Small business guide to business bank accounts

There are various types of business accounts to choose from:  

• Business current accounts. These are the standard accounts for day-to-day operations, enabling businesses to send and receive payments, and manage cash flow. Most UK banks offer these with features like online banking, debit cards, and direct debits. They may also offer business support and specialist accounting software.  
• Business savings accounts. Offered by many banks, these accounts can help businesses earn interest on surplus funds.  
• Merchant accounts. These accounts allow businesses to accept card payments from customers. They work with payment processors and are often integrated with point of sale (POS) systems, such as cash registers and card terminals, to facilitate electronic transactions.  
• Foreign currency accounts. These accounts help businesses trade internationally in multiple currencies and can help reduce foreign exchange costs.  

• Transaction limits. Many banks offer higher transaction limits for business accounts and commercial customers compared to personal accounts.  
• Monthly account fees. The basic cost of maintaining your account. Some banks offer business accounts with no monthly fees.  
• Online and mobile banking platforms. You can digitally access your account information, payment facilities, and account management tools via your bank’s online and mobile banking platforms.  
• Overdrafts. Short-term borrowing options, typically available from traditional banks and subject to credit checks, are designed to help you manage cash flow gaps. Interest rates and credit limits may vary between providers.  
• Payment processing capabilities. For example, direct debits, standing orders, and Bankers’ Automated Clearing System (BACS) payments, which are electronic money transfers between banks.1  
• Cash handling services. Allowing you to deposit and withdraw cash. Traditional banks typically offer this.  
• Account integration. Many business accounts now integrate with popular accounting software, such as Xero, QuickBooks, and Sage.  
• Customer support. Ranges from basic phone and email support to dedicated account managers and 24/7 helplines.  
• Card services. Business debit and credit cards are common. Some banks offer employee cards with spending controls.  
• International banking services. Enables foreign exchange, international transfers, and trade finance facilities, with potential charges.  

Many business owners start by researching various banks and account types to find one that suits their needs based on factors like fees and features.  

Before applying, you may need to gather:  

• Business registration documents (e.g., Certificate of Incorporation or Companies House registration number).
• Business tax identification (e.g., Corporation Tax UTR or HMRC registration).
• Personal identification for directors and owners.
• Proof of business address.
• Business plan or financial projections for new businesses.
• Anti-money laundering checks and source of funds documentation.

Sole traders may need fewer documents than limited companies, while partnerships may require more documentation for all partners. Many business owners schedule appointments with several banks to compare offerings and ensure they meet each bank’s specific criteria before making a decision.

Business bank accounts can incur various fees and charges. For example:  

• Monthly account fees represent the basic cost of maintaining the account, which may be fixed or tiered.  
• Transaction fees may apply when you exceed your free monthly allowance.
• Overdraft costs may apply, including arrangement fees, interest charges, and additional fees for unauthorised overdrafts.  
• Withdrawal charges may apply for cash withdrawals.  

Other common charges include foreign exchange fees for international transactions, paper statement fees, and charges for additional services such as faster payments or CHAPS transfers.  

Choosing between a traditional high-street bank and a digital-only business bank is an important step for many small business owners. Each option offers advantages depending on your business needs and preferences.  

Choosing the right business bank account can help you manage your finances more efficiently. Taking time to compare features, fees, and support options while considering your own needs and preferences can help ensure you make the right decision for your small business.