How to open a business bank account in the UK

If you are starting your first business, or you’re a sole trader and your business is growing and you’re looking to hire employees, you’ll need to open a bank account.

You might be wondering if you need to open a business bank account when you already have a personal bank account.

In this article, we’ll explain the differences between a business bank account and a personal bank account and outline the benefits of opening a business bank account.

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What is a business bank account?

A business bank account is a dedicated bank account that is used to keep a business's financial activity separate from an individual’s personal finances, and is a legal requirement for running a small business, with the exception of those with a sole trader status.

» MORE: Business bank account basics

What are the benefits of opening a business bank account?

Keeping personal and business finances separate is beneficial for a business for a number of reasons, and can save you from a number of headaches as your business develops through the years. For instance, this may include milestones such as securing your first big contract, hiring staff and renting an office space.

With a business bank account your bank statements will be much clearer, meaning keeping records is much easier and tasks like submitting a tax return are simplified.

Setting up a business account will help you determine:

• Your balance – knowing this will help you ensure you have the available funds to cover your outgoings
• Outgoing payments – by tracking regular payments like direct debits, you can calculate how much money will flow out of your account each month
• Incoming payments – your account marks the date when payments are made, meaning you can chase late payments as soon as the issue arises
• Payroll – the ability to keep up to date with whether employees pay

What are the key features of a business bank account?

The features of business bank accounts differ depending on the provider and the product offered.

Different accounts will offer a unique blend of fee rates, tools and features.

There are various types of business bank accounts, from accounts targeted at entrepreneurs and start-ups to accounts for community initiatives and charities, large enterprises and organisations that operate in the UK and overseas.

Despite the differences between providers of business bank accounts and their products, setting up a business bank account should include:

Personal advisor

This is a useful perk of opening a business bank account, as a personal advisor can help your business manage its finances more effectively and set you on the path to growth.

Personal advisors can explain the features of your account and the lending facilities open to you, including loans and overdraft facilities.

Bear in mind that some online-only accounts will lack a personal advisor, so if you are opening a new business or place high value on the advice available from a personal advisor, you might be best suited to apply to a business bank account from a high street bank.

Insurance

Setting up a business always entails some risks, such as missed payments, both outgoing and incoming.

Fortunately, some providers will offer insurance at an extra cost, and this can be a great weight off your mind, if debtors default on payments.

Always check the level of cover provided by a loan product before committing to an agreement.

Monthly charges

Unlike personal accounts, business accounts are mostly not free of charge. To maintain access to the benefits and features of a business bank account, your business will be required to pay a monthly charge.

Business bank account charges vary depending on the product you opt for. There are suitable options for businesses of all sizes and circumstances.

More basic accounts will cost between £5-10 per month, while the pricier and more feature-rich accounts can cost you upwards of £40 monthly.

Some accounts are free to set up, but costs accumulate when performing certain actions, such as sending electronic payments or when a business reaches limits on certain types of transactions.

Some loans offer free introductory periods, but always check what the charges for your business will be when the deal ends, to avoid facing any nasty surprises, which could have a knock-on effect on your cash flow.

Tools

With the revolution in banking and the rise of online-only lenders, businesses have greatly benefitted from innovations in tools including customisable reporting, 24-7 support and the ability to integrate banking with smart tools - such as accounting software and flexible overdrafts - which can be adjusted when necessary.

Useful tools provided by online lenders can also include automated expenses, instant payment alerts and even the ability to deposit cash payments in local shops.

How to open a business account in the UK

If you have identified a need for your business to open a business bank account, you may now be wondering who is eligible to open a UK business bank account and how to set up a business bank account.

There are various business account requirements and criteria you’ll need to pass before you start comparing business bank accounts you might wish to apply for.

Keep in mind that these requirements differ between providers, but the following will give you some of the main information you will need to provide.

Read on to learn the requirements to open a business bank account.

Documents you need to open a business bank account:

Here are the documents and information you’ll need to provide to a provider when applying for a business bank account:

• Proof of ID – driver’s licence, passport, ID card, for each company director
• Address – proof of business address – utility bills, bank statement, council tax statement
• Contact details – phone number, email address
• Turnover – projected annual turnover
• Companies house - registration number

» MORE: Everything you need to open a business bank 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.

The relative complexity of your business will also factor into the lead time until your account is set up.

A business bank account can take anywhere from a week to three months to be set up on average.

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.

Can I open a business bank account online?

Yes, many lenders will have a facility to allow businesses to set up a business bank account online.

But what are the potential benefits of opening your account online as opposed to visiting a branch in person?

Well, you can learn a lot from how online-only lenders advertise their services. When you search for online bank accounts, various lenders are very vocal about the speed of opening an online business bank account with their services.

These promises can be too good to be true though.

Is it quicker to open a business account online?

Yes, it can be possible to register for a business bank account in little more than 10 minutes, but the overall application and acceptance procedure could still take at least a couple of weeks up to a maximum of three months, to open a business bank account online, even with a digital bank.

While it’s true that it’s possible to register for a business account with online lenders in just a few short minutes, this is not the same as being accepted for a loan, but is just the process for opening a business bank account.

Lenders and banks still need to carry out the same thorough applications checks as a traditional bank.

What are the benefits of switching business bank accounts?

Switching business bank accounts is usually a quick and easy process - once you have paid off any debit balances - as this process is part of the Current Account Switching Guarantee, with more than 40 banks and building societies signed up to the service.

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. All are valid reasons to seek a new business bank account.

You should not have to pay a penalty fee for switching your business bank account, providing there is not a fixed-term policy on your account.

Conditions apply, with limits set on maximum company turnover and the number of employees, so always check first before switching.

Read our complete guide to switching your business bank account to get informed before switching, and make sure to compare deals from a wide range of lenders.

Is it possible to open a business bank account from overseas?

There are various options for opening a UK bank account from overseas. However, banks are often cautious when providing accounts to companies from overseas, due to concerns of potential money laundering and fraud.

If your overseas bank has a relationship with a UK bank, it may be easier for you to set up a UK account.

Opening an international account is not the best option for all overseas businesses, as many traditional lenders will require large deposits and a commitment to pay in a set minimum amount each month.

Online lenders can be a better option for businesses who wish to avoid these fees. Check out a variety of alternative lenders to find the best option for your business.

Is it possible to open a UK business bank account as a non-resident?

Yes, you don’t need to be a UK resident to open a bank account.

Consider an international account - these types of account are available from many lenders and are intended for foreign nationals, non-resident in the UK, so they’re suitable for individuals without the requisite documents to prove their UK address.

Opening your business bank account

If you’re now feeling confident about opening a business bank account, it’s time to compare business bank account products using our comparison table to find the best deal to suit your business requirements.