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The best bank accounts for the self-employed

If you’re self-employed, one of the most important first steps will be to choose the best online banking account for your business needs.

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What type of account does a self-employed person require?

If you are self-employed as a sole trader (as opposed to having a limited company) then it’s possible that you can use your personal bank account for business banking (you need to check with your bank first to see if you can apply online, what your finance options would be, etc). This is because in the eyes of the law and for tax purposes, your money and the money that belongs to the company are one and the same. A limited company must keep the finances of the company and its owner separate.

However, most banks are tightening up on letting sole traders use their personal accounts for professional purposes, as an existing customer and will tell you to use separate accounts for your banking, or you risk having your account shut. And if you are self-employed as a sole trader you will find that there are many benefits to having a dedicated bank account.

Why do you need a dedicated business account?

In theory, you might be able to keep your business earnings in your personal account as a self-employed sole trader (check with your bank) but there are many reasons why you will probably want to be applying for a dedicated account:

  • It will allow you to keep a better handle on your earnings for tax purposes and it will be easier to keep costs under control.
  • HMRC requires you to separate being a business customer from your personal transactions so having a separate account will simplify your accounting and save you time.
  • If you anticipate doing a lot of transactions, either through the bank online or using ATM withdrawals, then it’s best to get started with a business account.
  • If you have a different name for your company then you might want a bank account in that name and so that business cards, account charges, and cheques can be made out to it.
  • You can choose an account with the tools that you require, like directly linking to your accounting software.
  • If you ever need to apply for finance (like a credit card or loan) then having a business bank account will be necessary.
  • If you ever get selected by HMRC for an in-depth audit then having your transactions kept separate will make things a lot easier.

How to choose the best bank account for your needs

First, check with your bank if you definitely need a separate account, based on your specific circumstances. If you have very few transactions and your personal finance covers everything then you might not need to change or feel it’s worthwhile. If your bank tells you that you need another account, try to negotiate the rates with them (fixed term, the rate loan, account fee, etc) – don’t assume that they have to give you what’s written down. And don’t feel that you have to open one with the same bank that you have your personal banking with – shop around for the account that suits you best in terms of features, savings offers, fixed rates, and look for a good introductory offer.

The best basic bank accounts if you’re self-employed

These are the best bank accounts for the self-employed if you’re a small to medium-sized company. To get some of these deals there may be a limit on how long you can have been trading (sometimes less than a year) and they may have a limit on the number of directors you can have (for Santander, it’s two) and an annual turnover (for Natwest, it’s £1 million).

Bank

Headline features

Monthly fees

E-Payment fees

Additional notes

Tide Account

No monthly or annual fees.

Free

20p

  • Free debit card and credit card use abroad.
  • Fast account set up.
  • Transfers between accounts FREE for 1 year.

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Lloyd’s Current Account

18 months free banking.

£6.50

Free

Simple pricing and access to lots of financial and digital tools and guides.

Santander Start-Up Account  

Free day-to-day transactions for up to 18 months.  

Choose £7.50-£40 tariff after the free period.

Free within limits.

Monthly interest on in-credit at 0.10%. The app isn’t rated well.     

Natwest Start-Up Account

18 months free banking.

After the free period minimum monthly charge of £5.

35p

Award-winning mobile app. Free banking for charities and non-profits.

TSB Start-Up Banking

18 months free day-to-day banking.

Choose a tariff from £5 a month.

Free to 20p depending on tariff.

Free card payment reader and first £1,000 payments free. Also, access via Post Office.

HSBC Start-Up Account

18 months free banking.

£5.50

23p (small company) or free e-banking.

Best Tariff Promise for companies with turnover up to £2 million.

Barclays Start-Up Account

12 months free.

£6 (mixed) or £6.50 (e-payments).

35p (mixed) or free (e-payments).

Top rated online and mobile banking services for SMEs.

Coop Banking

18 months free banking.

£10

10p-20p

Ethical bank. Also, access via Post Office.

Metro Bank Account

Free transactions and no monthly fee if balance stays over £5,000.

£5 or free with a balance over £5,000.

30p each or 50 free transactions if balance over £5,000.

Branches open 7 days a week and dog-friendly.

Monzo Account

Promising to redefine banking.

TBC

TBC

You can currently join their waiting list.

There’s an overview of the main charges above but it’s impossible to go into all the finer details. Check each bank account for specifics on all charges for all transactions and have a think about what sort of transactions (in and out of your account) that you’ll be doing the most of. For example:

  • E-payments
  • Depositing cash
  • Debit card payments
  • Cheque payments
  • Standing orders
  • Direct debits
  • Getting change
  • CHAPS
  • Foreign currency transfers

If you need more features or higher levels of assistance with your banking then you will have to look at the next level of banking with these or other banks but they will come with more fees.

Setting up a savings account if you’re a self-employed sole trader

Business bank accounts do not offer good interest rates (Santander is the best offering 0.10% in-credit interest). You can link a dedicated savings account to your account so that if you’re building up earnings in your current account you can easily transfer it to the savings for better interest rates and security. Or for the best interest rates, shop around for the best personal savings account (you don’t need to directly link it to your account as a sole trader).

The best bank accounts if you have a poor credit history

Business bank accounts will require you to have a credit check so if you have a poor credit history you might want to try and keep your transactions in your personal account (if your bank agrees) or you might find it easier to get an account with the bank you already use for personal banking. These bank accounts are best if you have a poor credit history:

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