Why you need a business bank account and how to choose one

Do you need a business bank account?

Sole trader

If you are a sole trader, you are not legally required to have a separate business account and you can usually use your personal bank account to manage your business and non-business finances. Bear in mind that your bank’s terms and conditions may mean that you can’t use a personal bank account for business transactions. 

Limited company

If you run a limited company, a separate business bank account is a legal requirement. As a limited company is a separate legal entity from its owners, the money belongs to the business rather than you and must be kept separate. 

What are the advantages of having a business bank account for sole traders? 

Even though you don’t legally need one if you’re self-employed, there are advantages to opening a business bank account. 

Better manage your finances 

To reduce your tax bill, you can deduct allowable expenses. If you only have a personal account which mixes up your business and personal costs it can make it harder to accurately calculate the business expenses you are entitled to claim. You might miss out on tax savings when submitting your self assessment tax return.   

Having a business bank account also makes it easier to manage your business finances.  You can better track your business income and make more accurate business planning decisions, giving you a clean, accurate financial picture throuhgout the year.  

HMRC enquiries

HMRC may look at your business finances as part of a tax investigation. A separate business bank account will make this easier and less intrusive.  While there is nothing to be concerned about if everything is in order, it is still uncomfortable to have HMRC examining your personal banking history.

Build a business credit rating 

Opening a business bank account means you can start to build a business credit rating. This is important when accessing funding.  

If you are a sole trader with only a personal bank account, a lender will look at your personal credit history. If you have a business bank account, you can also have a credit rating for your business.  

Be careful to manage your finances effectively. Spending money beyond an agreed overdraft or defaulting on loan payments can negatively impact on your credit rating.  

Look more professional 

Having a business bank account helps to make your business look more professional and trustworthy. Clients and customers may be reluctant to make payments into a personal account. 

Beneficial extra features 

Although you may have to pay fees that don’t apply with personal accounts, many business bank accounts come with additional features that are useful to your business. This includes invoicing tools, integration with accounting software and access to business advisers. 

Bank feed and accounting software

When your bank account is connected to your accounting software through a secure bank feed, transactions are automatically imported - usually each day. This removes manual data entry, reduces mistakes and keeps your records up to date in real time.

For business owners, this means:

• better cashflow visibility
• fewer questions at year end, and
• faster, more accurate tax returns.

For your accountant, it means reliable data and the ability to give you better advice. Some software can also integrate with platforms like PayPal and credit cards.

Making Tax Digital for income tax integration

The first sole traders and landlords – those with qualifying income over £50,000 in the 2024/25 tax year – joined Making Tax Digital (MTD) for income tax from 6th April 2026. More businesses will be required to join MTD for income tax:

• from 6th April 2027 – qualifying income over £30,000 in the 2025/26 tax year
• from 6th April 2028 - qualifying income over £20,000 in the 2026/27 tax year

Under MTD for income tax, you must maintain digital bookkeeping records on approved software and make quarterly updates to HMRC and file your end of year tax return from your MTD-compliant software.

Having a business bank account with bank feed integration will make MTD for income tax much more efficient and easier to comply with. See our guide here and the dates you need to know here.

How do I choose a business bank account?   

To find the most appropriate bank account for your business you should do some detailed research. You may wish to open a business account with the same bank you already have a personal account with or you might want to use a different institution. 

There are several traditional high street banks as well as modern challenger banks which operate only online or via mobile apps.  

Ask other business owners in your network for recommendations, search online, visit bank websites and use business bank account comparison services.  You can find details of UK banks on the UK Finance website. 

During your research you should compare costs and the provision of services such as: 

• online, mobile and telephone banking 
• availability of in branch banking 
• debit and credit cards 
• loan and overdraft facilities 
• interest rates and overdraft charges 
• level of monthly fees  
• foreign currency services 
• additional account charges such as for cheques and statements 
• additional services such as invoicing tools, integration with accounting software and business advice 

How do I open a business bank account?

Once you’ve decided which bank to go with, you may need to arrange a physical meeting to set up the account or the bank might let you do it online or over the phone.

It usually takes between one and four weeks to open a business account.  

The bank will conduct checks and you’ll need to provide various business documents to satisfy theitr statutory money-laundering and 'know your client' procedures. As well as proof of ID and address using documents such as a passport, driving licence and utility bills, the bank may require: 

• your business name, address, contact details and business start date  
• details of the activities your business carries out 
• details of the amount of funds you’ve already invested in your business 
• an estimate of the amount of money you intend to pay into your account 
• Companies House registration number (for limited companies and partnerships) 
• certificate of incorporation and articles of association (for limited companies) 
• number of employees you have and their employment status 
• your business plan  
• expected turnover and cash flow forecasts  

How TaxAssist Accountants can help you

Before opening your new business bank account, TaxAssist Accountants can help you to refine your business plan and financial forecasts to ensure the bank has everything it needs to approve your application.  Call us on 0800 0523 555 or contact us online here.

Last updated 4 Jun 2026 | First published 4 Jan 2023

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This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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