How to Open a Business Bank Account

Opening a business bank account allows you to separate your business and personal cash flow. It’s one of the to do’s in how to finance your startup effectively. This blog explores how to open a business bank account, including a checklist to help you. It does not provide financial advice or recommendations. Most importantly, Maximum Solutions Consulting Ltd is not regulated by the Financial Conduct Authority (FCA). Therefore, it cannot and does not attempt to recommend or advise you about any financial services company or product.

This information is provided within the context of some of the current ways of opening a business bank account. The included table is listed in alphabetical order only. It does not (and nor does any other reference) promote any one provider as better or worse than another. Instead, it brings together some of your current options. Please complete thorough research before proceeding. You need to make sure you’re in receipt of the most up to date information. For example, check your options online and/or visit a high street branch. Most importantly, seek qualified financial advice before making a decision.

Reasons for Opening a Business Account

From an organisational and planning perspective, opening a business bank account is good practice. It makes it simpler, easier and more efficient to separate your business and personal transactions. This is particularly important for informing HMRC about earnings. Consider things like payroll and paying employees, whether now or in the future.

A business bank account helps your business appear more professional. Whilst as a sole trader you don’t need to have a business bank account, it will make it easier. For example, with submitting your self-assessment tax returns. In addition, keeping on top of your income and outgoings. This saves you time in separating out expenses and reduces possible errors.

Remember, your personal bank account terms and conditions might stipulate it’s for personal use only. In this instance, if you use a personal account for business purposes, your provider could close it. For example, if large transactions were to raise a red flag.

In the long-run, a business bank account can support your business’s credit rating. This could be important for future lending and loan application requirements. For example, a bank loan to fund a project, for new premises, to deliver growth plans or something else.

Certainly, the banks themselves offer different incentives, charges and interest rates. Whilst all banks and building societies must adhere to strict financial regulations, application processes can vary. For example, whether or not you have to go into a branch to complete the application process. In addition, the time it takes to process applications and/or open an account. Therefore, it’s important to check before proceeding to avoid spending a lot of time choosing an account that isn’t right for you and your startup’s needs.

Opening a Business Bank Account

Choosing the right type of business account can be daunting. There’s plenty of providers and options to choose from. As this article touched on earlier, opening a business bank account keeps things clean. Not only if this is good practice, but it conveys a level of professionalism. Let’s explore how to open a business bank account.

For UK residents setting up a business account in the UK

  • Comply with the applicable financial services providers’ eligibility criteria.
  • Provide proof of ID, which can be a passport, national ID card or photo driving license. For limited companies, all named directors will need to do this as part of photographic identification.
  • Provide proof of address, which includes a utility bill, recent bank statement or council tax statement. Note, some financial services providers stipulate that scanned copies aren’t admissible. In addition, you might need to get printed bank statements authorised by a local branch. Check with individual service providers for their exact and current requirements.
  • Confirm several company details, including business address and contact details. In addition, companies house registration number, estimated annual turnover etc.

For non-UK residents setting up an account

As is the case for UK residents, you will also need to comply with the applicable providers’ eligibility criteria. In addition, provide proof of ID and address. Whilst it’s not necessary to live in the UK to open an account, most banks expect you to have residency. If you don’t have residency, they may not proceed with your application.

The major UK Banks have international accounts, which are designed specifically for non-UK residents. It’s also possible to apply for these types of accounts online. This assists those that aren’t able to provide proof of a UK address. Barclays, Lloyds, HSBC and NatWest offer international accounts.

Typically, international accounts require an initial hefty deposit and thereafter, minimum monthly deposits. In addition, they may also have monthly account fees on top. TransferWise is an alternative option that allows you to convert and hold +40 currencies. It’s still regulated by the FCA, but potentially a much cheaper option. Check with all applicable providers before proceeding for up-to-date requirements.

Visit the Government’s website on how to open a UK bank account..

Comparing Business Accounts

business bank account fees

The included table details some of the current options. It does not attempt to provide every single business account option or provider.

This is to give you an idea of the current monthly account & electronic payment fees, and only for those listed.

Please make sure you thoroughly research your options. From time to time, banks and other providers change their tariffs and incentives.

Note, this table is based on October 2019 information and is correct at the time of publication.

How to Open a Business Bank Account in the UK

Certainly, the processes and steps involved will vary between banks, building societies and other financial services providers. As a startup and small business, identify any special features and support. For example, some banks provide a business startup account with no account fees for an initial period.

Think about your account needs. For example, do you want to be near a local branch for face-to-face meetings? Online banking is generally included, but not all account types come with an online banking facility. If having an overdraft facility or business credit card is important, what are the terms and fees? How competitive are they when you compare with other providers?

Most importantly, plan ahead and think about the future. For instance, consider the ability and ease to switch accounts. For example, if a new and better account comes available. What about foreign transactions and charges, even if you’re not currently trading outside the UK?

Checklist to help you Open a Business Account

  • Ensure you have a robust business plan, particularly if you have a low credit rating.
  • Check your credit rating score with Experian, Transunion or Equifax.
  • Make sure you’re registered on the Electoral Roll, otherwise it could be difficult to open an account.
  • Determine your current and potential account needs.
  • Start by doing a general search online and/or by visiting local branches.
  • Compare fees, interest rates, free cash withdrawals, mobile banking.
  • Check what incentives, rewards and customer service ratings and reviews.
  • Verify the expected time frame from application to account opening, if accepted. This may range from as little as 3 weeks to 3 months.
  • Weigh up the pros and cons for each provider, and in accordance with your needs.
  • Get required paperwork in order, so you’re ready to start the application processes.
  • Note, if you have foreign Directors and/or Shareholders you need to inform the provider. In addition, confirm whether you want a UK or international business bank account.
  • Seek qualified financial advice from a Financial Advisor. One that’s authorised and registered with the FCA. WHICH published a helpful article on how to find a financial advisor.

Most importantly, way up your options carefully and complete thorough research. If you’re unclear or unsure about what to do, seek financial advice from an authorised Financial Advisor.

Further Startup Support

Maximum Solutions Consulting Ltd provides startup business advice and business coaching. For example, if you need some general startup advice, want to make your business efficient or learn how to handle difficult conversations.