Compare small business bank accounts

April 2024

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What is a small business bank account?

A small business bank account is simply a bank account aimed at startups and small businesses. It can provide a host of free tools and support to help you manage your business’s financial transactions, including helping you with tasks such as invoicing.

Do I even need a bank account for my small business?

If you’re a sole trader, such as some freelancers and contractors, there’s no legal obligation to open a business bank account – but doing so can make it much easier to juggle your business’s income and expenditure with your own.

On the other hand, if you’ve set up your business as a limited company in the UK and it’s registered with Companies House you will legally be required to open a business bank account.

Small business bank accounts vs personal bank accounts explained

If you’re not legally obliged to open a business bank account, you might prefer to use your personal bank account for your small business banking needs. However, should you choose to do this, keep in mind that some banks may specify your personal current account should be for personal use only and could threaten to close your account if they see a large number of business-related transactions.

There are also several benefits to using a business account rather than a personal one:

It can be much easier to complete your tax return if you’ve kept business and personal income and expenses separate
A business bank account can help you to build a credit rating for your business which will benefit you if you later need to apply for a business loan or credit card
A dedicated bank account can make your business appear more professional to clients who can make payments into an account under your business name, rather than your own name

What is required to open a small business bank account?

To open a small business bank account, you’ll usually need to provide the following documents:

Proof of ID: such as a passport or driving licence
Proof of address: such as a utility bill, recent bank statement or mortgage statement

Additionally, you may be asked to provide the following:

Your full business address and contact details
Details of your company’s registration at Companies House if applicable
Tax and VAT registration details
Estimated annual turnover

Best UK business bank for customer service – 2023 survey

In August 2023 the BVA BDRC published the findings from its Business Banking Service Quality survey. Undertaken as part of a regulatory requirement and published at the request of the providers and the Competition and Markets Authority, the study surveyed 18,000 SME bank account customers between July 2022 and June 2023.

Each customer was asked how likely they would be to recommend to other SMEs –

Their provider?
Their provider’s online and mobile bank services?
Services in-branch and in business centres?
Their provider’s SME overdraft and loan services?
Their provider’s relationship/account management services?

The results show the proportion of customers of each provider, among those who took part in the survey, who said they were ‘extremely likely’ or ‘very likely’ to recommend each service. A detailed breakdown for each category can be seen in the table below.

Source: BVA BDRC

Ranking	Provider	Score
1	Monzo	84%
2	Starling Bank	82%
3	Handelsbanken	74%
4	tide	73%
5	Metro Bank	63%
6	Santander	59%
7	Lloyds Bank	58%
8	Bank of Scotland	54%
8	NatWest	54%
10	Barclays	50%
11	TSB	49%
11	Royal Bank of Scotland	49%
13	Money	48%
13	The Co-operative Bank	45%
15	HSBC	42%

Ranking	Provider	Score
1	Monzo	87%
2	Starling Bank	86%
3	tide	76%
4	Lloyds Bank	68%
4	NatWest	68%
6	Barclays	64%
6	Metro Bank	64%
6	Royal Bank of Scotland of Scotland	64%
6	Bank of Scotland	64%
10	Santander	59%
11	Handelsbanken	56%
11	TSB	56%
13	Money	55%
14	HSBC UK	54%
15	The Co-operative Bank	38%

Ranking	Provider	Score
1	Handelsbanken	64%
2	Lloyds Bank	57%
3	NatWest	56%
3	Metro Bank	56%
5	HSBC UK	53%%
6	Bank of Scotland	51%
6	Santander	51%
8	Royal Bank of Scotland	50%
9	Barclays	49%
10	Money	45%%
10	TSB	45%
	*The ranking does not include any brands where the eligible sample size is less than 100 (Starling Bank, tide and TSB are excluded from this table)

