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Do I Need a Business Bank Account?

Business bank accounts. If you’re thinking about starting up a company, you’ll hear more and more about them. But what is a business bank account, and more importantly, do you need one? And, if you do, how do you get one? Our guide explains all you need to know.

What Is a Business Bank Account?

By incorporating your business, you establish the company as a registered corporation. In doing so, you can access several important business management tools and processes not available to sole-trader business owners. Through incorporation, you create a limited liability organisation that can employ people, make its own tax payments, have directors, shareholders and lots other benefits.

When we think about resources that relate to business ownership, like business banks, business property, business tax, etc. we automatically assume they’re more complicated than similar personal assets. While that might be true in some cases, the reality for business bank accounts is that there is nothing more complex about a business bank account than a personal current account.

A business bank account works like a normal bank account. You have the same identifiers in terms of an account number, sort code, IBAN, etc. You also receive debit cards attached to the account.

The significant difference between a business bank account and a personal current account is that a business account must be registered to an incorporated company, while a personal account is registered to an individual.

Another difference is that business bank accounts come with a monthly fee attached — usually around £5.

Do I Need a Business Bank Account for My Company?

Business bank accounts are mandatory for all limited companies incorporated by Companies House operating in the UK. If you want to start a business, you need a business bank account.

Why?

Because businesses are separate legal entities — meaning they are financially independent of the business owner, who is an employee of the business. All business earnings must go through the business bank account, which then pays out salaries and dividends — even if you are the only employee of the business. For the purpose of financial tracking anti-fraud and taxation, you cannot start a business and have money paid into your personal bank account.

If you want to start a limited company, you will need a business bank account.

Do I Need a Business Bank Account If I’m Self-Employed?

If you are a self-employed sole trader , then you do not need a business bank account.

As a sole trader, you as an individual, are the business. Your earnings are in your name and you take all the legal liability for the activity of your company. Therefore, you are fully entitled to earn income directly into a personal account, as there is no separate business entity to consider.

Want to register your UK limited company today?

Should I Open a Business Bank Account Now?

Even if you’re self-employed, there are certain benefits to a business bank account:

  • Time Management — If you’re paying all your business purchases into a personal account, it can be difficult to separate personal from business transactions. 

  • Tax Management — You’ll need to submit accurate tax information, including income and expenditure. Business bank accounts keep all your data in one place, saving you from any inaccuracies and making it easy for HMRC to review your accounts if necessary. 

  • Business Finance — Business bank accounts often link to your business’s credit rating and finance options. If you want to take out business loans, it becomes easier if you have a business bank account. Lenders don’t like to offer business loans to personal accounts — understandably so, as the money could accidentally (or purposefully) be spent on personal items.

We recommend you consider opening a business bank account as a sole trader, simply because they can make your life easier.

If you’re considering moving from self-employed status to limited company business owner , or you intend to start a new business as a limited company, then now is a good time to open your business bank account. If you want to start trading straight after you establish your company, you’ll need your bank ready to go!

It should be noted that you do not need a business bank account set up to register a company with Companies House. You can open your business bank account at a later date. Just know you cannot start receiving income until that business bank account is open.

How to Set up a Business Bank Account

It’s easy to set up a business bank account. You can apply through any bank offering business bank services either in-branch or online depending on what options are available. 

Business bank accounts setups often require more administrative work than a personal account due to the greater level of financial responsibility imposed upon the account. This means the process of application can take up to four weeks.

Most business bank accounts will see a lot more activity than a personal account, with much higher transaction prices, which is why extra care is needed.

If you’re keen to get started right away, Mint Formations offer fast-tracked business bank account registration for both Barclays and Lloyds business bank accounts . Our benefits include free business banking for up to 18 months. We can also get your business bank account set up in less than a week.

Setting up Business Bank Accounts as a Foreign National

If you’re a foreign national attempting to set up a business bank account in the UK, you face numerous obstacles due to anti-money laundry rules. It is possible and no law says you cannot own a UK business bank account. But the process can be challenging and lengthy, with many high-street banks refusing such applications. 

If you’re a foreign national, we recommend you consider our application service to register a UK Company as a non-resident. We’ve negotiated agreements with UK banks to make it easy for you to secure your business bank account. 

Have you reached the stage where you need to start thinking about your business bank account, or have you still got a way to go yet? Read our FREE roadmap to success to find out if you’re ready.

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