A business bank account is not mandatory for all businesses. For example, sole traders and freelancers can use a personal bank account for business unless their bank prohibits it. However, even if it’s not necessary to open a business bank account there are still plenty of benefits to keeping professional and personal finances separate.
Opening a business bank account can provide exclusive features, access to special support, boost professional reputation, and more.
Business bank accounts to consider include:
Do Small Businesses Need A Business Bank Account?
If the business is set up as a limited company then a business account is needed to run it. However, sole traders are not legally required to set up a business account but the business can benefit greatly.
What Is The Difference Between A Business Bank Account and a Personal Bank Account?
Business bank accounts take in business revenue and pay for expenses, while personal accounts are meant for personal income and to pay personal bills. No matter how small the business, every owner should separate their personal and business finances.
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The Benefits Of A Business Bank Account
As well as making it easier to separate personal and business finances and spending, business bank accounts offer a host of other benefits. These benefits include:
Exclusive Features of UK Business Bank Accounts
There are exclusive features that come with opening a UK business bank account. Opening a business bank account allows access to helpful tools like:
- Invoicing tools built into the account
- Support to upload receipts daily
- Categories to help organise spending
- Easy integration into accounting software
- Support for global payments
Business Loans
Getting a business account can provide the opportunity to apply for a business loan. Business loans can be vital when it comes to growing a business. However, certain banks will not grant a loan or line of credit for business purposes without a separate business account.
Accurate Tax Returns
Working out the taxable benefits and deductions for a self-assessment tax return each year will be easier with a business account. If business expenses are mixed with personal expenses will cause hours of sifting through personal spending to find the business expenses.
Business Credit Score
A business bank account can boost the business’s credit score. If the time comes when owners need to secure a business loan or credit card, a good credit score will increase the chance of being accepted.
Credibility
Using a business bank account to receive payments from clients looks more professional than providing personal bank account details. This will show clients that the business is legit and above board and in turn help to build trust.
What Are The Disadvantages Of a Business Bank Account?
The biggest disadvantage of a business bank account is that it usually comes with more fees. The fees can include one or more of the following:
- Monthly maintenance fees just for having a business account
- Transaction fees. This includes when a deposit, withdrawal, or transfer is made
- Penalties when the business account falls under the minimum balance or if more transactions are made than allowed.
- Charges for extra services like wire transfers, ATM fees for using another bank’s machines, and cash handling fees for big deposits
Make sure to read the fine print like a detective in a mystery novel. Look out for phrases like ‘minimum balance required’ and standard transaction fees.’
What Should I Look For In a Business Bank Account?
There are certain key points to look for before choosing a bank to open a business account. These key points include:
Approved By Regulators
The first crucial key point is to choose a credible bank. Banks are financial service providers and must be authorised by the Financial Conduct Authority (FCA). When regulated by the FCA, banks must meet a certain standard and be honest, fair, and effective in their approach to make sure clients get a fair deal.
If a bank is regulated by the FCA they will state it on their website in the footer with a FCA reference number included.
Online Banking
Many companies and people need to be able to access their bank accounts using a mobile device. If so, be sure the bank offers a dependable, safe, and easy-to-use app that will enable you to conveniently manage the business account from any location. Access to mobile and online banking will facilitate speedy and safe payment approval.
Fees and Charges
Make sure to consider what the monthly service fee is before opening a business bank account, as well as taking into account fees charged for cash withdrawals, overdrafts, transfers and more.
Customer Service
Make sure that the bank’s customer service is easily accessible and available at all times. This will give piece of mind if there’s an issue with the account like an incorrect charge or fraudulent activity. When considering the bank, make sure to check what customer support features they offer. Reading customer reviews is always a good way to get some insight.
Transaction Limits
Find out what transaction limits will be on the business bank account. This will include the number of withdrawals allowed each month and make sure it is enough for the business to function without facing costly fees.
Is It Worth Getting a UK Business Bank Account?
A business bank account builds a clear wall between business and personal transactions. It protects the business from credit rating even if personal finances and credit take a dip. Opening a business bank account also offers various benefits such as building a business credit score, applying for business loans, and getting exclusive features.
