Best Business Bank Accounts for Small Businesses In the UK 2024

Last Updated: Jun 13, 2024

🔑 Key Takeaways

A business bank account is not a legal requirement, but having one is considered best practice.
When choosing a financial partner, assess their monthly and transaction charges while considering how well their features align with the specific needs of your venture.
Review their published service quality information to ascertain if it stands out as your business’s optimal bank.

As the business environment gets increasingly complex, directors and company leaders find it essential to leverage the best financial tools. A key component among the arsenal of tools is a corporate account, the primary way most companies manage their financial affairs.

According to a 2019 research by NationWide Media, 43% of micro-businesses with less than ten employees prefer using their personal bank accounts due to the associated costs of maintaining a proper corporate account.

However, although personal accounts might be cheaper, they make it harder to streamline business processes because they lack the features such as automated accounting integration, multi-user access, and batch payment processing necessary to help the business owner simplify their accounting processes.

Warning

Limited companies are distinct legal entities separate from their shareholders and directors. Maintaining a different account for business use, while not explicitly required by law, aligns with this identity. Neglecting this may subject the company and its directors to potential challenges, including complications in establishing a transparent audit trail for tax purposes.

Personal Accounts Vs. Corporate Accounts

Besides streamlined business operations, having a dedicated bank account offers various advantages for multiple business structures, including sole proprietors.

Best Business Bank Accounts for Small Businesses In the UK 2024 Your Company Formations

Personal vs business bank accounts

Factors to consider when choosing a business account

Previously, high street banks were the default option. These traditional brick-and-mortar institutions with strategically located branches provided easy access to company funds but only during operating hours.

However, according to the Nationwide Media report, over 58% of micro-businesses (businesses with less than ten employees and a turnover below £1.8 million) reported that banks emphasised profits over efficient service. These concerns, coupled with the rapid advancements in fintech, mainly due to the digitisation gold rush accelerated by the COVID-19 pandemic, have given impetus for significant transformation in the industry.

Digital banking apps make financial services cheaper with 24/7 business support through a smartphone or desktop.

Moreover, traditional banks have blended the benefit of digital and branch services to offer diverse products that cater to a broader spectrum of customer needs. Such drastic changes in consumer preferences forced banks to shift to digital banking products, causing big players like Barclays, NatWest, and Virgin Money to close down multiple branches.

In this context, there are nuanced differences between different account providers. So, if you are just starting a business or looking to shift banks, how do you choose the best bank account? Here are six key things to consider –

Monthly fees and transactional charges

Most corporate accounts usually have monthly fees and/or per transaction costs for everyday banking needs. High-street banks, in particular, tend to have higher fees due to the expenses associated with maintaining physical branches. For micro and medium business owners, consider exploring digital-only or hybrid banking options, as they often offer more cost-effective solutions.

Further, for e-commerce businesses that need to accept electronic payments (debit, credit, and gift cards), verify that your account comes with merchant services and review the associated costs.

Before choosing a bank, constantly analyse accounts across multiple providers, specifically checking their full list of transaction and service charges.
Financial Services Compensation Scheme

Security is a crucial aspect to consider when selecting a bank. Ensure that your deposits are protected by the FSCS, covering up to £85,000 for eligible businesses. Additionally, verify that the bank is regulated by the Financial Conduct Authority and the Prudential Regulation Authority (FCA and the PRA, respectively), which is evidence of an institution’s commitment to secure and regulated financial services.

It’s worth noting that some banks share licenses within the same group, and businesses with multiple accounts in such institutions would only be eligible for £85,000 in compensation if the group faced insolvency.

Warning

Not all banks are covered by the FSCS. Some financial institutions may be regulated and authorised by the FCA to offer forms of banking services without the full UK banking licence that would make it eligible for FSCS protection. However, all banks regulated and authorised by the PRA offer FSCS protection.

Opening accounts with multiple providers is advisable to enhance the scope of your business deposit protection and mitigate risk exposure. You can choose different banks based on multiple needs:
- A high-street bank with excellent fraud prevention features for high-balance accounts and significant transactions. The enhanced security measures provide an additional layer of protection.
- Use a challenger bank known for agile and user-friendly services for routine business-related purchases and expenses.
- If you need a unified platform to seamlessly accept payments, explore banks that consolidate merchant and current checking account features.
Ease of Integration with Accounting Tools and Apps

Selecting the right bank involves considering various features to ensure optimal financial management. One crucial aspect is the ease of integration with accounting tools and apps. A top-notch business account should seamlessly integrate with multiple tools and applications, facilitating the streamlining of financial processes.

Opt for an account that offers smooth integration with essential tools, such as Quickbooks, directly linked to your account. This integration enables the automation of tasks like reconciling transactions, ultimately saving you valuable time. Additionally, compatibility with cloud-based tools like Xero is essential. Xero simplifies tracking income and expenses, managing bill payments and invoices, and providing a comprehensive overview of your cash flow.

By choosing a business bank account that prioritises integration with these tools, you not only enhance efficiency but also empower yourself to make well-informed financial decisions for the success of your business.
Local Business Manager

Your local business manager is crucial in ensuring your financial needs are met and perfectly aligned with your business objectives. Taking the time to understand your unique requirements, they offer tailored advice on the most fitting business account from the bank’s array of options.

However, their role extends beyond mere account recommendations. A dedicated local business manager can provide invaluable insights into industry trends, equipping you with the knowledge to navigate the market successfully. Beyond financial solutions, they become strategic partners, assisting you in developing approaches that enhance your bottom line.

With their personalised assistance, you discover the optimal financial solutions and stay ahead of the curve by seamlessly incorporating well-informed strategies into your day-to-day business operations.
Current Account Switch Service (CASS)

CASS streamlines the often complicated process of transferring your account from one bank to another. The service offers users a seamless transition by effortlessly redirecting payments, standing orders, and direct debits to a new business account, minimising financial operation disruptions.

For businesses with multiple signatories (with some banks, signatories must be directors registered at Companies House), CASS ensures that all necessary parties are seamlessly included in the account switch, maintaining financial continuity for your business.

Brief Overview of Current Bank Accounts for Businesses

Corporate accounts offer a range of features tailored to the demands and complexities of business operations. While the exact services will vary depending on the bank, the best accounts facilitate organised, professional, and efficient financial management. Many accounts come with a chequebook and debit card, enabling access to funds through various platforms.

Furthermore, other services provide additional benefits such as —

Online or mobile banking, which offers fast and 24/7 access to funds;
Merchant services, which enable businesses to accept electronic payments;
Access to business loans and credit; and
High daily transaction limit.

Whether you are a freelancer, contractor, a budding enterprise, or a well-established corporation, a dedicated bank account can provide the flexibility you need for effective financial management. The banks mentioned in this article are regulated by the Financial Conduct Authority and authorised by the Prudential Regulation Authority.

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