It is a good idea to create a separate bank account to manage your finances when you’re self-employed so you can keep your business and personal finances in different places. A number of providers offer bank accounts for those who are self-employed. Here we look at how they work, the pros and cons, and how to pick one.
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If you're self-employed, there are 3 different pricing plans to choose from with the Revolut business freelancer account. The first is a free option which can be great if you're only looking for a few basic features and are just starting out. Alternatively, you can pay a monthly fee to benefit from additional features including a larger number of fee-free international payments and local payments. Paid-for plans also offer a free foreign exchange allowance, making it a good option if you often do business overseas. You can hold and exchange more than 25 currencies with the account. Further benefits include the option to connect to accounting software such as Xero, QuickBooks and Slack, and the ability to create and track invoices. It's quick and easy to sign up to an account via the Revolut app.
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
Receive a £100 Amazon gift card when opening a HSBC Kinetic Account between 8.8.24 and 31.10.24.
This everyday business bank account from HSBC has no monthly maintenance fee for the first 12 months, making it ideal if you're only recently self-employed. The fee is £6.50 per month after this. You can apply for the account in minutes via the app and most accounts are opened within 48 hours. The account lets you manage direct debits, standing orders and future payments with ease. Customers can also apply for an overdraft of up to £30,000 in-app, get insights on their business spending with automatically categorised transactions, and keep track of their finances with a monthly breakdown of cash flow. You'll also be able to freeze your debit card if you misplace it, and unfreeze it again when found. Plus you can scan and deposit cheques in the app and make payments of up to £25,000 per day. Larger payments can be made via business telephone banking.
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
£50 voucher when you open a Tide business bank account.
You can choose between three different pricing plans with the Tide business account. This includes a free option which could be suitable for freelancers, sole traders and contractors. You can then upgrade your account at any time as your business grows, but a monthly fee will then apply. All options enable you to sync your account with accounting software like Quickbooks, Sage, KashFlow and Xero, as well as automatically categorise transactions, send, pay and track invoices and upload receipts. ATM withdrawals cost £1 each, while other transaction fees will depend on the plan you have chosen. You can hold up to 5 business accounts and get 'read access' for team members, allowing them to view and download transactions. Opening an account can take as little as 10 minutes and no credit checks are carried out. Your Tide card should arrive within 2 to 4 working days.
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
Up to £50,000 subject to eligibility and application
Requires credit check
This business account from digital bank Starling has no monthly fees or UK payment charges, making it ideal for sole traders and limited companies. You can apply for the account with ease via the app and you'll also benefit from free 24/7 UK support via the app, phone or email. You can integrate the account with accounting software Xero, Quickbooks and FreeAgent, as well as benefit from automated business spending categorisation, receipt capture, free ATM withdrawals and fee-free spending on your card abroad. You can also choose to pay to bolt on extras such as a Business Toolkit to create and send invoices, record VAT and submit your VAT return, and carry out HMRC tax calculations. Or you can open a Euro business account for exchanging and holding euros and a US dollar business account for holding, sending and receiving US dollars.
Pros
Add the new Business Toolkit onto your free Starling account and get the first month free of charge (RRP £7pcm)
Completely free UK current account opened and ready to use in 20 minutes
Safe and secure
Fully licensed by the FCA and PRA
Free to use your card abroad including ATM withdrawals, splitting the bill made easy with "settle up" feature, competitive and comprehensible overdraft fees
Decent interest rate paid on current account balances
Efficient app offering a range of good features such as budgeting tools and saving features
Has a marketplace offering competitive pensions
Mortgages and insurance from other growing fintech companies
Teen account options
24/7 customer support (for all types of enquiries)
Cons
Relatively new so does not offer every feature, e.g. mortgages
No bank branches, all done via the web
Only available to UK residents
Accounting integrations
FreeAgent, QuickBooks, Xero
Account fee
Free
Arranged overdraft
Up to £50,000 subject to eligibility and application
One of the biggest draws of this business account from Mettle is that it's completely free to use. You can also apply in a matter of minutes from the app. Mettle is part of the NatWest Group and its account offers a range of features and benefits. These include assistance with invoicing, the option to set up Money Pots so that you can save for things like tax and new equipment, plus an overview of your cash flow at any time so you can keep track of your spending and income. You can also sync the account with accounting software such as FreeAgent, QuickBooks and Xero. To apply you must be a sole trader or limited company with up to two owners, and have a balance of less than £50,000 for sole traders, or £100,000 if not. You must also be a UK-based company and be a UK resident.
No annual or monthly fee when you apply using the Finder link.
The Cashplus business account charges no monthly fee and no fees for UK purchase transactions. Signing up for the account can be completed in a matter of minutes and once your application is approved, your card will arrive in 3 to 5 working days. Once your account is up and running, you can deposit cash via bank transfer or the Post Office, use your card online and instore or to withdraw cash, pay bills and expenses online and categorise spending on the go via the app. You'll also be able to track expenses and block certain transactions, order up to 20 additional cards, download statements for each card in CSV format online, manage cards via a centralised management system, and integrate your account with accounting software. Funds are also protected up to £85,000 by the Financial Services Compensation Scheme.
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
Do I need a business bank account or can I use my personal one?
If your business is set up as a partnership or a limited company, you’ll have to run your business finances through a business bank account, for tax and legal purposes.
