If you’re starting up a business, then setting up a business bank account is an important part of the process. In some cases, having a dedicated bank account for your business – and not simply a personal account where you can handle company finances – is mandatory. Whatever sort of venture you’re planning, a business current account can help make your finances much easier to manage.
In this post, we’ll provide information to help you get started, but you should seek the advice of a legal or financial expert for your specific needs.
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What is a business bank account?
A business current account works in much the same way as your personal bank account, but under the name of your enterprise rather than an individual. While not required by some types of business, a business bank account, along with a business saving account, offers numerous benefits, making them a smart choice for any company. They facilitate tracking profit, expenditures, tax, and the general finances of your venture, streamlining financial management and promoting overall financial security.
Do I need a business bank account?
For Limited companies and business partnerships, setting up a UK business bank account is required before they can trade. Charities and non-profits have their own requirements for operating in the UK – key information on what various business types require can be found on the gov.uk website.
These requirements vary from country to country (England and Scotland, for example, have different requirements) so if you plan to register a business in the UK, make sure you are aware of the regulations about the specific country you intend to trade in.
If you are a sole trader, you can continue to use your personal bank account for your business needs. However, many traders still opt for a business bank account. This simplifies the admin side of things and doesn’t require you to separate your business dealings from your personal ones. Some banks offer exclusive access to small business advisors for individuals who hold a business bank account with them, making them a sensible option for sole traders.
How do I open a business bank account?
Business bank accounts are offered by most high street banks. For your own convenience, you can open a business bank account with your current bank, but this is by no means necessary, and you may even save money by looking elsewhere.
To make a business bank account application, you’ll need to provide the following:
· Proof of identity (your passport or driving licence)
· Proof of address (a utility bill or bank statement will suffice)
· Business name and registered address
· The nature of your business
· Your business plan (in some cases)
If you have a poor credit history then you are less likely to be accepted for a business bank account, and banks may enquire about your personal finances before granting any business banking services to you.
Who is eligible for a business bank account?
If you wish to set up a business bank account, UK residents with a clean credit rating are in the best position to be accepted by providers, but being a native resident of the UK isn’t required.
If you have a locally-based representative of your business i.e., one half of your partnership, then your application for a UK business current account, even by a non-native can still be accepted. International residents may face greater amounts of admin due to any bank’s increased wariness of fraud.
Can a business bank account be opened online?
While you cannot open a business bank account online, your initial application can be made on your selected bank’s website. Most banks will require a meeting in person before granting you access to a business account. You will be required to provide the documents listed above, and may be asked for further details about your business.
Charges and fees of business bank accounts
Business bank accounts come with a fee and this varies depending on what services you require. Types of payments in and out of the account incur different costs, with cheques and credit payments often being charged at a higher rate than their electronic or cash counterparts.
Special introductory rates are also common, such as offering what appears to be a free business bank account. UK high street banks favour this approach in particular, with many offering 12 months free banking for new accounts. A glance at the small print will show that this may not be applicable to your business based on turnover or other similar details, so make sure to study the terms and conditions carefully.
Variations from bank to bank can include offering a dedicated mobile app, an online bank account, overdraft facilities or none of the above. As such, you are advised to not simply settle for the first business bank account you are offered, as it may not accommodate the way you plan to manage your business.
The best business bank accounts in the UK
When it comes to finding the best bank for business accounts, UK high street banks are the most commonly used providers, but they vary in their fees and offerings. Some banks will also charge differently for those who switch bank accounts compared to those who are opening a new bank account with them.
Below is a summary of what you can expect from the biggest names on the high street, helping you pick the best business bank for your needs.
Offers listed below current as of 4 June 2021 and are subject to change. Please visit individual bank websites for up-to-date pricing and for any temporary restrictions put in place due to COVID-19 .
Barclays offer two types of plans with their start-up business account. ‘Mixed Payments’ (charged at £6.00 a month) which offers the best balance for companies accepting both electronic and paper payments, and ‘E-Payments’ (£6.50/month) for those mostly working with digital payments. Both enjoy 12 months of free banking.
