Many or all of the products and brands we promote and feature including our ‘Partner Spotlights’ are from our partners who compensate us. However, this does not influence our editorial opinion found in articles, reviews and our ‘Best’ tables. Our opinion is our own. Read more on our methodology here.
Table of Contents
- Do you need a business bank account?
- Does a sole trader need a business bank account?
- Does my limited company need a business bank account?
- Does my partnership need a business bank account?
- Can I use my personal account for business banking?
- Can my business have multiple bank accounts?
- What do I need to open a business bank account?
- Choosing a business bank account
- Limited companies, limited liability partnerships and limited partnerships must have a business bank account
- Sole traders and general partnerships can sometimes use personal accounts for business, but it might not be a good idea
- Business bank accounts make tackling tax returns much easier
A business bank account can make handling your business’s finances feel like less of a chore.
The tools and features included in a business bank account are often unavailable to personal banking customers and are designed to help businesses like yours tackle every financial hurdle you encounter. For many businesses, these types of bank accounts are also a legal requirement.
» MORE: What is a business bank account?
Promotion
Virgin M Account for Business
For businesses with a turnover of less than £1 million, the M Account for Business gives you free day-to-day online business banking for all your everyday needs.
Do you need a business bank account?
You NEED a business bank account if…
- Your business is a limited company registered with Companies House. It is a legal requirement for limited companies to have distinct finances from their owners.
- Your personal bank account does not allow business transactions.
- You want to take advantage of banking features designed for businesses.
- You want to build your business credit rating.
- You want a business loan or business credit card.
- Managing your business’s finances is becoming complex and time-consuming.
You don’t NEED a business bank account if…
- Your business finances are simple and easy to manage.
- You are a sole trader, self-employed, a freelancer or in a general partnership (GP).
Does a sole trader need a business bank account?
Sole traders are not technically required to have a business bank account. That said, getting one can make your life considerably easier.
Pros
- Tax returns will be easier to file if your business and personal transactions are separate.
- Your business will appear more professional to customers and suppliers.
- Business bank accounts usually include useful extras, such as free accounting software, invoicing tools and digital receipt capture.
- If you need a business loan or credit card, you might need a business bank account to be eligible.
- Many providers have dedicated relationship managers who offer direct customer service and advice for business customers.
Cons
- Applying for and managing a business bank account might mean more admin.
- Some business bank accounts include a monthly fee or charge for each transaction. However, there are some fee free business accounts.
Some providers have specific sole trader bank accounts tailored to the needs of sole traders, freelancers, self-employed people and small business owners.
Does my limited company need a business bank account?
Every limited company is required by law to have a business bank account. This is because a limited company and its owner are distinct legal entities. As such, any profits are owned by the business, not the owner. The same goes for debts and assets.
Trying to track what money belongs to the business and what belongs to you would be a nightmare. That’s likely why it is a legal requirement.
Fortunately, many providers offer specific limited company bank accounts and opening one is relatively simple.
Does my partnership need a business bank account?
Whether your business partnership needs a business bank account will depend on the type of partnership you have:
- Limited liability partnership (LLP): This type of business is a separate legal entity to its owners and so legally required to have a business bank account.
- General partnership (GP): This type of business sees partners sharing profits, which are taxed as income. As this means the business is not legally distinct, a business bank account is not mandatory.
- Limited partnership (LP): This type of business, which is formed by a combination of limited partners and general partners, must have a business bank account.
Don’t dismiss the idea of opening a business bank account for your partnership, even if it is not mandatory. Being a partner means sharing responsibility for the business, so using a joint business bank account is probably a better option than relying on a partner’s personal account.
Can I use my personal account for business banking?
Sole traders can technically use a personal current account for business in the UK. However, some providers do not allow customers to use personal accounts for business.
In addition, opting for a business bank account makes boring administrative tasks, like sorting your tax return, much simpler. As such, using a personal account for business banking does not always make the most sense.
Can my business have multiple bank accounts?
There is no limit on the number of business bank accounts you can have. But is there any point in having multiple accounts?
You could use multiple business bank accounts to take advantage of special offers available from providers. You might also want to split your money between accounts for practical reasons, such as using one account for savings and another as a current account.
That being said, juggling these different accounts might be an administrative headache. For example, it could complicate things when it comes time to submit your tax return to HMRC.
What do I need to open a business bank account?
To open most business bank accounts, you must be:
- age 18 or above
- a resident of the UK
You will also need some documents and details to get started, such as:
- proof of ID
- proof of address
- Companies House registration number (if applicable)
- business verification documents (bank statements, bills, invoices, etc)
Don’t be intimidated by the details and information you need to provide. If you are worried, learn more about how to open a business bank account to make the application as stress-free as possible.
Choosing a business bank account
Business bank accounts are varied, and some will suit your business better than others. Getting the right account could get you access to free accounting software, easy access savings or other helpful perks. The best way to find the right match is to compare business bank accounts.
About the Author
Image source: Getty Images
Dive even deeper
What is a Business Bank Account?
by Kristina Fox
6 Benefits of a Business Bank Account
by Rhiannon Philps
by Peter Adams