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If you own a business, you may be considering managing your finances using a dedicated business account. But what is a business bank account and how is it different from a standard current account?
Read on to find out what a business bank account can offer you, whether it’s free or you’ll pay fees and who is eligible to apply for one.
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What is a business bank account?
A business bank account is a current account designed exclusively for businesses, whether you’re a start-up or more established. You can use a business account for day-to-day transactions related to your trade, including paying employees and paying for goods or services.
This means that a business bank account allows you to keep your business transactions separate from your personal finances. This is a legal requirement for limited companies, but can also be useful for sole traders when it comes to filing a self-assessment tax return as all your transactions will already be in one place.
If you run a general business partnership, you don’t need to have a separate bank account for your work transactions. However, limited partnerships and limited liability partnerships do need their own business accounts, as they are registered separately with Companies House.
» MORE: Should I register as a sole trader or a limited company?
What can I do with a business bank account?
Business accounts tend to have many of the same features you would expect from a standard current account, such as:
- a debit card for transactions in store and online
- electronic payments in and out of the account
- direct debits and standing orders
- a mobile app for money management on the go
- ATM cash withdrawals
Some business accounts also offer extra services such as a dedicated business adviser, automated invoice creation or accounting software integration to help you manage your business finances.
The specific details of what you can do with a business account will vary between providers, so it’s worth shopping around to see which one may best match your needs.
Who can get a business bank account?
Business bank accounts are generally available to most business owners. For example, you can open a business account if you’re a sole trader, you’re part of a business partnership or you run a limited company.
Providers may also offer specific accounts designed for particular types of business, such as start-ups, sole traders and charities or not-for-profit organisations.
Each provider has its own set of eligibility criteria. These could include how long your business has been trading, how much it makes, as well as where it is located.
Certain industries or business types may also be excluded from opening an account. For example, not all providers will accept applications from those working in alcohol and tobacco manufacturing, while others won’t accept charities or public companies. That’s why it is even more important to check the terms and conditions of any business account before you apply.
» MORE: Do I need a business bank account?
Is a business bank account free?
There are many free business bank account options on the market, though some come with fees. These can either come in the form of a monthly fee covering all transactions within the month, or a pay-as-you-go system where you are charged for each payment you make.
Business bank account charges vary between providers and it is a good idea to consider which fee structure may be most cost-effective for you. Think about how much you might use the account over a certain period and what features you will realistically use and benefit from.
If you only carry out a few transactions each month, you may find that a pay-as-you-go tariff is suitable for your circumstances. On the other hand, if your business makes many transactions, then an account with an all-inclusive monthly fee could be more appropriate.
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