If your business is a sole proprietorship, you are still taxed as an individual, so there’s no obligation for you to open a business bank account.
Can you transfer money from a business account to a personal one?
Yes, most business owners will pay themselves a salary – and perhaps an occasional bonus – from their business account into their personal account.
The important thing to do is to record and declare these transactions, for tax and bookkeeping reasons.
In many cases, these payments will be delivered automatically using a payroll software provider, so that they are automatically recorded and the taxes are paid.
If your business is set up as a partnership or a corporation, all one-off payments to your personal account will need to be signed off by your business partners.
Why is a business bank account useful for sole traders?
Although it is not a legal requirement, there are many advantages to having a business bank account as a sole trader.
Using your personal account for your startup business or side hustle might work at first, but as you start to carry out more transactions, your finances can quickly become overwhelming! This is especially true when transactions are not labelled clearly, or you want to keep an eye on the cash flow of your business separately from your personal finances.
If you choose to set up a business bank account, you’ll find it much easier to track how your business is doing as a sole trader, especially when you have many other responsibilities to keep you occupied.
As a sole trader, you are responsible for reporting your tax bill to HMRC at the end of the financial year. If you’ve been using a specific business account for all your business-related transactions, this process will be a lot quicker and easier and save you from the headache of tracking everything down.
Many business bank accounts come with additional features that will make your life easier if you are a sole trader trying to manage your business’s day-to-day operations.
Some of these include:
Interest rate
Invoice creation
Expenses management
Spending pots or categorisation
Budgeting tools
Tax and VAT calculators
Payment notifications
Setting up standing orders for expenses
If you use accounting software, you may also be able to link this with your business bank account through accounting integrations.
Many business accounts offer benefits, such as cashback when you spend with your business card. You can also get additional physical debit cards for your employees.
Finally, having a dedicated business account helps you appear more professional to your customers! It helps them to feel safe that they are sending their money to the right place and that your business is legitimate.
How to choose and compare a bank account for a sole trader
As with any financial product, the key to finding the best business bank account is to shop around and compare your options.
As part of your comparison, you’ll need to consider which features are the most important to you. For example, are you willing to pay a monthly fee or would you prefer a free account? Keep in mind that there may still be charges for certain transactions such as transfers and cash withdrawals.
You should also think about whether you might need an overdraft, whether you want your account to link to accounting software such as QuickBooks and Zero, whether you need invoicing support and whether you need to regularly bank overseas.
Don’t forget to also consider how you want to manage your account. Are you happy to bank solely online/via an app or would you like the option of being able to pop into a branch? When you’ve considered these options, you should find it easier to find the right account for you.
What does a sole trader need to apply for a business bank account?
The application process varies between business account providers, but you will always need the following:
Your business name and address
Your own personal details and contact information
A form of ID
Proof of address
Estimated business turnover
Personal banking/financial statements
Companies House registration number, if you’re a limited company
Pros and cons
Pros
Business bank accounts allow you to separate your business and personal funds. This makes accounting and bookkeeping far easier.
Many accounts include useful incentives and improved rates on international payments.
Cons
Business accounts don’t tend to have as many incentives as personal bank accounts.
Many of the best business bank accounts have monthly account fees and may charge you for making payments.
It’s not essential to open a business account if you’re a sole trader (you’ll have to do it if you’re a limited company), but it is a good idea. It lets you keep your personal and business finances separate, making day-to-day money management easier and it helps when it comes to accounting and tax returns. Keep an eye out for account fees, especially those those which kick in after a year. If you’re not going to use the extras thrown in with a paid-for account, such as accounting software, it’s better to choose a free account and pay for the software separately.”
Bottom line
For most types of business, it is compulsory to have a business bank account. Even if this isn’t the case for them, the majority of business owners recognise the advantages of opening one. The key benefit of opening a separate bank account for a sole trader’s business revenue is that this helps with tax calculations and enables the business owner to understand their cashflow situation easily.
Frequently asked questions
No. If you run a limited company, then that company is a separate legal entity and therefore needs a separate business account.
Yes. It’s more common to find these accounts offered by digital ‘challenger’ banks like Starling and Tide.
As a general rule of thumb, your business account is likely to allow you to accept payments in foreign currencies, particularly in euros and US dollars. While some accounts will charge you a conversion fee, others will use either Mastercard or Visa’s own exchange rates. These rates are as close to perfect as it’s possible to get for converting between major currencies. It’s best to check you accounts terms and conditions to find out more.
As a self-employed person you can usually claim bank charges as a business cost. The Gov.uk website has full details on self-employed expenses.
It is possible that you’ll be credit checked when opening a business account as a sole trader.
Banking scores
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★★★★★ — Subpar
★★★★★ — Poor
Finder scores, in blue, are based on our expert analysis. We also show reviews from users, where we've received more than 10, with a score in yellow. We gather more reviews from customers every year in Finder's customer satisfaction survey.
We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you. Most of the data in Finder's comparison tables has the source: Moneyfacts Group PLC. In other cases, Finder has sourced data directly from providers.
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To make sure you get accurate and helpful information, this guide has been reviewed by Rebecca Goodman, a member of Finder's Editorial Review Board.
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
Matthew's expertise
Matthew has written 285 Finder guides across topics including:
Helping first-time buyers apply for a mortgage
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.
While it may look like more work, opening a separate business account is actually likely to make your work life easier and more organised. Here are the pros and cons.
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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