If your business has a large amount of residual cash currently sitting in your business account then you may want to look for a business savings account to get a better return on your funds.

That way if the unexpected happened, such a loss in sales, a loss of a key team member, or even a pandemic, you would have the necessary funds to get by till things improve.

What do I need to know about business savings accounts?

While having a business savings account can be a great way to make sure you are prepared for unexpected events that might impact your ability to trade or turn a profit, they can also help generate interest from your surplus funds or cash reserves.

With a business savings account, you can usually find a higher interest rate than with a standard business current account. This means they will offer a better return on your business's cash reserves.

When you compare and choose your business savings account, make sure to think about when you will need those funds, and how you would want to access the money.

If you are operating with a strong cash flow, you might be happy to lock your money into a fixed rate business bond. That way you can get a higher rate of interest (compared to an easy access savings account) in exchange for limited access to the funds for a set period of time. This usually ranges from one to five years, though longer and shorter terms are sometimes available.

If you think you will need to be able to access your business's savings at short notice - or you just want the peace of mind that you could if you needed to - then a business instant access or easy access account will be more likely to suit your needs.

If you want something in between, a business notice account will usually offer higher interest rates than an instant access or easy access account, but with the caveat that you will need to provide notice to withdraw funds. This notice period can range from seven days up to 180 days.

How to find the best business savings accounts

Finding the best home for your business assets is vital if you want your company to be as profitable as possible. Opening a high interest business savings account could be the answer, here's how to pick the best savings account for your business.

As with personal savings accounts, business savings accounts can come in a variety of different guises and picking the best business savings account will depend on your circumstances, for example whether you have a small business or a sole trader.

To find the best business savings account you'll need to think about what type of account is right for you.

  • Instant access account: If you are going to need to access the money at short notice then this type of account will allow you to freely deposit and withdraw funds at your convenience while paying you interest on the money held in the account.

  • Fixed term savings account: These accounts lock your funds away for set term, at a fixed interest rate, but offer a better return as a result. The terms for these can range from 1 to 5 years, during which you won't be able to withdraw your funds without paying a penalty.

How to choose the best business savings accounts account

When choosing a new business savings account, it's best to consider your options carefully before applying:

Returns vs flexibility: Typically, the more restrictive the savings account the higher the interest rate. You essentially pay for the flexibility by getting a lower interest rate. Think about what's important to you before you apply.

Access: Providers can vary in how you'll be able to operate your business savings account. This could be through online banking, post, phone or a combination of these.

While most providers give you access to internet banking these days, it isn't a given.

Minimum balance: Most banks or providers will require a minimum balance to open the account. This also means that you'll have to maintain this balance throughout, or you'll be charged a penalty if it falls below.

Can you use a personal savings account instead of a business savings account?

If you have a business that is a limited company, it means that the business its own entity and separate from your personal finances.

The only exception is if you're a sole trader. As a sole trader, you and your business are the same entity, so you'd be be able to use a personal savings account for your business.

How much is the minimum balance to open a business savings account?

The required minimum balance depends on the type of account you open.

  • Instant access accounts: These can be opened with as little as 1 as a starting balance.

  • Notice accounts: These typically require a minimum balance of 100.

  • Fixed term accounts: Minimum balances for these can be 1,000 and above.

Keep in mind that that these are general guidelines and minimum balances can vary depending on provider.

Business savings accounts FAQs


Are business savings accounts protected by the FSCS?


The Financial Services Compensation Scheme (FSCS) protects the bank deposits of small businesses up to 85,000.

The FSCS will also protect other types of business including unincorporated organisations, partnerships and sole traders. However, in the case of sole traders, personal accounts and business accounts are not treated as separate accounts and will come under a single claim.


Are there any restrictions to opening a business savings account?


Some business savings accounts are only available to certain types of business. For example, one type of account may only be eligible to a limited company or a sole trader, but not for a charity.


Do business savings accounts have withdrawal restrictions?


Yes. Fixed term savings accounts don't allow you to withdraw money without paying a penalty. Instant or easy access savings accounts have no restrictions. However with an easy access account, you may have to wait a few days before the money is transferred.

Last updated: 31 December 2020