Ranking	Provider	Score
1	Handelsbanken	81%
2	Monzo	73%
3	Tide	69%%
4	Starling Bank	68%
5	Metro Bank	63%
6	Lloyds Bank	58%
7	NetWest	54%%
8	Santander	53%
9	TSB	51%
10	Bank of Scotland	50%
11	Royal Bank of Scotland	49%
11	Barclays	49%
13	Money	44%
14	The Co-operative bank	42%
15	HSBC UK	40%

Ranking	Provider	Score
1	Metro Bank	70%
2	Handelsbanken	61%
3	Lloyds Bank	55%
4	NatWest	53%
4	Bank of Scotland	53%
6	Santander	50%
7	The Co-operative Bank	47%
8	Money	46%
9	Royal Bank of Scotland	42%
10	Barclays	40%
11	TSB	39%
12	HSBC UK	33%
	*Monzo, Starling Bank and tide are excluded from this measure as do not operate a branch network

Frequently Asked Questions

Does opening a business bank account affect my credit score?

Providing you manage your account sensibly, opening a business bank account can help you to build your business credit score and this can make it easier for you to get credit in the future.

However, this also means that if you run into financial difficulty and are, for example, unable to pay back your overdraft, you could end up damaging your business credit score. What’s more, if you’re a sole trader, your personal credit score could also be affected if your business faces any financial problems. You should therefore talk to your bank as soon as possible if you have any financial concerns.

Can I get a small business bank account with an overdraft?

Yes – although this will partly depend on the account and your credit score. Many business bank accounts will offer an overdraft providing you have good credit, with smaller businesses tending to be offered smaller overdraft facilities than larger, more established businesses.

If having an overdraft is important to you, it’s worth comparing your options carefully to look for an account with the most generous overdraft facility and low fees.

Note that if you have a poor credit score, you may not be offered an overdraft with your account.

Can I get a small business bank account without fees?

Yes you can – many small business bank accounts won’t charge any monthly or annual fees at all, while others might waive fees for the first 12 to 18 months. Be sure to check what the fee will be after that period is over.

Can I open a small business bank account with bad credit?

Although it can be more of a challenge to open a small business bank account with poor credit, it is certainly still possible.

When you apply for a small business bank account, a number of app-based providers, such as Anna and Cashplus, won’t require a credit check as part of the application process and can therefore be worth considering if you have poor credit. However, many banks will indeed run a search on your credit history to check your creditworthiness and those with a poor credit score may be turned away.

Can a small business have two bank accounts in the UK?

Yes you can have two or more business bank accounts if you choose to. You may find this helps you to better manage your money or set aside funds for certain projects or business needs. You could choose to split your accounts for day-to-day spending, online payments, one for providing staff with debit cards for spending, and so on.

Is there a downside to having multiple business bank accounts?

As well as having its advantages, multiple bank accounts can make it harder for you to keep track of your finances. Some accounts also require a minimum balance to waive certain account fees which can be more difficult to monitor if you have more than one account.

What is the best bank for small businesses in the UK?

The right choice for you will depend on the type of business you run, your personal circumstances and how you plan to use the account.

The quickest and easiest way to find the best small business bank account is to shop around using our business bank account comparison tool. This will enable you to select which bank account features are the most important to you, such as the number of branches, foreign exchange, overdrafts and so on.

How do I open a small business bank account in the UK?

Once you’ve researched your options and found the right account for you, simply click through to fill in the online application form. If you choose a digital, app-based provider, the whole process of opening your account can be completed quickly and easily online – you’ll usually be asked to upload photos of your ID and record a short selfie video for identification purposes.

Written by

Rachel Wait

Rachel has been writing about finance and consumer affairs for over a decade, helping people to get to grips with their finances and cut through the jargon. She’s written for a range of websites and national newspapers including MoneySuperMarket, Money to the Masses, Forbes UK, and Mail on Sunday. Rachel has covered almost every financial topic, from car insurance and credit cards, to business bank accounts and mortgages.

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