Business bank account basics UK
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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.
Last reviewed:
Read the full banking & current accounts guide →Primary source: www.gov.uk/business-finance-support
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.
Common 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.