Benefits of a business bank account

Business bank accounts may be mandatory for limited companies, but sole traders and freelancers can use their personal current account for business transactions unless their bank specifically prohibits this. However, even if your bank doesn’t insist you set up a business bank account, there are still plenty of reasons to keep your professional and personal finances separate.

What are the advantages of a business bank account?

Business bank accounts come with many benefits, including:

Simplified finances. Keeping your business and personal transactions separate makes managing your business finances much easier. This is because it:

• Allows you to track business incomings and outgoings easily, including Direct Debits, supplier details and customer card payments

• Streamlines your tax. This covers everything from making tax returns easier to set up and process to ensuring only your business transactions are checked if HMRC audits your accounts

• Makes it easy to incorporate your transactions into accounting, budgeting and financial forecasting software

Exclusive features: Gain access to helpful tools, such as:

• Invoicing tools built into your account

• Support for uploading receipts directly

• Categories to help organise spending

• Easy integration into accounting software

• Support for global payments services such as currency conversion or processing payments from overseas

Access to specialist support, such as a dedicated customer service department or individual account managers

Boosts your professional reputation. A business account helps you appear trustworthy and professional to both customers and suppliers. A more professional approach can also help elsewhere too, such as when looking to attract potential investment

Access to contacts and new opportunities. Some banks organise networking events and workshops that can deliver new contacts and potential partnerships

Builds a business credit rating. A business bank account allows your business to build its own independent credit rating, which in turn opens access to other business financial products such as business credit cards and business loans

Easy switching. As with personal accounts, switching business bank accounts is easy thanks to the Current Account Switch Service (CASS). The switch guarantee scheme covers 99% of UK current accounts across 50 banks and building societies.

What are the disadvantages of a business bank account?

The biggest drawback of business bank accounts is that they usually come with one or more fees attached. These may include one or more of the following:

• Monthly fee. Some banks charge a fixed fee for providing business services. This typically ranges from £3 to £50.

• Transaction fees. Certain types of transactions may come with charges attached – typically around 20p to £1 per transfer. These include withdrawing cash, issuing cheques, depositing cash and setting up bank transfers

• Limits. Some accounts may charge extra if you exceed a certain number of transactions or cash deposits.

The type of fees charged and how much they are depends on the individual provider and account type – many entry-level accounts are free, while others are free for an introductory period that can range from 3 to 30 months. This is why it’s important to compare business bank accounts to find the best fit for your business.

Is it worth getting a business bank account?

While it’s not mandatory for sole traders and freelancers to have separate accounts for their business transactions, in most cases, it’s a good idea to consider getting a business bank account. If you’re just starting out, you may be tempted to put it off until you reach a certain point – for example, when you switch from being a sole trader to a limited company. However, switching to a business account now will save you hassle further down the line and could help you expand more quickly. Remember, you can start with a basic business account, then upgrade your account with extra features as your business grows.

How to find a business bank account

Our comparison tool makes it quick and easy to see what business bank accounts are available. Find out more with our guide to setting up a new business bank account.