How to Choose the Best UK Business Banking Account
Are you ready to take charge of your business finances and make your enterprise thrive? Choosing the right business banking partner is crucial in your journey to success. In this post, we’ll explore the ins and outs of UK business banking, compare different types of banks, and guide you in selecting the best business account for your specific needs. Let’s dive in!
Key Takeaways
- Weigh the pros and cons of high street banks vs challenger banks for your business
- Look out for fees, accounting tools integration & customer support when choosing a bank account
- Consider specialised accounts to meet unique needs + reviews/awards to make an informed decision
Understanding UK Business Banking
Navigating the world of UK business banking can be complex, but fear not; we’re here to help! UK business banking caters to organisations with an annual turnover of up to £25m (excluding VAT and other turnover-related taxes). The Financial Conduct Authority regulates it.
The two main types of banks you’ll encounter are high-street banks and challenger banks. High street banks, the old-school players, have been around for ages, while challenger banks are the new kids on the block offering more modern banking services.
One of the key differences between these banks is their approach to online and in-store banking. Online banking offers convenience, lower fees, and access to more features, while in-store banking provides personal interaction and easy access to physical cash. Weighing the pros and cons of each option is necessary to identify the perfect fit for your business.
High Street Banks vs Challenger Banks
With their physical branches, high street banks provide services such as current accounts, savings accounts, loans, mortgages, and investments. On the other hand, Challenger banks mainly operate online and offer similar services with added perks like budgeting tools and real-time notifications.
Regarding fees, high street banks generally charge account fees for services like overdrafts, transfers, and international payments, while challenger banks may offer lower fees or even no fees for certain services.
Choosing a provider that other customers would recommend their provider is a wise move, as it gives you a glimpse of the bank’s performance and customer experience. For instance, Starling Bank has received rave reviews for its award-winning business account, with customers describing it as refreshing and making business banking a breeze.
Online vs In-Store Banking
The perks of online banking for UK businesses are numerous, including:
- The ability to check your account anytime
- Manage finances on the go
- Perform quick and easy transactions
- Integrate with financial tools
- Pay bills and make payments hassle-free
- Enjoy lower costs and fees than traditional banks
- Faster transfers and transactions
- Environmentally friendly banking options
Online banking can help make your business banking easy and grow your business.
However, online banking comes with its set of downsides, such as:
- Security risks
- Lack of one-on-one customer service
- Difficulty in resolving disputes
- Limited access to physical cash
- Challenges in setting up direct debits, standing orders, and international payments
In contrast, in-store banking offers benefits like:
- Personal customer service
- Access to physical cash
- Ease in setting up direct debits and standing orders
- Easier dispute resolution
- Access to financial advisors
Do I need a Business Bank Account?
If you’re a sole trader or self-employed, you are considered an individual and not a separate legal entity. Therefore, you do not need a business bank account. However, keeping your personal transactions separate from your business transactions is advisable. By doing so, you can better manage your finances, track your business performance, and make more informed decisions.
Certain banks like Lloyds offer free business banking for 12 months when opening your first business bank account. This can particularly benefit start-ups and small businesses looking to minimise costs. Remember that fees may apply for services like overdrafts, transfers, and international payments, so always compare different banks to find the best fit for your needs.
Features to Look for in a Business Bank Account
As you search for the perfect business bank account, several key features must be considered. These include fee structures, integration with accounting tools, and customer support. Let’s delve deeper into these aspects to help you make an informed decision.
Fee Structures
Different banks offer varying fee structures, which can significantly impact your business finances, profitability, cash flow, competitiveness, and growth potential. Here are some examples:
- High street banks typically charge monthly fees ranging from £5 to £25.
- Challenger banks like ANNA charge around £15 per month or by transaction.
- Some challenger banks, like Starling Bank and Mettle, offer digital business accounts with no monthly fees.
Understanding the fees and their alignment with your financial goals and operational requirements is central to the process. You can save money in the long run by comparing fee structures across various banks, helping you identify the best option for your business.
Integration with Accounting Tools
Integrating your business bank account with accounting tools can simplify your financial management and help you keep a close eye on your money. Many banks, like Monzo Business Pro, integrate with popular accounting tools such as Xero, FreeAgent, and QuickBooks.
