Do I need a business bank account?

Limited companies must have a business bank account — you cannot use a personal account for company finances. Sole traders are not legally required to have one, but it is strongly recommended for separating personal and business finances, making record-keeping easier, and looking professional to clients.

Are business bank accounts free?

Many business bank accounts offer free banking for 12-24 months. After that, there are usually monthly fees (£5-£15/month) or transaction charges. Digital banks like Starling, Tide, and Mettle offer permanently free plans for basic banking. Traditional banks charge after the introductory period.

Can I use my personal bank account for my sole trader business?

Legally, yes — sole traders can use a personal account. However, it is not recommended. Mixing personal and business finances makes accounting harder, tax returns more complex, and could cause issues with HMRC if your records are unclear. A separate account is best practice.

Business Bank Account Guide UK — Best Options for Small Businesses | PocketWise

A dedicated business bank account keeps your finances organised, simplifies accounting, and presents a professional image. For limited companies it is mandatory; for sole traders it is strongly recommended.

Do You Need One?

Business Type	Required?	Recommended?
Limited company	Yes (legally required)	Essential
Sole trader	No	Strongly recommended
Partnership	No	Strongly recommended
Freelancer	No (unless Ltd)	Strongly recommended

Types of Business Bank Account

Type	Best For	Monthly Fee
Digital/app-based (Starling, Tide, Mettle)	Sole traders, freelancers, small Ltd companies	Free–£10/month
Traditional high street (Barclays, NatWest, HSBC, Lloyds)	Businesses needing branch access, cash handling	Free (intro) then £5–£15/month
Challenger banks (Monzo Business, Revolut Business)	Tech-savvy businesses, international payments	Free–£25/month

Feature Comparison

Free/Low-Cost Digital Accounts

Feature	Starling	Tide	Mettle	Monzo Business
Monthly fee	Free	Free (basic)	Free	Free (Lite)
UK transfers	Free	Free	Free	Free
Direct Debits	Free	Free	Free	Free
Cash deposits	Free (at Post Office)	£1/per deposit	No	Fee applies
Integration with accounting software	Xero, FreeAgent, QuickBooks	Xero, QuickBooks, Sage	FreeAgent	Xero, FreeAgent, QuickBooks
Invoicing	No	Yes (built-in)	No	Yes (paid plans)
Multi-currency	Via Wise integration	No	No	Yes (paid plans)
Overdraft	Available	No	No	No

Traditional Bank Accounts

Feature	Barclays	NatWest	HSBC	Lloyds
Free banking period	12 months	12 months	18 months	12 months
Monthly fee (after)	£8–£12/month	£5–£10/month	£8–£12/month	£7–£10/month
Branch access	Yes	Yes	Yes	Yes
Cash deposits	Yes (fee may apply)	Yes (fee may apply)	Yes (fee may apply)	Yes (fee may apply)
Overdraft	Yes	Yes	Yes	Yes
Dedicated business manager	Depends on turnover	Depends on turnover	Depends on turnover	Depends on turnover

What to Look For

Feature	Why It Matters
Monthly fees	Ongoing cost — compare carefully
Transaction fees	Per-transaction charges add up
Cash deposit facilities	Essential for cash-handling businesses
Accounting integration	Saves time on bookkeeping
Invoicing	Built-in invoicing saves on additional software
International payments	If you have overseas clients or suppliers
Overdraft/credit	Emergency funding access
Customer support	In-app chat, phone, branch?
Card controls	Freeze/unfreeze, spending limits
Multi-user access	If you have a business partner or bookkeeper

Fees to Watch

Fee Type	Typical Range
Monthly account fee	£0–£15/month
Cash deposits	50p–£1 per deposit or % of amount
Cash withdrawals	Free–70p per withdrawal
CHAPS payments	£15–£30 per payment
International transfers	£5–£25 + exchange rate margin
Returned Direct Debit	£5–£15
Overdraft interest	10–20% EAR

Opening a Business Bank Account

What You Need

Document	Sole Trader	Limited Company
Photo ID	Yes	Yes (all directors)
Proof of address	Yes	Yes (all directors)
Company registration number	N/A	Yes
Memorandum of Association	N/A	Yes
Business details (type, projected income)	Yes	Yes
UTR number	Helpful	Helpful

How Long It Takes

Bank Type	Typical Setup Time
Digital banks	Minutes to hours
Traditional banks	1–4 weeks
With appointment	Same day to 1 week

Best Account by Situation

Situation	Recommended
Freelancer — just starting	Starling or Mettle (free, simple)
Sole trader — cash-handling business	Traditional bank (branch + Post Office access)
Limited company — tech/services	Starling or Tide (free + invoicing)
International clients	Wise Business or Revolut Business
Growing business needing credit	Traditional bank (overdraft, loans)
Multiple team members	Monzo Business Pro or Revolut

Tips

Open early — do it when you register, not after
Keep business and personal separate — always
Connect to accounting software — automates bookkeeping
Review annually — better deals may appear
Use free introductory periods — switch after if fees start
Set aside tax — use pots or separate savings to hold tax funds

For managing business finances, see our invoicing guide and accounting software guide.