If you’re at the beginning of your business journey, perhaps setting up your first startup, then you’ll need to consider your business bank account. With a range of options available to you, how do you choose which bank to go with?
At Fair Investment, we like to help, so here’s a run down on the best business bank accounts in the UK – and what it all means for your business.
Choosing a UK Business Bank Account
It’s worth a pause and a think when it comes to selecting your business bank account. As humans, we’re all guilty of settling for what we know, and when it comes to banking that’s especially true.
Most businesses are still banking with the institution they chose when they first started; whether that was last year, five years ago, ten, twenty, or even fifty! Choosing your business bank is like selecting a long-term partner for your company, so it’s good to not rush into any decision. At Fair Investment we’re here to help.
Why Do You Need a Business Bank Account?
It is a legal requirement for all UK limited companies to have a separate business bank account that has nothing to do with the personal accounts of the directors. For self-employed sole traders and partnerships, the distinction between personal and business accounting is not as strict, but it can still be beneficial for sole traders to separate work finances from personal ones.
High Street Banks vs. App-Based Digital Banks
A decade ago, you might have simply chosen to bank with a high street bank without thinking; a familiar and trusted name and reputation. However, app-based banks (often called fintech banks or challenger banks) have grown in services and popularity in recent years, making them a strong and viable alternative to traditional banks.
In fact, Starling and Monzo, who together led the app-based online banking revolution from their inception in 2015, both feature in our list of best business bank accounts. App-based banks offer incredible ease of use and some of the best features of any of the banks and are at the top of the game when it comes to app-based features.
Banks vs. Electronic Money Institutions (EMI)
With the rise of digital banks has also come the growth of electronic money institutions or EMIs. Many larger EMIs also offer business banking accounts and services. There are a number of differences between EMIs and banks regarding regulation, but the main difference from a business perspective is that a bank is legally able to lend money, where an EMI is not. Note that Monzo and Sterling are both registered as banks, while Revolut which seems similar, is an EMI.
Banks vs. Building Societies
Building societies such as Nationwide or Coventry Building Society are not banks, though many do offer business services. As their main remit is to personal banking, their business services may be limited, lacking some of the features that banks offer.
Regulation and Guarantees
All banks, building societies and EMIs are regulated by the Financial Conduct Authority (FCA). However, only banks and building societies are protected by the Financial Services Compensation Scheme (FSCS) which means even if they go bankrupt, your money is protected and guaranteed up to £85,000. If an EMI business goes into administration, you may lose any money held in accounts.
UK Business Bank Accounts and Fees
Many banks will charge fees for business accounts, but these can be as low as £5 per month and many have a free period (often 12 months) while you start up your business. There are also fees for some of the services, such as card transaction fees when you take a card payment, overdraft fees if you go into your overdraft facility, or fees for handling large volumes of cash. It’s worth comparing fees between business bank accounts to see which is more suitable for your needs.
Common Business Bank Services
There are a number of services worth looking at when choosing your business bank:
- Overdraft Facility – While most business banks will offer an overdraft, the size of that overdraft and the fees associated will vary greatly. It is not recommended that you overuse overdrafts and other lines of credit, and good management of them is essential for good financial standing, however, they are a key part of cash flow management for any business.
- Merchant Services – Merchant services are the part of business banking to do with taking credit and debit card transactions. If you are a B2C (business-to-consumer) business, either online or taking physical card transactions, then merchant services will be an important part of your banking setup.
- Online Banking – The speed, efficiency and ease-of-use of online banking services improve each year, with most banks offering a great range of additional services through their mobile apps. Good online banking is essential in today’s business world, so look at the app features and make sure the ones you care about are available. Sometimes even the smallest feature, such as alerts when money goes into or out of your account, can make a world of difference to your day-to-day running of your business.
- Integrated Accounting – With responsibilities such as online tax payments to HMRC, and end of year tax returns, it is essential that your bank works smoothly with your accounting software. Many business accounts offer additional facilities such as payroll and invoicing software, which may be of considerable use. Discuss with your accountant and bank advisor if you are keen to make use of these facilities.