By connecting your business bank account to accounting software, you can benefit from features like banking feeds, digital receipts, and automated financial tracking, making the accounting process easier and more efficient. Some banks even offer free access to accounting software, such as FreeAgent, if you bank with h NatWest, Royal Bank of Scotland or Ulster Bank or make at least one transaction a month through a Mettle.
Customer Support
Reliable customer support is vital when it comes to business banking. Access to prompt and efficient assistance is crucial whenever issues or queries arise.
UK business banking customers can expect phone, email, or online chat support. Customer service ratings and reviews can provide valuable insight into a bank’s performance and help you decide when selecting a banking partner.
When evaluating customer support, consider factors like response times, ease of communication, and the bank’s track record in resolving issues or complaints. The right level of support can make all the difference in ensuring a smooth and hassle-free banking experience for your business. Service quality survey results can be a valuable tool in this evaluation process.
Specialised Accounts for Different Business Types
As businesses come in all shapes and sizes, banks offer specialised accounts tailored for different business types, including start-ups, small businesses, and medium-sized enterprises. Let’s explore the unique banking needs of these different business types and the business current accounts designed to cater to them.
Start-ups and Small Businesses
Start-ups and small businesses often require lower fees, more flexible payment options, and access to specialised accounts that cater to their needs. Barclays, for example, offers free digital banking for 12 months and free access to FreshBooks accounting software to start-up businesses, while Lloyds Bank caters to businesses with up to £3 million in annual turnover.
When evaluating business bank accounts for start-ups and small businesses, consider the following features before submitting your business account application:
- Day-to-day transactions
- Integrated and automated features
- No monthly maintenance fees
- Mobile app usability
- Accounting software integration
- Multi-Currency business account
- Requirements provided by UK Finance
These features can significantly contribute to growing your business, ensuring compliance with Companies House regulations and the success of your start-up or small business when you open a business.
Medium-Sized Enterprises
Medium-sized enterprises have unique banking requirements, including access to financing, digital banking solutions, price transparency, faster methods of switching accounts, and support from banks during significant changes.
When selecting a business bank account for your medium-sized enterprise, consider the following features:
- Easy access to funds and account management
- Bank support
- Additional features for business growth
- Credit and borrowing options
- International payment options
These features can help your small and medium-sized enterprise thrive in a competitive market.
Applying for a Business Bank Account
While opening a business bank account in the UK is straightforward, preparing the required documentation is crucial. To apply for a business bank account, you must provide proof of identity, a UK address for everyone involved, and additional documents, depending on your business type.
Some banks, like Mettle Bank, offer a smooth application process with no monthly account fees. Research different banks and their application requirements to find the best fit for your business needs.
Switching Your Business Bank Account
Switching your business bank account can be seamless if you choose the right business current account provider. For instance, NatWest, one of the largest business current account providers, promises to switch your account in a week if your annual turnover is under £2 million. Starling Bank also offers a Current Account Switch Service for a hassle-free transition.
When considering switching business bank accounts, evaluate factors such as fees, customer service, and features of the new bank. It’s also essential to assess the time it takes to switch and the potential impact on your business operations. By carefully analysing these factors, you can ensure a smooth transition to a new business bank account that better suits your needs.
Protecting Your Business Finances
Understanding deposit protection schemes, a key aspect of financial security, is crucial for safeguarding your business finances and achieving long-term success. In the UK, the Financial Services Compensation Scheme (FSCS) protects eligible deposits up to £85,000 per person for self-employed or per partnership. The FSCS states that they generally protect companies’ deposits, regardless of the company’s size.
Other deposit protection schemes include the Deposit Guarantee Schemes Directive (DGSD) and Tenant Deposit Protection (TDP) schemes. Researching the details and coverage of each scheme is necessary to ensure the best protection for your business finances.
In addition to deposit protection schemes, implementing financial best practices and regularly monitoring your business accounts can help you maintain the security and stability of your business finances. By taking these precautions, you can protect your hard-earned money and focus on growing your business.
