Just started a business? How to pick the right business account
So you’ve decided to take the leap and set up your own business.
Once you’ve fine-tuned your idea, it’s time to think about logistics – how do you pick the right business bank account for you?
Do I need a business bank account?
Business bank accounts are legally required for those looking to set up a limited company. If you’re not looking to operate in that way, you can keep your personal bank account.
Business bank accounts are set up in the same way as personal bank accounts; the only difference is that these accounts are solely for transactions related to your business. To set them up, you need proof of ID, proof of address, a registered business address and business contact details.
These accounts will allow you to apply for business credit cards and business loans, as well as make it easier to claim expenses. Additionally, most of the accounts mentioned below are covered by the Financial Services Compensation Scheme.
So, how do you go about choosing one?
How to choose a business bank account
| Bank | Fees | Things to note |
| Tide | No monthly fee | Manage invoices via the app Integrates with accounting software Bank transfers in and out charged at 20p each Cash deposits cost £2.50 for deposits up to £500 and 0.5% of the amount for deposits over £500 |
| Starling | No monthly fee | Provides own book keeping tool for £7 a month Integrates with accounting software 0.7% fee on cash deposited |
| Monzo Lite | No monthly fee | Other paid options include perks such as expense cards and automatically setting money aside for tax £1 fee to pay cash into the account |
| ANNA Money ANNA Money | No monthly fee | Taxes calculated and filed automatically Offers cashback |
| Co-Op Bank | No monthly fee | Integrates with accounting software Charges 1.5 per cent on cash deposited and withdrawn |
First, take a look at your business. If you’re just starting out, you may want to opt for a bank with the lowest fees. Those with more established businesses may be able to shop around a bit more.
Secondly, consider the type of transactions you will be handling most often. If you’ll be taking a lot of cash payments, a bank with physical branches might be best for you, as you’ll be able to deposit money easily.
If you don’t think you’ll be taking many cash transactions, then you could consider a digital bank.
Digital banks can quickly integrate with accounting software, which will make it easier to stay on top of financial admin as you won’t have to input data manually. Additionally, digital banks often let you attach photos of receipts to transactions, which could expedite the process of cataloguing expenses.
Another factor worth considering is transaction limits – some banks limit the number of transactions that can be processed without charging an additional fee.
If you think you’ll be processing a large number of transactions, digital, cash, or both, go for the bank that won’t charge you extra to process them.
Things to look out for when choosing a business bank account
The primary consideration is fees. Running a business is hard enough – you don’t want your hard-earned money to be spent on paying the bank an unnecessary amount.
Keep an eye out for introductory offers and bonuses, as these can alleviate the initial burden. But don’t be entirely swayed by these, as once they run out, you’ll be stuck paying the monthly fee.
According to the Federation of Small Businesses, these can range from £5 to £25. Make sure you’re not overpaying once the introductory period is over.
If you’re going to be taking payments from abroad, you should note whether your bank supports deposits from international accounts. Digital banks are often easier to pay into from abroad than traditional banks, so this is worth keeping in mind too.
If you think you’ll need an overdraft at any point, and even if you don’t, look into overdraft fees. Double-check what an overdraft would cost you before applying, and what size overdraft you’ll be eligible for. This will be largely dependent on your credit score.