Barclays also offer a Loyalty Reward, where more bank charges are returned to you the longer you bank with them. You’ll also get advice from a UK-based team of business managers and international high-growth and entrepreneur experts. Plus online banking with group payments and cash collection booking tools, as well as a smartphone app with free invoicing feature.
Lloyds offer 2 months of free day-to-day business banking, and have a monthly fee of £7. Electronic payments in or out are free and cheques and credit are charged at £0.85. Fees on cash depends on the amount being handled, anything under £1500 per month will be charged at £1 per £100 and anything over £1500 will be charged at £0.90. You’ll receive support from a UK-based business management team and a Mobile Business Banking smartphone app too.
HSBC charges £6.50 per month for their business accounts after their free banking period of 182 months. After the first year you move on to either an Electronic Banking Tariff or Small Business Tariff. The Electronic Banking Tariff is designed for those who mainly bank online or by phone. Cheques are charged at £0.50, cash in at 1.10% of the transfer, and debit cards are free.
The Small Business Tariff is designed for those mainly handling cash or cheques. Cheques are charged at £0.40, cash in at 0.70% of the transfer, and debit cards at £0.25. Overdrafts are available and you receive access to Business Internet Banking.
Royal Bank of Scotland
Offering 2 years’ free business banking and 12 months’ fee-free use of a dedicated business credit card (normally £30 per year), Royal Bank of Scotland completes the ‘Big Four’ UK high street banks. Cash payments are charged at £0.70 per £100, and cheques at £0.15. You’ll get 24/7 online, phone and mobile app banking, a programme of networking events, advice from business owners and accounting software. Overdrafts are subject to approval.
There are business bank accounts alternatives beyond major banks. The Cashplus Business Account and CardoneBanking Small Business Account are entirely online and though limited in their offerings compared to high street banks, may be the more convenient choice.
If your business has an ethical slant then Triodos Bank has business account offerings you may be interested in. With customers including River Cottage, Triodos aims to help businesses that are making a positive difference to society socially, culturally or environmentally.
Linking your business bank account and setting up transfers with Square
Once you have your business bank account, it’s simple to link it to your Square account and begin receiving funds as soon as the next business day with Square Transfers. You can set up PayPal with Square Online but you will need to upgrade your Square Online site.
Square will need to verify your account before money can be transferred, however, you can still accept payments – these will be securely stored in your Square balance.
To add your bank account to Square:
Sign in to your Square account and go to Bank Accounts
Enter your account holder name, sort code and account number
Check your information is correct and click submit
Square will verify your account and complete the process, this can take up to 7 business days.
Following your account being verified by Square, you can have payments transferred straight to your account. Square’s transfer schedule has payments transferred by 16:00 the following business day. Transactions made from Friday – Sunday will be transferred the following Monday. If you pay 1% of the transfer amount, you can select Instant Transfer. This initiates transfers instantly and they arrive in 20 minutes or less, including on weekends and bank holidays.
You can change your Close of Day time in your Square Dashboard to better reflect your trading hours, this allows Square to group the transactions of the past 24 hours into one transfer and is especially useful for businesses trading after midnight.
For further information of transfers and linked account settings, visit our Support Centre.
Square Instant Transfers
The quickest way to get your money is to take advantage of Square’s instant transfers.
Sometimes you need your money immediately – that’s when instant transfer can help. If it’s available on your account, you can instantly send funds to your linked bank account 24 hours a day, 7 days a week, for a fee of 1% of the transfer total. Using instant transfer, you can instantly send up to £2500 per 24 hour period to your bank account. The funds will arrive in your bank account within 20 minutes.
Before you get started, make sure you have at least £50, after processing fees, in your Square balance.
Learn more about sending an instant transfer.
Note: New sellers may be restricted from using instant transfer until they have sufficient account history. As you run and grow your business with Square, instant transfer will become available.