Growing Your Business with the Right Bank Account
The right business bank account, such as a business current account, can significantly contribute to your business’s growth and success. Some features to consider when choosing a business bank account include:
- Access to capital
- Cash management tools
- Foreign currency transactions
- 24-hour account access
- Integrated financial tools
- Separation of personal and business finances
These features can help you make informed decisions and drive your business forward.
Some banks, like Starling Bank, even offer partnerships with business experts like best-selling author Della Hudson, providing free guides on managing and growing your business. Choosing a business bank account that aligns with your goals, offers valuable resources, and supports your growth can propel your business toward success.
International Banking for UK Businesses
For UK businesses operating globally, international banking is essential. Banks that cater to the international banking needs of UK businesses include:
- Revolut Business
- Starling Bank
- Wise
- HSBC
- Barclays
The financial perks of international banking include tax efficiency, access to multiple countries and currencies, competitive exchange rates, international experts, and increased profits through diversified client bases.
However, international banking comes with its share of risks and challenges, such as:
- Cross-border payment complexities
- Regulatory compliance
- Currency exchange risks
- Political and economic instability
- Cultural and language barriers
- Legal and contractual issues
- Cybersecurity threats
By carefully evaluating these factors and selecting the right international banking partner, you can successfully navigate the global financial landscape and expand your business internationally.
Customer Testimonials and Reviews
A survey conducted by the BVA aimed at SMEs has resulted in a service quality ranking for business banking. The UK results reveal valuable insights into the performance of various banking institutions, providing a comprehensive guide for businesses in selecting their banking partner.
Customer testimonials and reviews can provide valuable insights into the experiences of real business owners, helping you make an informed decision when selecting a business bank account. Trustworthy sources like:
- Trustpilot
- Which?
- Money.co.uk
- Barclays Business Insight
Remember, not all reviews and ratings are created equal. Scrutinising the credibility and legitimacy of the reviews, along with considering factors such as the number of reviews, the diversity of opinions, and the standing of the review platform, is crucial. By seeking reviews from reliable sources and asking fellow business owners for recommendations, you can select a bank that offers excellent services and support for your business needs.
Business Banking Awards and Recognition
Business banking awards and recognitions are another way to identify top-performing banks in the UK. The top banking awards are found on the Smart Money People site, with Starling winning the best business account in 2023.
By considering banks that have been recognised for their outstanding performance and services, you can ensure that you select a banking partner that is committed to excellence and will support your business’s growth and success.
Summary
In conclusion, selecting the proper business account is crucial for your business’s growth and success. By understanding the differences between high street and challenger banks, weighing the pros and cons of online and in-store banking, considering essential features such as fees, accounting tool integration, and customer support, and researching specialised accounts for different business types, you can make an informed decision and choose the best banking partner for your unique needs. With the right bank account, your business is set to thrive and reach new heights.
Frequently Asked Questions
Can I open a UK business account online?
You can open a UK business bank account online in just a few minutes – subject to eligibility and credit check. You can also apply in-store for same-day account opening, which includes getting your debit card printed on the spot.
What is required to open Business Bank Accounts?
To open a business bank account in the UK, you’ll need photographic identification, proof of address for all directors and any substantial shareholders, Companies House registration number or certificate of incorporation if applicable, number of employees, business tax status, expected yearly turnover and someone to meet with the bank face-to-face to sign a bank mandate. Check the requirements with your chosen bank.
Can anyone open a business account in the UK?
Yes, anyone over 18 and a UK resident with a business plan can apply for a business bank account. The business must be either a sole trader or a limited company and must meet the requirements of the specific provider, such as minimum or maximum turnover limits or prohibited industries.
Which bank is best for a Business Current Accounts?
Starling is one of the best choices for business accounts, offering a great set of features and an easy-to-use mobile app. It is award-winning and won the 2023 Business Banking Award. It might not suit your business account, so do your research first.
Do I need a business account if I’m a sole trader?
As a sole trader, it’s best to open a business bank account to separate your personal and business transactions, but it is not a legal requirement.
A good place to look for a business bank account is Money Saving Expert. They compare the best accounts and let you see a breakdown of charges
