to tie up the funds in a bond or notice account.
However, you may be able to compromise on one or more aspects of your account to boost its rates, e.g. limiting the withdrawals you can make or choosing an account that still offers free withdrawals but requires you to give a number of weeks' notice first.
This means it will be especially important to compare the available accounts to make sure you get the best rate you can. One alternative is to open two separate business accounts in tandem. Go with one you can manage easily and that has no withdrawal restrictions, which you could use as a current account. Then open a separate less flexible savings account with a decent interest rate - you can put in any money you intend to keep hold of longer.
You'll want to look for a high rate, but make sure the best ones really are all they seem.
Some accounts are offered with bonus interest rates - these will be high for a set period (usually a year), but then go down significantly afterwards. Only go for one of these accounts if you're happy to search for something new when the rate changes.
You should also check if you have to maintain a minimum balance to earn the headline rate, as you'll earn little or no interest if you don't.
What about tax?
UK banks usually automatically deduct tax from any interest earned on savings accounts at 20%. The tax your business needs to pay may be more than this, in which case it will be up to you to pay anything extra when you settle your tax bill each year.
However, some business accounts are based offshore - these often pay your interest gross, so you'll have to arrange to pay the tax on them yourself.
It might be worth getting advice from an accountant to make sure you pay your tax correctly.
Is your money protected in the best business deposit accounts?
After the banking sector's crisis of confidence a few years ago, you might be worried about just how safe your money is in a savings account - the nightmare scenario for any business owner is that the company's assets or profits could be lost through no fault of their own.
As long as the bank or building society is regulated by the Financial Conduct Authority, the Financial Services Compensation Scheme (FSCS) will protect funds held in savings or bank accounts up to £50,000.
This means it's good practice to try to spread your cash around, making sure you don't have more than £50,000 with any one institution, and your business will be protected by the scheme if it meets at least two of the following criteria:
Turnover under £6.5 million
Balance sheet under £3.26 million
Fewer than 50 employees
Compare instant access business savings accounts
When you know what you're looking for, check out our business savings accounts comparison for a selection of accounts that suit the needs of your business and its cash flow. When you've found a few with appropriate terms, look at the interest rates and pick the best business instant savings account.
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