Separating your work finances from your personal ones is almost always a good idea, although it may end up being more expensive.
What are the benefits of opening a business bank account?
Separating your business and personal banking is a necessity for anyone who owns a company. Not sure why exactly you should open a business bank account? Here are some of the many reasons:
All your business transactions are separated from your personal ones which makes your business accounting records more organised.
Some banks have mobile apps so you can check your records and make business payments anytime you want and anywhere you are.
You can set up standing orders for business expenses. No need to worry about not paying on time anymore!
You can pay your employees easily.
If you’re a small business owner, you may be able to enjoy a free banking period for some time.
From insurance to coffee supplies, some banks offer discounts for products and services that you may find useful for your company.
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A key benefit of Revolut Business is that the Basic plan has no fees, so you can set up your brand-new business account for free. You get both physical and virtual company cards for spending, and you can grant access to your entire team if you need to. It also has plenty of helpful features to elevate your business workflow, including expense management, invoicing tools and 24/7 customer support. You can integrate certain accounting software, such as Xero and Quickbooks. Revolut is particularly suited to businesses dealing in multiple currencies - with multi-currency accounts that allow you to easily send, receive and exchange money around the world.
Pros
Flexible account options
Mobile app with lots of good features
Ability to issue cards to all employees
Easy to apply
Freeze card if lost or stolen
Safe and secure
Free purchases
Cons
Basic account does not include many free transactions
The Monzo Lite business account has no subscription fees, offering an affordable way to separate your personal and business finances. You can set up an account in no time, with easy access on both mobile and web browser. It comes with benefits such as 24/7 customer support, instant notifications, budgeting and categorised spending, digital receipts, and pots to separate money. You also get access to a free instant access savings account to manage your business savings. There's the option to upgrade to a paid-for plan if you decide you need any additional features such as integrated accounting or Tax Pots.
Pros
Fee-free spending abroad.
Custom payment links.
Pots to separate money.
FSCS protected.
Cons
No branches.
Charge to deposit cash.
Accounting software only available with Pro account.
£50 voucher when you open a Tide business bank account.
Another fee-free business account, Tide offers a number of key benefits for business owners, such as free personalised invoicing and payment tracking, cashflow insights, spending categorisation and Open Banking integration. You can also open a linked instant business savings account with a competitive rate and access 24/7 customer support. One stand-out feature with Tide is the accounting integrations - you can link your business account to a whole host of software, including Clear Books, Sage, Xero, Quickbooks and more.It comes with 1 free Tide business card, but you can order additional company expense cards for team members for a small fee, as well as a card reader if you need one for payments.
Pros
24/7 customer support
Categorised spending
FCA regulated
Quick set-up
No monthly fees
Easy to manage accounts and track payments within the app
Ability to set up direct debits and standing orders
No annual or monthly fee when you apply using the Finder link.
Formerly known as Cashplus, the Zempler Business Go comes with no monthly fee so you can get your business finances under control without paying extra. It comes with 1 dedicated card, although you can order additional cards for a small fee. Business-specific benefits of the Zemplar account include cashflow tracking, instant notifications and integrated accounting with software including Clear Books, QuickBooks, Sage, Xero and more. Other useful tools include digital receipts, invoicing and a Making Tax Digital feature.It could also be a good option if your business deals with cash as a Zemplar Bank Business Go Account allows cash deposits via the Post Office.
Pros
Open an account in 5 minutes
"Cashplus iDraft" once eligible
Currency cards for travel
Online services in addition to the mobile app
Cons
Charge to have your bank card issued
Traditional bank still needed for majority of your business finance needs
Receive a £100 Amazon gift card when opening a HSBC Kinetic Account between 8.8.24 and 31.10.24.
This business account is aimed at sole traders and single directors who want to get their business finances under control. There's no fee for the first 12 months but, after that, there's a monthly fee of £6.50. Categorised spending and cashflow insights are available in the app to help you stay on top of business expenses and plan ahead. Mobile cheque deposits are also available with this account and there's an international payments feature (but fees do apply). Another feature that business owners may find useful with the HSBC account is the overdraft - you can apply for an overdraft of up to £30,000 in the app, with quick availability of funds.
Pros
Easy to apply for and manage
Arranged overdraft
Useful app features to help you track spending
No monthly fee for 12 months
Cons
Interest is charged on overdraft
Monthly maintenance fee applies after first 12 months
No monthly account fee for the first three months.
Designed specifically for small businesses, the Card One Money account can be quickly and easily set up online. It also doesn't require a credit check - one of the few providers to offer this - so could be a good option for business owners concerned about their credit rating. Another great perk of this account is the cashback rewards programme - you can earn cash rewards of up to 3.5% at more than 35 different retailers by using the Mastercard that comes with the account. There is a monthly account fee associated with this account, but Card One Money sometimes runs a free trial where this fee will be waived for a set period.
Pros
Quick application process
No credit check required
Cashback rewards available on the associated Mastercard
No failed payment fees
Cons
Quite a few charges involved compared to some other business accounts, including the £55 application fee, £12.50 monthly account fee and various other transaction fees
No credit or overdrafts available
Accounting integrations
FreeAgent, Sage, Wave, Xero
Account fee
£12.50 (waived in first 3 months)
Arranged overdraft
Requires credit check
Can’t I just use my personal account?
