A billion different decisions go into starting up a new business. Some of them are simple. Others such as choosing the right business bank account can be much more challenging. To make things easier, in this post we take a look at the top business bank accounts for new businesses.

If you haven't already, we recommend reading the post ‘How to open a business bank account with a poor credit history‘ Yes, it's written for those with an adverse credit history but the guiding principles in the article hold true whatever your situation.

Business banking – What you need to know.

1. Use a personal account if you can – (sole traders only)

Many will baulk at this advice, and even claim it's irresponsible, but if you're a sole trader with only a few business transactions per month, then you might be able to use your personal account, at least initially.

HMRC requires that business and personal transactions are separate, in that you can identify which is which, but there is no requirement for sole traders to run a dedicated business account (though it does make life easier).

There's not a business account on the market that can beat the cost of using personal account i.e. free, but you will need to check with your bank to make sure that you aren't breaching their terms and conditions, otherwise you could end up with your account closed.

In our article ‘Yes, you can use a personal account for business‘ we asked several banks for their take on what might constitute business use, and what might be allowed. Of the traditional banks, only Nationwide (yes, we know it's a building society) said that it didn't break their terms and conditions, while HSBC said it was something they would look at on a case by case basis.

Your milage may of course vary, but it could be something to consider in the run up to trading, or whilst you are testing your proposition.

2. Free banking isn't always free

Almost all of the major highstreet banks offer free business banking for companies that have been trading for less than a year. This free period often covers typical day-to-day transactions such as paying bills, and cashing cheques, but not CHAPS payments, international payments, ordering drafts, and stopping cheques.

Typical cover charges range from £5 per month to £12.50 per month or more depending on business turnover, however, these fees are allowable expenses, meaning they can be can be deducted before tax.

Unfortunately free banking for established businesses is limited. Currently only TSB and Clydesdale/Yorkshire Bank offer free day-to-day banking for switchers.

3. There's no such thing as a basic business account

Despite limited companies being distinct and separate legal entities to their owners, the directors of the the business will need to undergo a credit check when applying to open a new account. As being turned down often triggers a spiral of rejection, would-be business owners with a checkered credit history should take a look at the Cash Plus and Cardonebanking accounts, neither of which require a credit check and can often be opened the same day.

4. Transfer cash reserves into a savings account

Just like a personal current account, most business accounts pay little or no interest. If you have built up reserves, then be sure to move that money into a business savings or reserve account to take advantage of higher interest rates.

5. Most banks are suppliers not partners

Many businesses owners tend to think of their bank as a partner, someone they need to appease. Instead, try to think of  banks as a supplier of a service, and treat them just like any other provider in your supply chain. Remember, you are the customer.

Where you can, you should aim to always have more than one supplier for any services that are critical to your business. There is no reason this should be any different for your business bank account.

While we're not necessarily suggesting that you open a second highstreet business account, there are card-based accounts that can be used to supplement your business' existing set up.

Business bank accounts compared

Not all business bank accounts are created equally and it pays to shop around. There can be huge differences in cost, not just between banks but between tariffs too. To save you searching, we've picked out our top accounts.

When selecting an account it's important not to get too hung up on the free banking period or cover charge, and instead focus on choosing the correct tariff to suit your business' planned activity, whether that's accepting electronic payments, cash payments, or mixture of both.

Our pick for the best overall business bank account

santander logo

Up to 18 Months free banking with Santander

Flat rate service charge and free day-to-day banking

Unlike most of the other banks featured, Santander's approach to business accounts is relatively straightforward. Pay a flat rate fee each month, and enjoy free banking on day-to-day activities such as cashing cheques, making payments, and depositing cash.

Activities such as stopping cheques, and making international payments are of course charged for, so bare that in mind. The main downside is Santander's mobile app. With a rating of just 1 out of 5 (on iTunes), it falls well short of competition.

What makes this account a top pick, other than being great value, is that it's one of the quickest, and easiest accounts to open. It's also the only account in our list that paying interest on credit balances, though you'd be better off placing any reserves into a specialist business savings account.

Key facts

Free banking: 18 months | Service charge: £7.50 | Access: Online/branch/phone | Interest: 0.10%

Monthly limit on over the counter cash deposits is £1,000 then 50p per £100 thereafter.

The best business bank account for online businesses and electronic payments

Many small businesses and freelancers are paid electronically. This is especially true for online business such as eBay and Amazon sellers, websites, and freelancers. If you're not taking cash payments or cheques often, then you can save by opting for an electronic business banking tariff.

barclays bank logo

Up to 12 Months free banking for start-ups

Free electronic payments and withdrawals

The Barclays e-payments plan account is specifically designed for businesses taking and making online payments. All day-to-day electronic payments are free of charge including direct debits, standing orders, and automated payments.

