The best banks for small businesses

When starting your own business in the UK, it’s important to think long-term. And this means setting up a proper business bank account.

You might wonder whether you actually need a business bank account, especially if you’re a sole trader. But the truth is that every new business will benefit from establishing a business bank account.

In this article, we’ll explain how to set one up and summarise what’s on offer from some of the most popular banks for small businesses in the UK.

Do I need a business bank account as a self-employed person?

Do you need a business bank account as a self-employed person? Strictly speaking, no. It’s quite possible to use your personal bank account for business banking, and many sole traders do.

The reason for this is simple: legally speaking, your finances and those of your business are identical. But that doesn’t mean you shouldn’t get one. 

A business bank account can provide many benefits if you’re self-employed, including:

• making it easier to keep track of your business transactions – especially if you find yourself selected by HMRC for an in-depth audit 

• providing you with a base from which to apply for business finance, such as a loan or credit card 

• avoiding the stricter limits on transactions placed on personal accounts, allowing you to do more business

While you don’t need a business bank account to operate as a sole trader, then, it’s still worth looking into the options, as having one can make running your self-employed business much easier.

How to open a small business bank account in the UK

What’s required?

First, we should note that different banks will have different requirements. As always, you need to do your research here and make sure you’re picking the right account for you.

With that said, there are some things you’ll generally need no matter which provider you decide to work with.

On top of this, you’ll need to let the bank know if any of your shareholders or directors are based overseas, as this will affect the kind of account you can open.

It can take anywhere from three weeks to three months for your application to be approved, though some banks do offer a quicker process.

Does it cost money?

In a word, yes. In most cases, the bank will charge some sort of monthly, quarterly or annual fee. As always, though, it’s worth shopping around, as almost all providers offer a certain period for free as an incentive to sign up.

Don’t worry too much about this in the longer term, though, as fees are usually not more than around £5 or £6 a month.

What documents do I need to bring?

As with any other bank account, setting up a small business bank account involves showing some evidence that you are who you say you are.

All types of business will need to produce the following documents:

• proof of identity, such as a passport or driving licence, for all partners or named directors 

• proof of address, such as a utility bill, recent bank statement or council tax statement 

• a full business address, including a postcode 

• your contact details 

• your estimated turnover

Limited companies will also need to provide a Companies House registration number, and in some cases you’ll be asked to provide evidence of your financial history, such as a report showing you have clean credit.

The best banks for small businesses

Now you know the basics of setting up a business account, you’ll need to find out which bank is best for your small business. Which.co.uk offers a helpful comparison of bank accounts for small businesses with no minimum annual turnover requirements, perfect for those who are just starting out.

Connect your bank to QuickBooks

At QuickBooks, we’re all about making accounting easy. That’s why over 60 of the UK’s biggest banks and financial institutions can be easily connected to QuickBooks accounting software via QuickBooks Open Banking. This gives you a complete, real-time view of all your finances and cash flow while your transactions are recorded and categorised automatically. You can set up categories and use Bank Rules to fine-tune the automated transactions you accept into QuickBooks. See our explainer to learn more.

Here is a selection of some of the most popular banks used by QuickBooks customers to give you an idea of what’s available - for a full list of bank integrations, visit our Learn & Support section.

1. QuickBooks Cash (coming to the UK soon)

Key features:

• Free to open

• No monthly fees or account minimums

• Seamless integration with QuickBooks accounting software

2. Starling

Key features:

• no monthly fees 

• free UK bank transfers 

• paid options for extra features such as international payments

3. Tide (this is an e-money institution)

Key features: 

• no monthly fees 

• Overdrafts aren’t allowed

• 20p charge on e-payments 

• free debit card and credit card use abroad 

• fast set-up 

• transfers between accounts are free for one year

4. Lloyds

Key features:

• 18 months’ free banking 

• £6.50 monthly fee thereafter 

• free e-payments 

5. Santander

Key features:

• free day-to-day transactions for up to 18 months 

• monthly fees starting at £7.50 thereafter

• 1% annual fee on agreed overdraft 

6. NatWest

Key features:

• 18 months free

• minimum monthly charge of £5 thereafter

• 35p charge on e-payments 

• free banking for charities and nonprofits

7. Barclays

Key features:

• 12 months free 

• £6 monthly charge or £6.50 with free e-payments 

• top-rated online and mobile services for small businesses

8. TSB

Key features:

• 18 months’ free day-to-day banking 

• monthly fee from £5 thereafter 

• e-payments may be free, dependent on your tariff 

• maximum e-payments charge of 20p 

• free card payment reader 

• first £1,000 payments free

9. HSBC

Key features:

• 18 months’ free banking 

• flat tariff of £5.50 per month 

• 23p e-payment fee for small companies 

• free e-banking 

• guarantees the best tariff for companies with an annual turnover

• of up to £2 million

10. Metro

Key features:

• free transactions and no monthly fee if your balance stays above £5,000 

• £5 monthly charge if your balance drops below £5,000 

• 30p charge for each e-payment if your balance drops below £5,000

11. Monzo

The final bank we’re summarising is a little different. Monzo is an online-only bank, and its business account has only been available since March 2020.

This offers unique benefits, such as a far quicker in-app sign-up process and built-in, easy-to-use tools for managing your account.

At the same time, it presents limitations, including: 

• unlimited payments between £5 and £300 only 

• open only to UK-based limited companies and sole traders that only pay tax in the UK 

• £5 per month flat fee to access features such as integrated accounting and multi-user access

 Monzo also has stricter limits on eligibility than many other providers. You can view these in detail on its website.

General tips

As you can see, there are lots of options to choose from when looking for the right business bank account for your small business. As always, you should ensure the provider you pick suits your needs.

Keep an eye on the following elements in particular:

• payment structures and free periods 

• e-payments, cash deposits and card and cheque payments 

• ease of transferring money abroad and exchanging foreign currency

You should also note that, while most business bank accounts offer poor interest rates, this is nothing to worry about: business accounts are not intended for saving. For that, you’ll need to set up a separate business savings account.

Whether you choose to go for an established provider like NatWest or explore offerings from newer players like Tide or Monzo, there’s a wealth of different options to explore.

You’ve chosen your bank. What’s next?

We hope you found this quick guide to business bank accounts helpful. If you need help in any other areas, use our comprehensive checklist for starting your own business in the UK – it covers everything from developing your initial business idea to finding your first customers. Fill out the short questionnaire to get a personalised to do list sent straight to your inbox.