The best bank accounts for the self-employed

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 your business banking (you need to check with your bank first). This is because in the eyes of the law and for the purposes of tax, your money and the money that belongs to the business are one and the same. A limited company must keep the finances of the business and the business owner separate.

However, most banks are tightening up on letting sole traders use their personal accounts for business and will tell you to use separate accounts for your personal and business 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 business bank 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 an account that’s dedicated to your business:

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

First, check with your bank if you definitely need a separate account for your business based on your specific circumstances. If you have very few transactions 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 – don’t assume that they have to give you what’s written down. And don’t feel that you have to open a business bank account with the same bank that you have your personal banking with – shop around for the account that suits you best in terms of features, rates and look for a good introductory offer.

These are the best business bank accounts if you’re a small to medium-sized business. 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).

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 business banking with these or other banks but they will come with more fees.

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 business 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 business account as a sole trader).

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 business transactions in your personal account (if your bank agrees) or you might find it easier to get a business account with the bank you already use for personal banking. These bank accounts are best if you have a poor credit history:

• Cashplus Business Bank Account
• CardOneMoney Business Bank Account
• Acorn Business Account