Do I Need A Business Bank Account? | An In-Depth Guide
What is a Business Bank Account?
A business bank account can range from that very simple money-in, money-out account to an account that helps you issue invoices, run payroll (if you employ others) and help with your accounting and tax return. Whatever you need it to do, there’ll be an account out there to help.
There’s nothing really special about a business bank account at its basic level. it’s just like your personal bank account, but it’s one you open solely for your business income and expenditure.
Do I Need a Business Bank Account?
There is no one size fits all answer to this question as it depends on your own individual circumstances, however whether you’re legally obliged to have a business bank account depends on your business structure.
Let’s break it down further;
- ‘Do I need a business bank account if self-employed?’ – NO
It’s not a legal requirement but it would be recommended so you can keep your business finances and transactions separate from your personal banking.
- ‘Do I need a business bank account as a sole trader?” – NO. Similarly to being self-employed, it’s not a legal requirement but is highly recommended
- ‘Do i need a business bank account for a sole proprietorship?’ – NO. Again, the advice is the same as above
- ‘Do I need a business bank account for a limited company?’ –YES. It’s a legal requirement for limited companies to have at least one dedicated business bank account.
You DO need a business bank account if…
You’ve set your business up as a limited company in the UK (i.e., you’ve registered it at Companies House). In this case, your business is legally separate from you, so you shouldn’t be using a personal account for its expenses.
You DON’T need a business bank account if…
You’re a sole trader or freelancer or contracting (but not through a limited company), e.g., hairdresser, research interviewer, journalist, TV producer, gardener, designer, developer.
So, which is the best business bank account to have?
Here we review 3 of the most popular business bank accounts available, to help you decide which one is the best fit for your business;
Starling Business Account
Starling Bank is a relative newcomer to world of banking having been founded by former Allied Irish Banks COO, Anne Boden, in January 2014.
Starling has been voted best British bank and best current account provider at the British Bank Awards in 2018, 2019 and 2020 and It has 4.5 out of 5.0 stars based on more than 13,500 reviews and is rated as ‘Excellent’ on Trustpilot, so is definitely one to consider.
The Bank is a fully licensed and regulated, so don’t be put off by its lack of branches, or its short history in the sector. Your money is just as safe here as it is in any of the more ‘well known’ banks.
Everything is managed via the Starling Bank app and your Starling business account can be managed on both desktop and on mobile, wherever you are, 24 hours a day. You can review and track payments and incoming cash in real-time, pay physical cash into your account through the Post Office (costs £3 each time), and categorise expenses to keep them organised.
Monzo Business Account
Monzo Bank has two separate business bank accounts;
- Business Pro: your business’ finances taken care of, for £5 per month.
- Business Lite: the best of Monzo but for your business, with no monthly fee.
Both accounts are full UK current accounts, and Monzo is regulated by all the same rules as high street banks. Plus, like most other banks, eligible deposits in Monzo are FSCS protected up to £85,000.
One of the USP’s of a Monzo Pro account is it’s ‘tax pot’ feature – You can choose what percentage of your income you want to set aside for tax, then whenever you’re paid, they’ll put it in your Tax Pot automatically. You can add or take out money from your Tax Pot any time.
Another feature of the ‘pro’ account is it’s multi user access, allowing you to add up to 2 other people to the app, so you can manage your finances together. The additional users can pay people, see incoming and outgoing payments, and edit account information – just like you.
On both the pro and lite accounts you can get notified the second you pay, or get paid, with instant notifications, thus saving you from having to continually log into the app to check your account status.
With 24/7 support on the app too for both pro and lite accounts, there’s no need to make an appointment with customer service or wonder when you’ll hear back.
Barclays Business Account
One of the most familiar and recognisable names in the world of banking is Barclays, and it’s not surprising as Barclays traces its origins to the Goldsmith banking business established in the City of London in 1690.
Barclays offer 4 different business bank accounts;
- Start-up business account
- Business account for turnover up to £400k
- Business account for £400k-£6.5m turnover
- Community Account (for small not-for-profit organisations)
One feature of a Barclays Business Bank Account worth mentioning is Barclays Invoicing – You can send, track and reconcile invoices for free using their app. Plus see what’s been paid and when, send reminders for overdue payments and get notified when an invoice has been settled.
There’s also Barclaycard Anywhere, which lets you take payments simply by connecting a card machine to your smartphone or tablet.
- Mixed Payments Plan – is designed for businesses that use cash, cheques or a range of ways to make and receive payments.
- e-Payments Plan – is designed for businesses that receive electronic payments and make payments mainly through Online Banking and debit cards.
Fees vary significantly between the two plans so ensure you research both thoroughly before deciding which one is best for your business.
The good thing is Barclays also offer Price Plan Guarantee where they will review your Price Plan on an annual basis, and if you may be better off on a different Price Plan, they will move you across to that Price Plan.
Hopefully we’ve given you a few ideas on what different types of business bank accounts are out there and if you’ve got any specific recommendations of other banking providers please feel free to share in the comments section
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