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The best basic business bank accounts

Whether you’re just starting your business or already running one, there are lots of products and tools that can help you to manage your finances more effectively. A business bank account is amongst the most important. We’re going to look at some of the key considerations and focus on the best basic business bank accounts available including the well-known high street brands and new challenger banks. 

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Why do I need a business bank account?

For sole traders it’s not a legal necessity to use a dedicated self-employed business bank account, but there are many advantages to doing so:

  • Separate your business income and expenditure from your personal finances.
  • Easier to track and monitor your business’s spending, and ultimately assess your profits.
  • Simplify your accounting, tax returns and expense claims. 
  • Set up business-focused direct debits and standing orders.
  • Convey a more professional image to customers and suppliers. 

Beyond this, many banks and business accounts now offer a substantial digital offering either through their mobile app or online banking. These include useful tools such as automated invoicing, expense tracking, integration with accounting software, and financial reporting. 

Limited companies are required by law to have a dedicated business account. 

What is a basic bank account?

A basic bank account is a term that is used to describe accounts which are typically fee-free with limited features included. Whilst lacking premium features and tools, this low-cost option is perfect if you’re looking for a no-frills bank account.

  • Make deposits
  • Withdraw funds
  • Use a debit card
  • Manage finances via mobile app

Many banks offer basic business accounts like this for sole-traders, freelancers and micro-businesses. 

However, some basic accounts are geared towards those with bad credit. For example, if you’ve been made bankrupt. 

High street vs Challenger banks

One of the key developments in the banking world in the last decade, has been the emergence of the ‘challenger banks’ or ‘mobile banks’. This refers to the likes of Monzo, Tide Business and Starling Bank, new brands who are challenging traditional high street banks by focusing their business model on a digital-only offering. 

Whilst these banks may not offer the personal experience of popping into your local branch, they’re often a good choice if you’re looking to set up an account quickly and cheaply. Plus, their mobile apps come with lots of features that might be more beneficial for your business when starting out: notifications, alerts, spending pots, budgeting tools etc. 

However, many business owners do enjoy being able to speak to someone face-to-face at their local branch for advice and support. Barclays, Lloyds TSB, HSBC and RBS (the Big Four) all have a significant high street presence, at the same time offering a growing range of digital services. Getting access to funding and competitive interest rates can also be easier through the traditional banks (although the challenger banks are beginning to address this). 

What do I need to think about when choosing an account?

For many startups, a basic business bank account will offer the necessary features whilst you get your business off the ground. Here are some of the considerations you’ll need to factor in:

  • What are your typical incomings and outgoings?
  • How many payments are you likely to be making and what is their total cost?
  • Do you need an overdraft or access to finance?
  • Do you also need a savings account?
  • Can you afford to pay fees?
  • Do you need to pay in cash?
  • Would you benefit from face-to-face business advice and support?
  • What other features would be useful? E.g invoicing, basic bookkeeping, integration with accounting software. 

Understanding your needs, will help you decide which business bank account is best for you

How to open a basic bank account

Opening a basic bank account should be a relatively straightforward process and can usually be done online. Indeed, many of the challenger banks give you the option to set up an account in minutes.  

  • What do I need to open a fee-free basic bank account? If you’re a sole trader it’s simple. You’ll just need a form of personal ID (your driving license or passport) and proof of address (a recent bill). If you’re a limited company, you will need to provide your company registration number (issued by Companies House) plus your tax and VAT details (if applicable). 
  • Why might I be refused for basic bank account? You’re more likely to be refused by the high street banks if you have a poor credit history. If you’re worried about this, you can view your credit score using Experian. However, many of the challenger (Tide and ANNA) do not perform credit checks and will only need to verify your identity. 

Are basic bank accounts always free?

In short, no. Banks have to make their money somewhere. 

Whilst you might not have to pay a monthly charge, there are likely to be running costs such as transaction fees. For example, there might be a small fee every time you make an e-payment. Some basic accounts, however, do allow you a limited number of free transactions a month, after which you pay a set fee each time. 

You may also need to upgrade your account once you’ve gone beyond certain thresholds such as your account balance or the number of monthly transactions. 

The 10 best basic business accounts

We’re going to compare the different options on the market focusing on basic business accounts: ie the low-cost or free business accounts.

In most cases, these banks offer paid account options which offer more premium features such as dedicated account managers and priority support. This is something to bear in mind as your business needs are likely to change later down the line. Equally, you may feel this additional support will be beneficial when starting out. 

First of all, let’s look at the challenger banks and mobile business accounts. 

Bank

Monthly fees

Payment fees

Key features

Tide Business

Free

20p

  • Quick and easy to set up.
  • Scheduled payments.
  • Integration with accounting software.
  • Set up sub-accounts so you can ringfence money for wages, expenses or bills.
  • Plus and Premium options with expanded features.

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ANNA Money

Free

2 free transfers per month.

  • Less than 10 minutes to set up.
  • Ideal for freelancers and creatives.
  • Invoice management functionality.
  • Expense management automation and accounting software integration.
  • 1% cashback on purchases.
  • FS Tech Award Winner for Customer Experience.

Starling Bank

Free

Free

  • Different account options for limited companies and sole traders.
  • 24/7 customer service support.
  • Integration with Quickbooks, Xero and FreeAgent.
  • Deposit cash and cheques at your Post Office.

Monzo Business

Free

Free

  • Fee-free spending abroad.
  • Spending and budget categorisation.
  • Pots to separate money. 
  • Add receipts to payments on the go. 

Revolut Business

Free

5 free transfers per month. 

  • Freelancer and company options available. 
  • Pay abroad with 150 local currencies, and hold and exchange with 28. 
  • Two free additional account members.

Now, let’s look at the best five high street bank accounts. Most offer a free introductory period after which monthly fees come into effect as well as standard tariffs for transactions. 

Bank

Monthly fees

Payment fees

Key features

Lloyds Bank – Business Current Account

£7

Free

  • 12 months’ free day-to-day business banking for new businesses.
  • Dedicated support from UK-based business management team.
  • Extensive online resources and guidance for running your business.
  • Mobile business banking app. 

HSBC Start-Up Business Account

Free (first 18 months)

Free

  • Free banking for first 18 months
  • Free Visa business debit card
  • Mobile business banking app
  • Integration with accounting software including Xero, Quickbooks and Sage.
  • Voted best bank for small businesses by Euromoney in 2019.

Barclays Start-Up Business Account

Free (first 12 months)

Free

  • UK-based Business Direct team on hand to support you. 
  • Comprehensive range of online support and guidance. 
  • Online banking tools and mobile app. 
  • Accredited International Team and High Growth & Entrepreneur experts.

Natwest Start-Up Business Account

Free (first 18 months)

Free

  • Free accounting software with FreeAgent.
  • Dedicated ‘Business Builder’ online community with free resources plus local networking events. 
  • Apply for Business Credit Card with no fee for the first month. 

Metro Bank Business Account

Free for balances over £5,000.

50 free transfers per month.

  • Access to a Local Business Manager. 
  • High scores across Independent Service Quality Survey, including 1st for online and mobile services and service in branches. 
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