How to Open a UK Business Bank Account

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How to Open a UK Business Bank Account

Opening a UK business bank account will not only make managing your finances a whole lot easier but it is also recommended by HMRC if you are self employed.

If you operate through a Limited Company or Limited Liability Partnership then you definitely need to open one up – it’s the law.

How to Open a UK Business Bank Account

What is a Business Bank Account

A business bank account works much like your personal bank account. Except that they money that goes in and out relate purely to your business.

Often business bank accounts have different types of benefits and perks attached to them. These are designed to benefit you from a work perspective. So when you start to look around at potential business banks ask what they will offer you.  For example: Clydesdale Bank currently offer a 25 month free bank account before charges kick in of £5 pcm, so that’s a £125 saving. Whereas Natwest offer a free subscription to Freeagent which is normally £29 pcm.  

Who Should Open a Business Bank Account

Anyone who is in business!

I strongly recommend that if you are planning to go self employed that you open a business bank account.  

But why bother if you are just self employed and you are not legally required to do so?

Why Open a Business Bank Account if You’re Self Employed

A lot of self employed business owners choose to open a business bank account, here’s why:

1 Understand Your Business Better

Every business is different.  But trying to understand how your business works when personal banking intermingles with business banking is almost impossible.

Inaccurate allocation of personal expenses against your business profits might mean you think your business makes less money than it does!

You’ll also easily be able to check on payments or clients who have paid you in one place.  Or choose to link your bank account to an accounting app which automatically allocates payments for you.

2 Pay the Right Amount of Tax

When there are personal and business transactions in the same bank account, you risk expenses being incorrectly allocated as drawings meaning you end up paying too much personal tax.

Keeping all your business transactions in one place means you can budget for your tax as well.

3 Save Time and Money

Keeping your business and financial admin tidy will make preparing your tax return much easier and quicker.  And if you chose to use an accountant then speed things up for them and reduce their bill!

4 Automation

Accounting apps like Freeagent connect to your business bank account which means all you have to do is allocate payments. That way it automatically works out your tax on an ongoing basis!

How to Open a UK Business Bank Account

Almost every high street bank offers Business Bank Accounts for Self Employed. And with over 4 million people self employed in the UK, it’s easy to see why.

But what this does mean is that it can be pretty confusing when it comes to picking one.  

Each one carries different benefits and charges so it is hard to know where to begin.

How to Choose a UK Business Bank Account

Here’s what you need to ask yourself before jumping in and signing up to a business bank account:

  • Do you need to make & receive international payments? There is generally a bank charge for arranging overseas payments. You should check the costs of making and receiving payments.
  • Do you need to deposit cheques from customers? Then it will make sense to check there is a physical branch near you so you can do your banking.
  • Do you need to withdraw cash for your business bank account? With some accounts this can also attract charges.
  • Is the mobile banking app user friendly? Banking apps are useful so make sure the business bank account your choose has an app you’ll find easy to use.  Being able to check payments and pay suppliers easily will save you a lot of time
  • Do you need Business borrowing or overdraft?

What You’ll Need to Open Your Business Bank Account

Each bank varies but you will need to provide certain information so that the bank know who you are.  This is all to do with money laundering requirements or what the bank called KYC ‘Know Your Customer’ Checks.

Even though you can apply online for a business bank account to complete the application you will need to go into a branch.  You’ll need to meet with someone there as part of money laundering.

Opening a business bank account involves quite a bit of paperwork so be prepared.  Here is some of the information you will definitely need to have ready:

  • Prove your identity with a document such as a passport or driving licence.
  • Prove your address with something like a driving licence, recent bank statement or mortgage statement
  • Give details of your business, its trading name and address
  • Provide a brief description of what your business does, expected turnover and an idea of money coming in/going out
  • Detail your own personal details such as name, address, phone number, date of birth and residential status.

Which Business Bank Account Should You Open

This can be the toughest question to answer. The first place you could start is with the bank you use personally – this may reduce some of the administration.

Most high street banks offer options for self employed business bank accounts such as:

Barclays

Natwest

Clydesdale

HSBC

Head over to the Business Hub for more advice. It’s full of templates and guides to help you manage your finances when you’re self employed. And don’t forget to find me on Facebook.

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