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Do I need a business bank account for my trade business?

Reading time: 3 minutes

Keeping on top of your money and knowing exactly what’s coming in and out is vital, so it’s important to make sure you’ve got the right bank account for the job...

What is a business bank account?

It might sound self-explanatory, but not all businesses necessarily need to have a business bank account.

A business bank account is a special account offered specifically to businesses. They’re similar to personal current accounts so you can:

  • Buy things using a debit card
  • Pay money in
  • Set up regular bill payments
  • Move money to other accounts
  • Receive transfers from other people
  • Get an overdraft if you arrange one
  • Use online banking but also have a branch

Some also offer features that are only available to businesses. These can include:

  • Processing salary payments to employees
  • Running credit checks on other businesses and suppliers
  • Receiving payments via direct debit
  • Sending and receiving payments in foreign currencies

Some business accounts are completely free - usually for a set initial period - but most will have different charges for certain services. These can include things like: paying in cheques, using your overdraft, making transfers, receiving card payments. It’s important you check any charges when you sign up for your business account.

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Do tradespeople need a business bank account?

As a sole trader, you are not required to have one. Legally, you can use your personal bank account for both business and non-business transactions or you can set up a second personal bank account to use for your business. However, you may violate your terms of service if you use your personal account for business purposes.

If you’re a limited company or run an incorporated company you have to get a business account instead of a personal account.

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What are the benefits of a business bank account?

For many people, having a business account helps separate your own personal finances from those of your business, which makes it easy to keep track of things, stay on top of your tax liability and budget. When it comes to totting up the books, you’ll know immediately that everything coming in and out is relevant to the business, which can cut your admin time in half.

It also helps you build up credit which can be useful in future if you want to borrow money for business purposes.

There are also little perks to having a business account, like receiving dedicated help at some bank branches.

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How do you get a business bank account?

Opening a bank account for your business is quite simple. Talk to your bank first to find out what the best account would be for you and your business, then they’ll help set it up.

They’ll probably ask you to provide information like proof of identity, your business name, address, annual revenue, company number and numbers of employees, as well as details of any business partners if you’re not a sole trader. They’ll also probably need proof you’re authorised to run the business’s finances.

Once they’ve got everything they need, the bank will open the account for you and help sort out moving any money from old accounts.

How much does a business bank account cost?

You may find introductory offers for business bank accounts where you don’t pay anything for a set time, such as the first year. Typically though, business bank accounts will cost around £5 a month, while you might also pay fees on withdrawals and deposits. Some accounts may be free, only charging for certain transactions, so shop around.

Having a business account separate from your personal account does mean another layer of admin, with more statements, cards, passwords and PINs to remember.

But in the long run, the admin you’ll save by having a dedicated business account can make getting one a no-brainer.

Accounting and tax