Choosing the right kind of banking service can have a huge impact on your business — the best one for you will depend on how you manage your company’s finances.
Sole traders are not required by law to have a separate business account – but it’s strongly advised. Even though there may be fees and charges in the future, keeping your personal and business income and costs separate can make life much easier when doing your accounts, claiming expenses and completing your tax returns, while making mistakes less likely. In any case, many banks will not allow you to use your personal bank account for business, while limited companies must have their own bank accounts.
As any small business owner knows, keeping your costs down is essential. Your business bank account is no exception to this. For many new entrepreneurs, the temptation can be to stick with your personal banking provider. This option is certainly the easiest, but if a bank is perfect for your personal use, it may not be the best choice for business banking.
When choosing, here are a few factors to consider:
Fees and charges - These charges are typically made for the handling and moving of money in and out of your business account such as DD, standing orders, automated payments, cash operations, cheques.
Products and services - Most banks offer online banking and app transactions in the UK but not all provide services in the branches.
Your future business needs - If you’re planning on expanding your company significantly over the coming months or years, you may need access to credit, loans, or other financial services. Bear this in mind when choosing a bank for your business.
Customer service and support - Every business is different and has its own financial needs. Take time to choose the right provider for your business. Check on the bank’s service quality score and where they’re ranked compared to other banks based on the latest report from the Competition and Markets Authority.
Independent service quality survey results on Business current accounts published in August 2022 show the following overall service quality ranking:
1. Starling Bank 83%
2. Monzo 79%
3. Handelsbanken 73%
4. Tide 68%
5. Metro Bank 64%
6. Santander 59%
7. Lloyds 58%
8. NatWest 56%
9. Barclays 55%
10. Bank of Scotland 53%
11. TSB 51%
12. Royal Bank of
Scotland 50%
13. HSBC 43%
14. Money 43%
15. The co-op
Bank 40%
From high street to online-only banking, research the full range of business bank account options available and compare introductory offers. Normally, new businesses get charge-free periods for first 12 or 18 months, possibly followed by discounted standard charges or fees for a fixed period. Once introductory periods are over, businesses pay monthly bank account fees usually averaging £5-£12 for high-street banks.
Useful link to compare terms https://www.finder.com/uk/business-banking
If you are thinking to switch your current account to the different provider you may find it easy to use Current Account Switch Guarantee website https://www.currentaccountswitch.co.uk.
Most banks are signed up to the Current Account Switch Guarantee meaning the switch should be straight forward and free, your balance and incoming/outgoing payments are automatically moved and the old bank account closed.
Before any switch you may consider to clear any overdrawn balances, review and cancel some payments and download your bank statements.
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