Barclays security is a bit of a pain, but they undoubtably have the best online banking system, and mobile apps around. Like Santander's offering, this account can be setup quickly and easily, but often requires a meeting with a local business manager.

For the tech savvy, or those wanting integration with popular account packages, Barclays also offer account feeds via its DataServices platform. This allows you to hook up your account to the likes of Freeagent and Xero, without having to hand over passwords or other sensitive information to third parties.

Watch the number of cheques and cash deposits you make in branch though as fees for these can sneak up on you quickly.

Key facts

Free banking: 12 months | Service charge: £6.50 | Access: Online/branch/phone | Interest: 0%


Alternatives

TSB Electronic Business Tariff – 18 months free banking for start-ups, then £5 per month fixed rate. All standard electronic transactions are free. Minimum balance £1. Write to your branch 2 months before the free period ends to let them know which tariff you want. The downside is a long drawn-out opening process involving posting application papers back and forth.

HSBC Small Business Tariff – 18 months free banking for start-ups then 12 months fixed rate at £5.50 per month, allows £3,000 cash to be deposited per month free, then charges 50p per £100. Switch after the fixed rate ends.

The best business bank account for cash based businesses

For some businesses there's just no avoiding cash transactions. Unfortunately banks often charge a premium for handling hard currency. If you know that your business is likely to need to deposit cash frequently, then you can save a packet by choosing a specific cash based tariff.

santander logo

Deposit £5,000 per month with no additional fees

And enjoy free day-to-day banking

Santander's £20 per month Business Current Account allows up to £5,000 (£10,000 for £40) cash to be deposited fee free over the counter, and charges just 50p per £100 over that limit. HSBC offer a similar deal (£3,000 and 50p per £100 after that), but it's the addition of free day-to-day banking that makes this the top pick for cash handling businesses.

This tariff is only available to businesses that have been trading for 12 months or more. Making it a great choice to switch to once your free banking period ends elsewhere.

Key facts

Free banking: N/A | Service charge: £20-£40 | Access: Online/branch/phone | Interest: 0.10%

Alternatives

Natwest Standard Tariff – 24 months free banking for start-ups, then £6 per month fixed rate. Cash deposits charged at 66p per £100 once free banking ends. Switch to the Natwest Advantage tariff (£25 per month – free day-to-day banking including cash deposits) after 24 months.

HSBC Small Business Tariff – 18 months free banking for start-ups then 12 months fixed rate at £5.50 per month, allows £3,000 cash to be deposited per month free, then charges 50p per £100. Switch after the fixed rate ends.

 

Business Bank Accounts with no credit history checks

It's astonishing that the main highstreet banks still haven't clocked on to the fact that many small business owners, start ups, and freelancers, just want a basic no-frills business account. No overdraft, no credit card, no business loan, just a basic account with which they can make and receive payments.

All of the business accounts from the top highstreet banks require the owner or directors to undergo a credit history check. If that fails, you're stuck without an account and even less likely to get one at the next bank you apply with.

Fortunately there are at least a few alternatives for those with less than spotless credit histories, or that just need to open an account asap.

Cashplus Business logo - White background JPEG

No credit check, no paperwork, and no interviews

Alternative business account

CashPlus is a card-based business bank account alternative. For a yearly £69 fee, you get a Mastercard debit card in your business name, and access to online banking.

There's no paperwork, credit checks or interviews, meaning the account can be opened quickly, making it an ideal choice for those with previous credit problems. In the most cases the account can be up and running within 24 hours.

While there's no charge for inbound transfers, or setting up direct debits, there is a fee for ATM use, and outbound transfers (after the first three per month).

Key facts

Free banking: N/A | Service charge: £69 per year | Access: Online/Post Office/phone | Interest: N/A

Alternatives
Really, there are only few alternatives to the alternative. They are as follows.

CardOneBanking Business Account – £55 application fee and £12.50 per month service charge. No credit checks, same day account opening. Ability to use Barclays Branches, and Post Offices nationwide. Watch out for transaction charges though as they can add up quickly.

Natwest Foundation Account – Designed for business owners with poor credit histories. Natwest tend to be coy about this account, and all information about it has been removed from their website. As such, it can't be applied for directly, but might be offered if you fail the credit check for regular Natwest Business account.

Fore more information on business bank accounts, see our business banking comparison chart

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