# Business bank account basics UK

> Banking & current accounts · Last updated 4 July 2026

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## Quick answer

Sole traders and limited companies need business bank accounts separate from personal money — FCA-regulated accounts offer FSCS protection and simplify HMRC record keeping.

Trading through a personal account breaches most bank terms and blurs your tax records. Business account fees range from free to around £25 monthly depending on turnover and features. This guide compares startup banking options for sole traders and limited companies.

## Key facts

- Limited companies legally require separate account — mixing funds risks piercing corporate veil
- Sole traders not legally required but strongly advised — simplifies MTD and Self Assessment records
- FSCS protects eligible deposits £85,000 per institution — same as personal accounts
- Monthly fees £0–£25 — free tiers often need minimum pay-ins or charge for cash handling

## Choosing account

Compare transaction fees, international payment costs, accounting software integration and overdraft availability before opening. Free banking periods often expire after twelve months.

Digital challenger banks offer fast online signup, while high street banks may suit retail businesses that deposit significant cash takings regularly. Compare cash deposit fees if you handle physical cash daily.

## Opening requirements

Limited companies need a certificate of incorporation and proof of directors' identities. Sole traders typically need ID and proof of address to open a business account.

Some banks credit check business applicants. Previous personal banking issues may affect approval, so check eligibility before applying.

## Tax and MTD

A separate business account makes quarterly Making Tax Digital updates easier because transactions feed directly into accounting software without manual sorting. Most accounting apps connect directly to major business bank feeds.

Do not pay personal bills from a business account. For limited companies, reimburse yourself via dividend or salary through proper payroll rather than treating the account as personal spending money.

## Frequently asked questions

### Do sole traders need a business account?

Not legally required but strongly recommended for clear HMRC records and Making Tax Digital compliance. Mixing personal and business transactions creates errors at year end.

### Is business money FSCS protected?

Eligible deposits up to £85,000 per banking group at authorised UK banks receive the same FSCS protection as personal accounts. Business accounts at the same bank share the limit with any personal accounts you hold there.

### Can I use a personal account temporarily?

Short-term use is possible but breaches many bank terms and complicates tax. Open a business account as early as possible when you start trading.

## Primary source

https://www.gov.uk/business-finance-support

## Related

- [Self employment basics](https://moneyguide.org.uk/work-earnings/self-employment-basics/)
- [CIS tax construction](https://moneyguide.org.uk/work-earnings/cis-tax-construction/)

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Independent UK money guidance from [Money Guide](https://moneyguide.org.uk). Information only — not regulated financial advice.