How to open business bank account in the UK

Thinking about starting a new business? Opening a business bank account is one of the most important steps you’ll take. This brings us to our topic for today: How to open business bank account in the UK.

There are many benefits that come with a business bank account—from separating your personal and business finances to simplifying the tax-filing process. Here, we’ll uncover everything you need to know about the business bank account process including the advantages of a business bank account and how to choose the right business bank account for your needs.

We’ll also explore the TransferGo Business Account to see how it compares to traditional business bank accounts.

Ready to get started? Let’s go.

Why you need a business bank account

Before we explore how to open a business account in the UK, let’s take a look at some of the benefits of having a UK business bank account.

Having a business bank account will help you manage your business finances more efficiently. With one, you can better organise your finances and ensure smooth operations and legal compliance.

Benefits for your business

Opening a business account comes with many different benefits. Here are some of the advantages of opening a business bank account UK.

• Separates your finances: A business bank account allows you to keep your personal finances separate from your business finances.
• Looks professional: A dedicated business bank account looks more professional, helping you build trust among your clients, customers and suppliers. 
• Improved cash-flow management: With an account, you can monitor your income and expenses and manage your cash flow more easily.
• Access to financial tools: Many business accounts give you access to additional financial services such as credit cards, business loans and overdrafts.
• Improves your credit rating: A business bank account can help you build your business’s credit rating, increasing your chances of being approved for business loans.

Legal requirements and compliance

Although it’s not a legal requirement to have a business bank account, having one makes it easier to adhere to legal tax requirements and compliance since it keeps all of your business finances in one place. With a business bank account, the tax return process becomes simplified and the risk of errors becomes reduced.

Types of business bank accounts

When it comes to opening a business bank account, there are many different types available. Here’s a quick overview.

Current accounts

A business current account helps you manage your everyday transactions, including earnings, payments and expenses. It’s also useful for receiving payments and managing employee’s salaries. You can also use business current accounts to access essential services such as ATM withdrawals and online banking.

Savings accounts for businesses

If you want to set aside some money for your future business needs, like expanding your business or making tax payments for example, a savings account is a good option as it separates specific finances and helps you earn additional interest on the business funds available in the account. Building a savings pot can also be useful for quieter months when you may need to top up your income.

Specialised accounts

Some banks also offer specialised accounts to suit different business needs. This can include pension fund accounts, segregated funds accounts, pledged accounts and insolvency accounts. 

Choosing the right bank for your business

Before opening a business bank account in the UK, it’s important to choose the right bank for your business needs. 

Comparing major UK banks

The major banks in the UK include Lloyds, HSBC, Barclays and NatWest. If you decide to go down the traditional bank route, consider the following factors. 

Account type: Most major UK banks offer different account types including current accounts and savings accounts.

Accessibility: The above banks offer in-person support at their local branches, along with the option of online and mobile banking.

Monthly fee: Monthly fees for business accounts vary. For example, Lloyds, HSBC and Barclays offer free business banking for the first year, with the monthly fee varying after that. The monthly cost of a Lloyds business bank account is £8.50. 

Key features: All major UK banks offer some additional features including smart accounting tools, business debit cards and overdraft facilities. Not all features are available with all banks so it’s recommended that you assess what’s important for your business needs before making a choice.

Online vs. traditional banks

In addition to traditional banks, business owners have the choice to choose a digital banking service through fintech money transfer companies such as TransferGo, Wise and Revolut. The benefits of digital banks include user-friendly technology, faster transactions and lower fees. 

Factors to consider 

When choosing your bank, it’s important to compare your options. Here are some factors to consider. 

• Fees: Consider the monthly fees, transaction fees and any other hidden charges that may apply to your everyday business banking.
• Services: Most major banks offer additional services such as overdrafts, credit cards and invoicing tools, with some digital banks offering multi-currency accounts that let you hold and exchange multiple currencies.
• Accessibility: You should be able to easily access your funds when required. Consider a bank with great mobile app services that facilitate easy online banking.

Prerequisites and requirements

When opening a business bank account in the UK, you’ll need to meet several UK business banking requirements. 

Necessary documentation

To open business bank account UK, you’ll need to provide some basic documents. The requirements will vary from bank to bank but as a general guide, you’ll need to show:

• Proof of your identity (such as a passport or driving license)
• Proof of your address (such as a bank statement or utility bill)
• Your business details including the name, address, details of your activities and estimated annual turnover
• Limited company accounts must also show proof of their Companies House registration 

Business eligibility criteria

Certain banks, like Starling Bank for example, require businesses to meet certain criteria to open a business bank account. Some of the additional requirements banks may request you meet include: being an existing customer, being a UK resident and meeting a minimum or maximum annual turnover amount.

Some banks may also decide not to provide banking services to businesses in certain sectors such as gambling, politics and financial services. It’s recommended that you check the bank’s eligibility criteria before beginning your application process.

Credit checks and financial history

Before allowing you to open a business bank account, some banks may also perform credit checks on your personal finances and business operations. This will help banks identify any previous issues such as bankruptcy or unpaid debt and help them decide how much credit they can offer you and at what rate.

