Strong organisational skills are vital when you’re setting up your own business, and it’s particularly important to apply this to your business banking.

Limited companies need to have to have separate accounts in the company name as the money belongs to the company and not the director. If you’re a sole trader it can appear easier and more convenient to use one bank account for work and personal expenses – but as you get busier, it’ll definitely become more difficult to decipher all of your bank statements when it comes to Self Assessment time. Was that £3.79 in WHSmith a business expense, or your lunch? Or perhaps both?

To avoid confusing matters, and possible problems with HMRC, it’s absolutely essential to make sure that you keep your personal and business banking separate, and to do that you’ll usually need a dedicated bank account for your business.

Many banks don’t want to let you use a personal account for your business – it may be against the terms and conditions of your personal account. Most business bank accounts come with monthly fees, but also offer introductory offers such as free banking for a set amount of time. In this article, we’ll give you some ideas for what to look for in a business good bank account.

Do I need to open a business bank account if I’m a sole trader?

It’s not strictly a legal requirement, but it’s highly recommended that you set up a separate business bank account.

As a sole trader, all of your business profit is taxable to you personally, and legally there is no difference between you and your business. But unless you want to pay more tax than necessary, you’ll usually want to claim sole trader business expenses when it comes to submitting your annual Self Assessment tax return. You need to be able to prove what your business expenses are, and be sure that they’re all allowable. Having them mixed up with your personal expenses can cause all sorts of headaches and mean getting your accounts ready takes longer than necessary.

Do I need to open a business bank account for my limited company?

In a word, yes. Again, it’s not strictly a legal requirement to have a dedicated business bank account. However, as your limited company is a separate legal entity, its money does not belong to you and must be separated from your own finances.

The bank account should be in the name of your business. So it’s highly recommended that you set up a separate business bank account. Most Banks will spot that you’re setting up an account in the name of a limited company, and likely insist you use a business account under specific terms and conditions.

There are strict rules on how you can take money out of your limited company. You can take a salary, dividends, and claim back any expense you paid personally, but that’s about it. Any other money you take out of your business will usually be treated as a director loan, with strict rules about how, and when, it needs to be paid back as well as the tax payable on the loan and repayments.

You’re taxed personally on the money you take from the limited company in salary and dividends. If you’ve recently made the jump from sole trader to a limited company, it’s highly recommended you don’t use the bank account you operated when you were a sole trader, or you’ll risk some nasty tax consequences.

Finally, there’s the professionalism aspect. Some clients may be uncomfortable paying an individual rather than a business. Indeed, some larger businesses may not allow it at all so it could mean you’re missing out on work.

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What do I need to open a business bank account in the UK?

If you’re looking to open a business bank account in the UK, you’ll usually need to make sure you have the following documents and details to hand:

• Proof of ID (passport, photo driving license or national ID card) for all named company directors
• Proof of address (utility bill, council tax statement, recent bank statement).
• Full business address (including postcode)
• Contact details
• Companies House registration number (for limited companies and partnerships)
• Estimated annual turnover.

You may also be required to provide proof that you have a clean credit and banking history.

How to open a business bank account in the UK

Many major banks don’t give you the option to open an account online, but usually, you’ll be able to start your application on the bank’s website, prior to meeting a representative in person or over the phone.

Some banks will allow you to walk into the branch and make a same-day appointment, but of course, this cannot always be guaranteed.

Some newer online banks do allow online account opening though. Alastair Travis, VP Business Services at Tide, one of our banking partners has this to say:

“It’s advisable for anyone considering setting up on their own to open a business account. Besides keeping your company finances separate from your personal expenses, some accounts will even let you manage your finances while on the move.

“Opening an account doesn’t need to be time-consuming or complicated. For instance, it only takes minutes to open a free Tide account. All your finance admin can be managed on mobile or web from the Tide app, which has been designed specifically with small business owners in mind. From invoicing to expenses, Direct Debit to accounting software integration, Tide is by your side as your business grows.”

Applying for an account with Tide couldn’t be easier! Simply use our partner link to their website to apply online and use the code ‘CRUNCH’ to enjoy £50 cashback.

What should I expect from a good business bank account?

Some perks that banks may offer to entice you to choose them for your business account are:

A personal adviser

Having a specialist you can contact directly and who understands your business will mean you have a more personal experience when discussing your banking needs.

Low charges

The majority of business bank accounts have a monthly fee, as well as additional fees for certain transactions, such as depositing cheques. You can expect to pay around £5 per month to maintain a business bank account, while the more expensive fees can be more than £10 per month. As with any deal, it’s worth shopping around to make sure you’re getting value for money.

A fee-free introductory period

Many banks offer a period at the beginning of your relationship when you don’t incur any standing fees on your business bank account. Again, consider this when choosing who to work with, but always ensure you’re aware of how much it will cost you when this period ends. It can be time-consuming to change business bank accounts, so don’t just consider the initial offer rate, consider the long term as well.

Manage your finances through an App

Having real-time access to your finances means you’re less likely to make any rash, uninformed decisions. It’s especially helpful if your business bank account can sync with your online accounting software.

Telephone banking

Running your business is time-consuming enough without having to physically go to your bank to speak to somebody. If it’s too difficult to speak to someone when you need to, then you might want to look elsewhere.

Overdraft facility

Just like a personal bank, your business bank will probably be able to lend you money via an overdraft. It’s worth researching how much each provider is willing to lend, and the fees and interest they charge.

Foreign transactions

If you deal with overseas clients, you’ll need a bank account that can process foreign currency transactions. Don’t forget to check before you sign anything if this is a service you need.

Is it easy to switch accounts?

Like any ongoing business relationship, it’s sensible to regularly check your deal and reviewing whether or not you can get a better one from a different provider.

Talk to your bank before making any decisions, as they may be able to improve your deal.

The straightforwardness of switching will inevitably come down to the two banks in question, but in most cases, they will assist you in moving your accounts over seamlessly.

Can Crunch deal with my bank directly?

For efficient and simple business management, we’ve got our free Crunch Open Banking solution for many high street and online banks. If your bank is supported then your transactions will be securely and automatically imported into your Crunch online accounting software.

We’ve also got secure direct feeds available from Metro Bank and Cater Allen.

This means that as a Crunch client, it’s even easier to keep on top of your business finances, all your transactions will be automatically imported into your Crunch account, so you have a really good overview of your company accounts, at no extra cost.

If you’re a Crunch client and you want to start benefiting from this easy-to-use feature then we’ve got an article with information on how to get Open Banking set up in Crunch You can give your client managers a shout if you need any help getting started.

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What if I’m not with one of these banks?

Don’t worry if you’re not with one of our banking partners – you’ll still be able to upload your bank statements into your Crunch account, we make it easy using our CSV import functionality.

You simply export the transactions from your online business bank account and import them into your Crunch account at the end of every month. We’ll guide you through the process from start to finish.