How to Set Up a Business Bank Account in the UK
Do You Need a Business Bank Account?
Sole traders: Not legally required, but strongly recommended. Mixing personal and business transactions makes bookkeeping harder and increases the risk of errors on your tax return.
Limited companies: Legally required. A company is a separate legal entity and must have its own bank account.
Benefits of a Separate Business Account
- Cleaner bookkeeping — all business income and expenses in one place
- Easier tax returns — clear separation between business and personal transactions
- Professional image — clients pay into a business-named account
- Better cash flow visibility — see your business finances at a glance
- Bank feed integration — connect to accounting software like Accounted for automatic categorisation
What to Look For
Fees
Some business accounts are free (especially for the first year or for sole traders with low transaction volumes). Others charge monthly fees from £5 to £25+. Compare:
- Monthly account fee
- Transaction fees (per payment in/out)
- Cash deposit fees
- International payment fees
Features
- Mobile banking app
- Integration with accounting software
- Invoicing tools
- Multi-currency support (if needed)
- Overdraft facility
Popular Options for Sole Traders
- Starling Bank — free business account with good app and integrations
- Tide — free basic account, popular with sole traders
- Mettle — free account from NatWest
- Monzo Business — simple and well-designed
- High street banks — HSBC, Barclays, Lloyds, NatWest all offer business accounts
How to Open One
What You Need
- Proof of identity (passport or driving licence)
- Proof of address (utility bill or bank statement)
- Your business details (nature of business, expected turnover)
- For limited companies: company registration number and details of directors
The Process
- Choose a provider and apply online (most accept online applications)
- Verify your identity (online or in branch)
- Provide business information
- Account is usually active within 1-5 working days
Tips for Managing Your Business Account
- Pay yourself a regular "salary" from business to personal account
- Keep a tax reserve — transfer 25-30% of profit to a savings account monthly
- Reconcile regularly — check transactions weekly
- Connect to accounting software — automatic bank feeds save hours of bookkeeping
Connect your business bank account to Accounted and Penny will categorise transactions automatically.
Separate your finances from day one. Sign up for Accounted and connect your business bank account for effortless bookkeeping.
Business & Operations Advisors
Our business advisors cover the practical side of running a UK sole trader business — from HMRC registration to managing growth. Content is written for real business owners in plain English, not accountants.
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