Step-by-step process to open a business bank account

To open a business bank account, follow the simple steps below.

Preparing your documentation

Collect all of your requirements documents together. Check them thoroughly and ensure they’re complete, up-to-date and accurate.

Applying online or in-person

Depending on the business bank account you choose, you can begin your application process either online or in-person (if using a traditional bank). Most banks offer online applications, where you scan and upload your documents digitally. If in-person assistance is important to you, you may prefer to visit a traditional high-street branch.  

Verification and approval process

Once you’ve submitted your application form, the bank will verify all of your documents and perform important checks. Depending on the bank, it may take a few days for the application process to be completed. 

Costs and fees associated with business bank accounts

When opening a business bank account, you may have to pay several types of fees to complete your set-up and make transactions. The costs involved depend on your bank. Here are some things to look out for.

Monthly maintenance fees

Some banks charge a fixed monthly maintenance fee to manage your business accounts. This fee can vary and depend on the features and services offered. 

The TransferGo Business Account is completely free to set up and subscribe to. But more on this later.

Transaction and service charges

Some banks may charge you for individual transactions such as cash withdrawals and international payments. Before opening your account, consider your general business activities and look for accounts that offer free or low-cost services that help you meet these needs.

The TransferGo Business Account comes with transparent pricing and no hidden fees. Plus, when it comes to international payments, it charges zero fees on major routes.

Hidden costs to watch out for

As well as monthly fees, some banks may charge extra for accessing your overdraft facility and using your debit card abroad. Find out about any hidden costs that may apply before signing up for a business bank account. 

Managing your business bank account

Opening a business bank account can help ensure smoother business operations. Some of the features that help with this include:

Online banking features

Most banks offer several online banking features including online transfers and real-time tracking. Get to know these features to make the most out of your account.

Integrating with accounting software

Some banks also offer a facility to integrate your accounts with your existing accounting software. This can help streamline processes and save you valuable team admin time.

Security measures and fraud protection

When setting up your business bank account, get to know the different security features offered. This includes encryption, two-factor authentication and fraud detection.

Common challenges and how to overcome them

Although the process of opening an account is usually smooth, some business owners may still face some challenges. Here are some of the common issues and how to deal with them. 

Dealing with rejected applications

Sometimes applications get rejected. To avoid this happening, make sure you provide all the required documents and double-check that everything is up-to-date and accurate. If your application is rejected, you can contact the bank to find out the issue and decide whether to reapply if the issue can be addressed.

Navigating complex requirements

Startups or businesses with unconventional business practices may also face some complex requirements. To help with the process, consider contacting a professional.

Managing multiple accounts

If you need multiple accounts for your business operations, managing each account can be tricky. Choose a bank that offers easy management features and does not charge hefty fees for maintaining multiple business bank accounts.

Tips for a smooth application process

Here are some tips to ensure a smooth bank account application process. 

1. Organise your documents 

Only submit documents that are up-to-date and complete. This will help ensure there are no delays with your application process.

2. Understand bank policies 

Before applying to set up your business bank account, it’s important to familiarise yourself with the different policies of the bank. This includes withdrawal limits and additional fees for services.

3. Seek professional assistance if needed

If you face repeated rejections or you’re struggling to understand the application process, it’s recommended you contact a financial advisor or accountant for help and advice. You can also contact the bank’s customer support team if you have any questions.

Alternative options for business banking

While a traditional bank can offer various benefits, it’s not the only available option. Here are some of the alternative banking options. 

Fintech solutions and neobanks

Fintech companies like TransferGo (that’s us) can provide multiple benefits for businesses of all sizes looking to streamline their finances.

Some of the many benefits of a TransferGo Business Account include high-speed transfers, low fees, state-of-the-art security and a dedicated customer support team with a 4.7/5 average customer score on Trustpilot.

Peer-to-peer banking platforms

Funding Circle and other peer-to-peer (p2P) platforms allow businesses to access additional financial services such as loans through individuals rather than through banks. P2P banking usually takes place online or via apps.

Credit unions and community banks

You can also access personalised banking services through credit unions and community banks. The benefits of doing so may include lower minimum balance requirements and more flexible loan agreements. 

Conclusion: Choosing the best business bank account for your UK business

Opening a UK business bank account is essential for seamless business operations. But in order to decide which of the best business bank accounts UK best suits your needs, it’s important to determine which features are important to you.

The TransferGo Business Account is free to set up and subscribe to, with many businesses in the UK using it alongside their traditional business current account to make international business payments faster, and for less. The simple-to-use, multi-currency account also lets you hold and exchange multiple currencies and maximise efficiency and profit with local and global account details. What’s more, TransferGo has a top-notch customer support team that addresses 80% of enquiries within just two hours.

Ready to get started? Sign up to TransferGo Business today.

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The information provided in this blog post is for general informational purposes only and reflects the author’s personal opinion. Any comparisons made between TransferGo and other businesses are intended to highlight differences and provide a fair overview, based on publicly available information as of the date of publication.

While every effort is made to ensure the accuracy of the content, we make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date. We encourage readers to independently verify any claims or information presented in this post.

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