First of all: if you have set up your business as a limited company, that’s a no. As a separate legal entity, your company must have its own bank account.
If you are set up as a sole trader instead, you can choose to just do everything from your personal account if you wish. And it might actually be ok if freelancing is just your side gig, and you only have to deal with a few occasional transactions.
However, if you manage a number of different clients and expect to receive various transactions a week or even a day, a business account will help you keep everything properly separated.
Also, keep in mind that most banks’ terms and conditions say you shouldn’t use your personal account for business purposes.
How a business account can help you organise your finances
A more organised workflow is probably the main benefit of using a business bank account for work, rather than dumping everything into your personal one. It’s the same difference between sporting a neat, clean desk, and working in a corner of your kitchen table.
It means not having to scroll through pub and supermarket transactions to find invoice payments, and being able to keep track of your earnings and expenditure.
A dedicated business account, together with a good accounting system, will enable you to quickly calculate how much you earn and what business expenses you have. Most importantly, it will save you time; and time really is money for a freelancer.
Once you have a clear picture of what your work finances look like, you can regularly transfer your net earnings into your personal account and use the money for everything that’s not business related, from bills to groceries to cinema tickets.
Dedicated business tools
Generally speaking, a business account and a personal account are pretty similar. But the best business accounts offer additional features that are built around the needs of small businesses and self-employed professionals.
For example, they sometimes come with some kind of accounting or invoicing service, or can integrate with existing software. This allows you to streamline your business finances, again saving you time and making it easier to keep track of what clients you should chase for payment.
Some also offer dedicated customer service, which can come in very handy if anything goes wrong.
Business accounts don’t have to be complicated
“Business account” sounds very official and grown-up, and it can feel weird if it’s just you, managing your business from a tiny desk in the corner of your living room. And indeed some of them are pretty complex products meant for big businesses.
But there’s also a whole range of business current accounts that are specifically meant for sole traders and very small businesses.
Some are digital-only, can be opened very quickly without too much hassle or administration, and are also cheap.
A business account can help you build your business credit rating
While you may have no intention of taking out a business loan now, you never know what the future holds.
At one point, you may want to grow your business, move it out of your living room, develop a great idea you’ve had, and might need credit to do so.
If that moment comes, you want to have a business credit history to show for, and getting a business bank account is a first step in that direction.
More costs
This is probably the main disadvantage of business bank accounts: they usually have more fees than personal bank accounts. Some come with a monthly fee, others will apparently be free but then charge you for things you wouldn’t expect, such as a simple bank transfer.
It may still be worth it, especially if the account is very good and offers extra features. It really goes back to the first point we made: Business bank accounts are great for freelancers that have to deal with quite a lot of invoices and transactions, and not just the occasional monthly payment.
Also, if you are looking for a mostly free business account and you don’t usually need to deposit cash, have a look at Starling Bank’s business account.
Pros and cons of business bank accounts if you are a freelancer
Pros
Keep your work and personal finances separate.
It’s easier to find clients’ payments, and keep track of how much your activity really earns you.
Dedicated business features, such as invoicing services.
It helps you build your business’s credit rating.
Some business accounts are actually easy to open and manage.
Cons
Business accounts tend to be more expensive than personal ones.
Slightly more banking administration, especially if you go via two different banks for your personal and business accounts.
Bottom line
As a sole trader or freelancer you may not necessarily need to open a separate business bank account, but it can be a very good idea. If you manage a number of different clients and expect to receive various transactions a week or even a day, a business account will help you keep everything properly separated.
Opening a business bank account can help your business for several reasons. It can help your business build a credit rating, which may be helpful in future if your firm needs to borrow money.
Some business account providers also offer services tailored to small business owners, including invoicing features and basic bookkeeping via banking apps.
The main drawback of using a business bank account is that a fair few banks charge their business account customers transaction and account management fees. These fees apply make managing a business account more expensive than a personal current account.
Frequently asked questions
As long as your business account is with a fully licensed bank, it will be covered by the FSCS, which means that your deposits are protected up £85,000. The only thing you need to keep in mind is that, if you are a sole trader who also has a personal account with the same bank, protection only applies on deposits up to £85,000 in total (and not for each account). To claim separately for your business via the FSCS, it will need to be a separate legal entity, such as a limited company.
We have a longer guide on the topic, together with a selection of business accounts you can compare, on this page.
Short answer: if you set up as a limited company, your business becomes a separate legal entity, which can give you a series of advantages such as better tax conditions. The long answer is here.
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Matthew Boyle is a banking and mortgages publisher at Finder. He has a 7-year history of publishing helpful guides to assist consumers in making better decisions. In his spare time, you will find him walking in the Norfolk countryside admiring the local wildlife. See full bio
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Matthew has written 285 Finder guides across topics including:
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Comparing bank accounts and highlighting useful features
By switching your business bank account, you may be able to reduce your monthly fees or take advantage of different features like smart bookkeeping tools.
Considering a Revolut Business account? We take a closer look at the features and price plans available with these digital-only accounts.
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