A limited company is a separate legal entity, so its money should move through an account in the company's name. Sole traders can legally use a personal account, but a separate business account makes bookkeeping and tax returns much easier. Choosing the right account is mostly about fees, how you take payment, and how well the account connects to your accounting software.
Who needs what
| Business type | Account | Notes |
|---|---|---|
| Limited company | A business account in the company's name | Company and personal money must stay separate |
| Sole trader | A personal account is allowed, but a business account is recommended | Check the provider's rules if you trade under a business name |
| Partnership | A business account in the partnership's name | You may be asked for a partnership agreement |
What to compare
- Monthly fees, and how long any free period lasts before charges start
- Transaction costs, for payments in and out, card use and international transfers
- Cash deposits, which can be costly or limited if your business takes cash
- Payment features, such as Faster Payments, Direct Debit, card acceptance and foreign exchange margins
- Accounting links, so transactions flow into your software through a bank feed
- Overdraft or credit, and whether a personal guarantee is needed
- Support and access, including business-hours help and the ability to add users with limited permissions
How your money is protected
Banks and building societies authorised in the UK are covered by the Financial Services Compensation Scheme, which protects eligible deposits, including those of most small businesses, up to £120,000 per person per authorised firm. Some digital providers are e-money institutions rather than banks. They protect customer money by safeguarding it in separate accounts instead of through FSCS deposit cover, which is a different kind of protection, so check which type your provider is.
Opening an account: what you will need
- Your company registration number and certificate, if you are a limited company
- Details of the directors and anyone with significant control
- Photo ID and proof of address for the directors, or for you as a sole trader
- A description of what the business does, and your expected monthly turnover
Why separate accounts help at tax time
Keeping business and personal money apart simplifies your accounts and your HMRC records. For limited companies it also avoids tangled director's loan accounts. If you are a sole trader with income above £50,000, Making Tax Digital for Income Tax now requires digital records anyway, which a clean business account makes far easier. See our guide to small business accounting software with payroll.
Choosing
- Estimate your monthly payments in and out, and any cash you handle.
- Price two or three accounts at that level, after the free period ends.
- Check the bank feed works with your accounting software.
- Confirm what protection applies to your balance.
When you need extra funding later, see our guides to business loans and business credit cards.