Best business bank accounts for small businesses

By Joe Francis Updated 28th Oct 2019

When starting a small business, choosing a business bank account can seem such a hassle, but picking the right one could save you thousands in the long run.

Business bank accounts come in many forms, from traditional banks to the revolutionary business banks. Most business bank accounts charge fees in different ways, and this guide is intended to help prepare you to find the cheapest option for your business.

What is a business bank account?

A business bank account is similar to a personal bank account. It is a requirement of all limited companies to have a business bank account, but other small businesses may find it beneficial to have a business account to separate all of your personal and business transactions to make it easier to manage your cash flow or calculate any tax you owe.

Business bank accounts are available to sole traders, partnerships, companies and charities, but the service levels available may vary depending on your size. A business bank account is a prerequisite when applying for a business loan or business credit card.

When you open a business bank account, you will receive a bank account account number and sort code similar to a personal bank account that will allow you to use your account for transactions, payments and transfers.

Do you need a business bank account?

If you have a limited company then you must have a business bank account as the business is its own legal entity and separate from you as a person.

You do not need legally need a business bank account if you are a sole trader or freelancer as HMRC treat your business and personal income as one when calculating tax.

Partnerships can also choose to operate from a joint personal account, but may find it easier to open a business bank account to manage cash flow.

What do you need to open a business bank account?

This will largely depend on the business type you have and which account you are opening.

You can expect to need the following:

  • Your business details
  • Your personal details
  • The personal details of anyone involved in the application

Private limited companies or limited liability partnerships will also need:

  • Company’s registered name
  • Company’s registered address
  • Date of incorporation
  • Company registration number

Can you use a business account for personal banking?

No, you are not allowed to use your business bank account for personal banking.

Digital-Only banking vs high street banks

The growth of digital only banks over the past 5 years has seen the competition and offers available within business banking improve markedly. The amount of choice on the market has grown significantly, and as more and more payments move to digital, the need for a traditional (and generally more expensive) bank is reducing.

Digital only (or challenger) banks are banks that only provide their banking services online or via an app. Digital banks have no need for physical premises and offer their automated services online allowing them to provide real time views of your accounts, and customer support through in app chat.

For small businesses, digital only banks offer a number of efficiencies that make them an incredibly attractive proposition. Many challenger banks allow for bulk payments, scheduling, multiple cards for employees, auto categorised spending and even invoicing. The majority also allow you to connect to other third party apps (such as accounting software) to provide real time data in both apps and to streamline your banking. They also can offer advantageous transfer rates for foreign transactions, which can be costly when making regular foreign payments.

Traditional high street banks are still able to offer physical locations for businesses to bank from which makes them a top choice for businesses handling lots of cash, and with banks still assigning account managers and support, there are reasons still to go with them.

What do you need to consider when choosing a business bank account?

When working out the best bank account for your business, it is critical to think about all of the fees you are likely to incur.

Below are a list of actions / fees that you should consider to understand how much each account will cost you:

  • Monthly account fee
  • ATM withdrawal charges
  • Foreign exchange transaction charges
  • Foreign ATM withdrawal charges
  • BACS / CHAPS / UK faster payments charges (often per transaction)
  • Card transaction fees
  • Bank transfer fees
  • Overdraft fees

In addition, you should look for benefits that you can obtain with business bank account, which could include:

  • Cashback
  • Interest on in-credit balances
  • Preferential saving rates

Best business bank accounts

Below we have listed a range of business bank accounts that are on the market today. The banks are listed in alphabetical order.

Name Bank Type
Bank of Scotland Traditional Bank
Barclays Traditional Bank
Clydesdale Bank Traditional Bank
Coconut Challenger Bank
Cooperative Bank Traditional Bank
HSBC Traditional Bank
Lloyds Bank Traditional Bank
Metro Bank Traditional Bank
Natwest Traditional Bank
Revolut Challenger Bank
Royal Bank of Scotland Traditional Bank
Santander Traditional Bank
Starling Bank Challenger Bank
Tide Challenger Bank
TSB Traditional Bank


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