- Loans and Credit Cards – It is very common to go to your primary bank for loans and credit cards in the early days of your business. As a new customer, they will be keen to help you grow and keep your business in this way. Check the loan rates at your preferred banks and look into any specialised loans that may be relevant to your industry.
- Advice – Many banks, especially traditional high street banks, offer comprehensive business advice to new entrepreneurs. If advice is important to you, you may want to consider a traditional rather than online-only bank.
- International Transactions – If your business is going to be working with customers overseas, exchange rates and fees are going to be an important consideration. Take the time to research how the account deals with international exchanges.
Best Business Bank Accounts in the UK – 2024
Monzo
One of the early challenger banks, Monzo built on their personal accounts, opening up to business customers in 2020. A great innovator in the mobile app sector, many of the features that banking apps have today originated with Monzo, including the idea of instant transaction notifications. For its business banking, Monzo received Smart Money People’s 2024 British Bank Award for Best Business Banking Provider, having previously won in 2022. Pros and Cons
- One of the best, user-friendly mobile banking apps.
- Comprehensive tracking tools to help cash flow and budgeting.
- Competitive exchange rates and fee-free spending when abroad.
- Seamless integration with accounting software.
- Transparent fee structure.
- Focus on startups and SMEs
- Some limitations on business banking features compared to traditional banks for larger businesses.
HSBC
One of the world’s largest banks, HSBC’s global presence makes it especially useful for businesses operating internationally. They have extremely experienced and specialised teams dedicated to all business sectors and a focus on advancing their digital banking tools, making them a worldwide industry leader. Pros and Cons
- Comprehensive range of services, covering every banking and insurance need.
- Superior global reach.
- Dedicated relationship managers for business customers.
- Advanced digital banking tools.
- Account fees can be larger than competitors.
Barclays
A regular award winner on the banking stage, Barclays has been providing banking services to businesses for over three centuries, meaning they have the experience and understanding to excel on every level. With a huge range of services for businesses, Barclays offer support to both young and established businesses, with dedicated relationship managers and premium online banking services. Pros and Cons
- Dedicated support for startup businesses in the UK.
- Networking and event opportunities for business customers.
- Impressive range of business loans, overdrafts, credit cards and other financial support.
- Excellent digital banking platform.
- Complex fee structure, with higher than average fees.
- Shrinking physical presence, with many branches closing across the UK.
Starling
Our second fintech bank to make the list, Starling is extremely well-regarded by its customers, scoring highly in reviews, Starling has won the Smart Money People’s British Bank Award for Business three years out of the last five, as well as picking up awards in other categories. With a fully-digital banking experience, Starling is perfect for tech-savvy entrepreneurs looking to make the most of online banking. Pros and Cons
- Exceptionally easy account opening procedure.
- Full integration with all common accounting software platforms.
- No monthly fees for the basic business account.
- Advanced security features.
- Limited lending and other services compared to traditional banks.
Cashplus
With no credit check requirement, Cashplus provides business account services to those with poor credit, making them an excellent option for new entrepreneurs looking to build their business credit score and develop a business in its early stages. Features such as prepaid expense cards for employees help manage budgets and business cash flow. Pros and Cons
- No credit check to open account.
- Good integration with accounting software.
- Basic account comes with no monthly fees.
- Limited lending options.
- Charges for additional services can be greater than other banks.
Revolut
Revolut is the only EMI to make our list. As it is not a bank, it is not protected by the FSCS, however with a good history and arrangements with other banks to protect your money, the risk is low. An expert in the field of international currency exchange, Revolut offers multi-currency accounts with competitive exchange rates and some advanced financial management tools. It is also well-regarded as the best bank for those using cryptocurrency with crypto built into its web interface and mobile app. Pros and Cons
- Excellent for multi-currency businesses.
- Cryptocurrency support.
- Free ATM cash withdrawals internationally.
- No FSCS protection.
- Maximum £3,000 daily withdrawal.
- No lending facilities or overdraft.