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Written by
Katy Ratican
17 Aug 2021
4 minutes

Do I need a small business bank account?

Everything you need to know about small business bank accounts, with a comparison of the top five currently available
Do I need a small business bank account?

If you’ve been running your business for years, you know the importance of having the best business bank account. But if you’re starting out, it’s crucial to know what a business account is and what services the major banks are offering small businesses.

Opening a business bank account is a crucial step in starting a business, along with making a viable and effective business plan. But it can be confusing for someone with no experience in finance. To help you, here’s everything a startup or freelancer needs to know about business accounts.

What is a business bank account?

A business bank account or current account is designed to facilitate easier financial management of businesses. It would offer the same services as a personal bank account, including withdrawals, deposits, an overdraft facility and a debit card. The primary difference is that you’ll be charged an annual or monthly fee to use the services of a business account.

Whether you run a two-person startup or multi-location business, a business bank account ensures that your personal and professional financial lives are separated.

Who needs to open a business bank account?

If you’re a limited company, you need to open a business bank account, irrespective of your size or the number of people you employ. But increasingly, as more individuals enter the gig economy, a question we frequently hear is “Do I need a business bank account if I’m working alone as a freelancer?”

The simple answer is no. As a freelancer or individual service provider, you’re technically a ‘sole trader’. The government will treat your business and personal income as one. But banks usually discourage using personal bank accounts for business.

Remember that you don’t have to work alone to qualify as a sole trader. You can employ people and still be a sole trader. What it means is that, like 59% of all businesses in the UK, you’re self-employed.

Pros and cons of keeping personal and business finances separate


  • You’ll better understand your cash flow

  • You can easily track and claim expenses for tax deduction

  • Makes your business look professional

  • It’s easier to use merchant services


  • Although banks may offer an introductory free period, most will require you to pay fees eventually

  • The process of opening one can be more complex than a personal account

A comparison of business bank accounts

If you’re looking for the best small business bank account, you have several options to choose from. Whether you’re a sole trader or a limited company starting out, you can select one from either the more traditional banks or digital-only fintech providers.

Starling Bank

If you’re a freelancer, entrepreneur, contractor or small business, Starling Bank’s current account is a top choice. For starters, there’s no monthly fee. Secondly, you can receive an overdraft of up to £150,000. Thirdly, if you use an accounting app, you can integrate it easily.

The Co-operative Bank

With the Business Direct Plus current account from The Co-operative Bank, you won’t have to pay monthly fees for 30 months. Plus, no monthly service charge if your credit balance is at least £1000. An excellent app and desktop version are another reason why freelancers, contractors, and small and medium enterprises should consider it.

HSBC Kinetic

Designed to make business banking simple and fast, HSBC Kinetic offers zero monthly fees for a year. You can apply for an account in a few minutes through the app. The bank claims that a significant proportion of the accounts are opened on the same day. You can secure funds easily by applying for overdrafts through the app.

Digital-only services


The best small business bank account need not be a traditional account, as Monzo has proven. Their app is all you need to open a current account and manage your finances. With no monthly fees when you start out, this is the right option for sole traders, freelancers and small businesses that would like to keep it simple.


It’s effortless to open and manage a current account with Tide. But what we really like are the tiers the app provides. You can start as either a freelancer, small business or medium-sized enterprise. For freelancers, the service comes with no monthly charge.

In short

Getting the best small business bank account can help organise your finances, manage your cash flow and expenses and seek an overdraft if needed. With digital-only providers, opening a small business bank account has become easier than ever before, for everyone from freelancers to small and medium businesses.

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