Choosing the right bank for your small business

When starting a small business in the United Kingdom, it is vital to think long term. One of the most important things you should take to ensure the success of your new business is to open a separate business account.

If you are a sole trader, you might be wondering if you really need a business bank account. But the reality is that opening a business bank account is beneficial to any new company. 

In this post, we will go over how to set one up and what some of the most popular banks for small companies in the UK have to offer.

Do I need a separate bank account?
It is reasonable for sole traders to utilise personal bank accounts for their own small businesses without the need to open a new separate business bank account. The reason for this is simple: your personal funds and those of your company are legally equivalent, however, it is advisable to establish a different bank account for better efficiency.

If you own a small business, a separate business bank account may help you with a variety of things, including:
  • Easier to keep track of company transactions - particularly if you are chosen for an in-depth audit by HM Revenue & Customs (HMRC);
  • Allowing you to apply for other financial necessities - such as a loan or a credit card;
  • Avoid stricter regulations and limitations - personal bank accounts are subject to stricter rules and limitations, you can simply bypass this by opening a separate bank account more suitable for your business needs;
  • Professional look - a business account can provide a more professional look for your small business;
  • Simpler to sell your small business - You may provide bank statements to a potential buyer without having to worry about releasing personal information if you have a business bank account.

How do I open a business account in the UK?
Different banks will have different criteria therefore we advise you to conduct research on suitable banks to ensure that you are selecting the correct account for your small business. 

Having said that, there are a few things you still need to do regardless of the bank you will choose. For instance, many banks will require a meeting with any person of importance such as the company director or partner. You must also sign a bank mandate in person before you can successfully open a business account for your small business. We will highlight other essential steps that you should adhere to in the following list:

  • Costs - The bank will almost always impose a monthly, quarterly, or yearly fee.  you can select a suitable bank based on your own budget and financial situation;

  • Required documents - Setting up a small company bank account necessitates providing proof that you are who you claim to be, here are the things you will need:
  • Proof of identity;
  • Proof of home address;
  • Registered office address;
  • Contact details;
  • An estimated turnover of your small business.

* Limited Companies must submit a Companies House registration number, and you may be requested to produce proof of your financial background, such as a credit report demonstrating you have a clean credit history.

Banks for small businesses:
A cheque and a paying-in book are the most basic features of a business account, but many banks will provide extra benefits, such as an interest-free credit balance or 18 months of free banking in order to incentivise you to join their banks.  

When comparing accounts, it is vital to consider both the benefits and the fees, as well as how you will use them, to choose the one that's ideal for you. 

To assist you, we have compiled a list of the top small business accounts available.

  • TSB Business Plus account
A TSB Business Plus account includes a year of free Enterprise Nation membership, which provides help to small businesses. TSB also boasts that it offers a Fraud Refund Guarantee, which states that if you are obviously the innocent victim of fraud on your TSB account, the money you lost will be refunded.

  • HSBC Kinetic Current account
The HSBC Kinetic app offers an immediate access savings account to help you budget for future needs, as well as automated transaction categorization and tailored cash flow analytics to help companies better understand their inflows and outflows.

  • Natwest Startup account
For businesses in their first year of operation with a predicted or present annual turnover of less than £1 million, the account gives 18 months of free banking. Customers will also have free access to the accounting software ‘Free Agent’  which will allow them to track cash flow, invoices, and spending records.

  • Santander Business Current account
Customers in their first year of operation can get 18 months of free banking if they have no more than two directors, owners, or partners and it's their first business current account with Santander.

  • Lloyds Business account for new and small business
Start-ups and smaller enterprises with an annual sales or balance sheet worth of less than £3 million are eligible for this account. The free day-to-day banking package includes no monthly account charge, electronic payments, checks, and cash withdrawals for a period of 12 months.

Persona Finance offers essential remote accounting and business services for all business types. For more information on what we offer, please contact Persona Finance at [].