As London small businesses accountants we fully understand how your business bank account is a vital part of everything you do and can have a tremendous effect on the way your business operates and its financial dealings.
With a wide range of business bank accounts available in today’s market, choosing the right bank for your business can sometimes be confusing and as premium accountants we are often called upon for advice.
Low fees or higher interest? In a branch or online? Maybe a balanced mixture of both will be better for your needs?
As part of our professional accounting services let’s take a look at some options.
What Do You Need?
When you first start looking around you will find that at the basic level, a business bank account is remarkably similar to your personal bank account, but it’s one you will open that will be dedicated to your business income and expenditure.
However, once you start reviewing the full terms of a business account they can range from a very simple revenue in, expenditure out account to the type of account that can help you issue invoices, run payroll (if you employ others) and actually be of benefit to assisting your accountants with your accounting and tax return.
The holy grail for many small businesses who have succumbed to clever advertising is to find free business banking, though that is hardly ever or rarely available in the same way as it is for your personal bank account.
If you have taken the decision when setting up your business through your small business accountants to start as a limited company in the UK (ie, you’ve registered it at Companies House) then you will definitely need a business bank account.
As a limited company your business is legally separate from your personal finances, so you must not use a personal account for its expenses.
On the other side of the fence if you have started your business as a sole trader or freelancer or if you are contracting (but not through a limited company), – ie trading as something like a hairdresser, research interviewer, journalist, gardener, designer etc. – , then you don’t need a separate dedicated business bank account as your self employment isn’t legally separate from you. Under UK laws, trading as a sole trader, you and your business are one and the same in the eyes of the taxman!
You can take a look at our recent blog on Should I stay as a sole trader or register as a limited company to help you clarify other differences between the two types of businesses.
Following the rules is fine but as a sole trader you should still consider opening a separate bank account for your business. As part of our accounting services we would advise that, if you’re offsetting any kind of legitimate business expenses such as stationary and office expenses, travel, customer hospitality etc against your income, then it is always advisable to simply open a separate business account.
Best Business Bank Account Options
Finding the best business bank accounts for startups, sole traders and small businesses is not straightforward, as the account you choose very much depends on what you need the account to do for you and your business.
Over the years a number of new fintechs have been offering business accounts and they tend to be relatively easy to set up and normally cheaper than their high street counterparts. These types of accounts can be set up within minutes, as long as you have the required documents, and as part of our accounting services we are happy to offer our experienced advice.
Business bank account fees vary between providers and various factors such as the account type, your account balance, and what kind of transactions are made using it.
Business banking monthly fees range from £3 to £50, and for cash withdrawals the charges can range from as little as 20p to £1 per withdrawal. Although cheques are rarely used these days. you may be charged from 20p to £1 for each cheque written.
Like most premium small business accountants we would advise you to review how you have set up and intend to run your business, and think about the services you will most frequently use, and then look at accounts that best meet the needs of your business.
Key Examples Of Small Business Bank Accounts
Barclays Bank – Suitable for most businesses with a turnover of up to £6.5 million. Specific criteria for businesses in certain sectors e.g. agriculture, social housing. Free Banking for 12 months, after this period the account fee £8 per month.
Co-operative Bank Business Current Account – Free banking for 30 months. Customers must be £1,000 in credit at all times to qualify for free banking ,otherwise it’s £10 per month.
HSBC Kinetic – The free banking period is for 12 months. This account is for single director limited companies or sole traders with annual turnover of up to £2m.
HSBC Small Business Banking Account – For this account your turnover needs to be below £2m and your business does not have a requirement to borrow more than £30,000. Free banking for 12 months, thereafter fees are £8 per month.
Metro Bank – This bank account offers free banking as long as your business account balance remains over £6,000. If that criteria is not met then fees are £6 per month.
It’s clear that business banking options abound, but lots of research and financial know-how is required to select which one works best for you and your business.
As long-standing professional accountants in London we have contacts in a lot of banks and are happy to offer our clients advice and research assistance as part of our accounting services.
Final Thoughts
Don’t be rushed into a decision as it’s an important one and your banking partner is there to support your business through good times and bad, so you need to be confident with your choice.
As small business accountants we keep our fingers on the pulse regarding new business bank accounts and regulatory changes to assist our clients with obtaining the best possible banking solutions.
Arrange an appointment to chat about your business banking needs and lean on our experience.
