1. Home
  2. Business Bank Accounts in the UK
  3. What You Need to Know About Business Bank Account Charges
Published 27 February 2021
Reading Time
3 minutes

What You Need to Know About Business Bank Account Charges

Business bank accounts often have additional charges for using your account so it’s important to understand them before opening one. Learn the typical charges to look out for and what to do if your charges go up.

Even the most competitive-looking business bank accounts can have hidden fees and charges lurking in their small print. When you’re choosing a bank account, there’s no substitute for reading the terms and conditions to find out what you will actually be charged for your everyday banking. That’s because small fees per transaction can soon add up over the course of a year.

What is a business bank account charge?

A business bank account charge is any cost you might incur during the setting up and day-to-day running of your company’s bank account. Different banks will charge you varying fees for different types of transaction, which can make it tricky to compare overall costs between providers.

Finding the best deal on a business bank account means thinking carefully about how your company actually does business and how money moves in and out. This will help you decide where your priorities lie when it comes to seeking out the most competitive fees.

What typical charges do I need to be aware of?

Unfortunately, there are lots of different charges you might encounter while using your business bank account, so even a seemingly ‘free’ or competitively-priced account could come with some costs that aren’t immediately obvious.

Some banks charge a monthly or annual fee for their business bank accounts. Many monthly fees fall between the £5 and £10 range, although some are higher.

Then there could be a raft of transaction-related costs. You may be charged for using an overdraft, paying in cash or cheques, withdrawing cash, writing a cheque, making a bank transfer, or sending or receiving international payments.

You could also be charged for making more or less than a certain number of transactions a month, or paying in more or less than a certain amount.

What should I do if my bank charges go up?

You could be offered a free account or a free overdraft facility for an introductory period, or while your business is below a certain size based on turnover or number of employees, but you may have to pay a fee or interest on an overdraft as your business grows.

If this happens, you can switch to another bank. Once you have found a better value deal the Current Account Switch Service automatically transfers across your balance, standing orders and direct debits before closing the old account. However, this can be a bit more of a pain than switching your personal account as you will need to inform clients of the change and update your invoices accordingly. Bear in mind that not every bank participates in the switching scheme.

» MORE: How to close your business bank account and key factors to consider

Can I claim back bank charges on a business account?

Yes, under HMRC rules, bank charges are an allowable business expense, which means you can claim tax relief on bank, overdraft and credit card charges, as well as the interest on business and bank loans (although not the capital repayments). You can also get tax relief on hire purchase interest, leasing and alternative finance payments. This has the overall effect of reducing your taxable business profits, so you’ll pay less in corporation tax. The bank account on which you incur charges must be in the name of your business though, not in your own name.

Sneaky charges can quickly push up the total cost of your business banking, so do your research and make sure you’re well informed before you choose a new business bank account.

Image source: Getty Images

Dive even deeper

6 Benefits of a Business Bank Account

6 Benefits of a Business Bank Account

Is it worth having a separate business bank account? Limited companies and partnerships legally need to have a business account, but it’s optional for sole traders. However, there are many potential benefits to opening a business account, as listed below.

How to Open a Business Bank Account in the UK

How to Open a Business Bank Account in the UK

If you run a small business, you need to keep on top of your finances. You may want to open a business bank account. We cover the steps you need to follow to open an account for your business.

Do I Need a Business Bank Account?

Do I Need a Business Bank Account?

Using a business bank account is a smart way to keep your finances organised and separate from your personal money. Whether you’re self-employed, in a business partnership or run a limited company, find out why you may need a business account, and how to choose the right one to suit you.

Back To Top