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If you’re just starting out, a sole trader with a growing business, or you’re looking to hire employees, you may need to open a dedicated business bank account.
Below, we explain how to open a business bank account. We explore the documents you’ll need to provide before your account can be set up and how long it can take to open an account.
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Opening a business bank account in 5 steps
- Compare a range of business bank accounts, and choose the one that best suits your organisation’s needs.
- Make sure you are eligible for your chosen business account.
- Submit an application form for your chosen provider, whether online or in-branch.
- Provide the required documentation, including proof of ID, proof of address, and business verification.
- Wait to receive your account number, sort code and, if applicable, debit card.
» ROUND-UP: Best business bank accounts
What is a business bank account?
A business bank account is used to keep a business’s financial activity separate from an individual’s personal finances. Whether you are required to have one depends on whether you are registered as a sole trader or a limited company.
If you run a limited company, you are legally required to have a business bank account to keep your business transactions separate from your personal account.
Similarly, if you have a limited liability partnership (LLP), you need to open a separate account for your business because you and your business are distinct legal entities.
If you’re a sole trader, you don’t legally need a separate bank account – you can use your personal account. However, you may want to consider opening a dedicated business account to manage your business finances.
» MORE: Do I need a business bank account?
How do business accounts work?
Business bank accounts work in a similar way to personal current accounts. You can use a business account to send and receive money, set up standing orders and direct debits, pay for goods and services online and in person, among other things.
Typical rates and prices
One difference between business accounts and personal accounts is that business accounts may charge a fee for features that are commonly free with a personal account.
For example, you may have to pay a fee for bank transfers from a business bank account. Personal accounts may allow you to do this for free.
Or you may have to pay a monthly fee to maintain the account. On the other hand, personal current accounts may not have a monthly fee unless it’s for a package including extras such as cashback.
Who can open a business bank account?
If you run a small business or a start up in the UK, you could be eligible for a business bank account.
Some banking providers have business accounts designed specifically for start ups or sole traders, while others offer a more general account suitable for small business owners.
It’s worth checking eligibility criteria across a number of providers to see which accounts are suitable for your business.
Is it hard to open a business account?
Whether you can open a business bank account depends on whether you meet the eligibility criteria for your chosen provider. It’s worth checking these carefully and making sure you have all the required information to hand before applying to open an account. If you are eligible, it should be fairly straightforward to open a business account.
How long does it take to open a business bank account?
The length of time it will take to set up your business bank account depends on several factors.
The process could be delayed if the information and documents you provide as part of the application process are incomplete or invalid.If your business structure is complex, it could also take longer to open your account.
A business bank account can take anywhere from a matter of minutes to a few weeks to set up, depending on the provider you choose and your personal circumstances. That’s why businesses should factor in the length of time it takes to open an account into their overall business plan, just in case it takes a little bit longer than planned.
Digital banks may offer speedy application processes and even same-day opening in some cases. However, this depends on the provider, how quickly your documents can be processed, and whether the provider needs more information from you.
What do I need to open a business bank account in the UK?
Summary
If you want to open a business bank account, you’ll need to provide some information about what your business does, as well as details about the people who run it. There are usually also eligibility criteria to meet before you will be considered for an account. For example, you may need to be at least 18 years old with a UK address.
Your bank could ask for verification of identity and address for anyone who will have access to the account, or anyone who owns a part of the business (normally at least 25%).
Proof of ID documents
You may need to provide:
- proof of ID, such as a driver’s licence, passport, or ID card
- contact details, such as your phone number and email address, both personal and business (if applicable)
Proof of UK address
Banking providers may also want to see:
- proof of personal address in the UK, such as a recent bank or credit card statement or council tax bill
- proof of a business address in the UK, such as a recent utility bill or HM Revenue & Customs (HMRC) correspondence
Business verification documents
You may be asked to provide ‘proof of business’ to help the bank ensure that your business is legitimate.
The bank may want to see evidence of:
- projected annual turnover
- Companies House registration number or certificate of incorporation if you run a limited company
- the number of employees you have, if applicable
- your business’s tax status – you may need to provide your Unique Taxpayer Reference (UTR) or your National Insurance number
You may also be asked to provide proof that your business is up and running. For example, evidence that your business has a website or social media presence or that you are registered with an official industry body. The provider you choose will be able to give more details about what it can accept as proof.
How to set up a business account in the UK
Am I eligible for a business account?
To open a business bank account, you must be a sole trader or limited liability partnership, or run a limited company that is registered with Companies House.
There may be other requirements depending on your provider, such as minimum or maximum turnover limits or prohibited industries. You should check whether you’re eligible before applying.
Some providers offer accounts designed specifically for sole traders. It’s important to know how your business is structured so that you can find an account that best matches your needs.
» MORE: Switch your bank account from sole trader to limited company
Can I get a business account with bad credit?
It is possible to get a business bank account if you have bad or no credit history. Some providers offer accounts with no credit checks.
Business accounts for those with bad or no credit may have limited features. For example, you may not be able to access an overdraft or earn interest on your money even when you’re in credit.
Can I open a business bank account from overseas?
Banks are often cautious when providing accounts to companies from overseas, due to concerns of potential money laundering and fraud.
It can be possible to open a UK business bank account from overseas, but it will depend on your provider.
Some providers will allow you to open a business bank account from overseas, as long as you are the director of a company registered with Companies House and can prove you have a UK residential address.
Other providers may need you to be physically in the UK when you apply, or will need to meet a company representative in person before you can open the account.
Can I open a UK business bank account as a non-resident?
Yes, you don’t need to be a UK resident to open a business bank account. However, it can be more difficult if you don’t live in the UK.
According to the Department for International Trade, you will usually need a signatory on your account to be resident in the UK (this can be a director or an employee). Your company must also have a UK business address.
You’ll also need someone to be present in the UK when the account is opened so that a bank mandate can be signed in person.
Some providers will ask that all directors or persons with significant control are resident in the UK.
It’s similar for sole traders. You may need to prove you are ordinarily resident in the UK and that you pay taxes through self-assessment before you can open a business bank account here.
Again, the process and requirements to open an account in this manner will differ from provider to provider. You should check directly with your chosen bank to find the most accurate and up-to-date information on their policies.
What happens after I apply?
After you apply, the bank will process your application. They may contact you if they need extra information or additional documents.
If you’re accepted for a business account, you should receive your account number and sort code, as well as your debit card, within a few days. You can then start using your business bank account.
What if I want to switch business banks?
You may wish to switch your business bank account to a different provider if you are unhappy with the quality of service provided by your current provider. Alternatively, you might have found a better deal elsewhere altogether.
In other cases, your business circumstances might have changed, meaning you have different requirements for your business bank account.
Whatever your reason for switching, if you’re in the market for a new business account, you can compare new providers with NerdWallet.
Additionally, you may be able to use the Current Account Switch Service. It’s free to use and guarantees a simple switch between providers.
Businesses that employ fewer than 50 people with an annual turnover of less than £6.5 million are eligible to use the service. Both your old bank and the one you wish to switch to must be signed up.
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