What is a business bank account?

A business bank account is a bank account in a business's name, which keeps business funds and transactions separate from personal funds and transactions.

A business bank account is designed for businesses including sole traders, partnerships, companies and charities. It works a bit like a personal bank account but often includes extra features.

Having a separate business bank account is not required legally but there must be a clear division between the company’s finances and those of the owners and directors. This is because the company is a separate legal entity. For example, your company’s banking must be separate from your personal banking.

The simplest way to keep your finances separate is to open a business bank account. This may also save you time at the end of the tax year as it will keep your business transactions separate from your personal transactions, simplifying preparation for year end accounts.

Here are some of the key features of many business bank accounts:

• Overdraft facility

• Relationship manager and business support

• Free invoicing, accounting and payroll software

• Monthly admin fees and transaction fees

Compare business bank accounts

There are two broad options for opening a business bank account: a traditional bank or a digital challenger bank. These tend to differ in a few consistent ways:

Traditional banks (e.g. Barclays, Lloyds, NatWest, RBS, HSBC) typically offer:

• Branch access and in-person support, useful if you regularly handle cash or cheques

• A dedicated relationship manager on some account tiers, usually for more established businesses

• An introductory free-banking period for new or switching businesses (commonly 12–24 months), after which a monthly fee applies — often in the region of £5–£10/month depending on the provider and account tier

• Overdraft facilities and other lending options, subject to eligibility

• Free accounting software (often FreeAgent) bundled with the account for a period

Digital challenger banks (e.g. Mettle, Starling, Tide, Monzo) typically offer:

• App-based account opening, often completed within minutes

• No monthly fee on many accounts, sometimes permanently rather than just for an introductory period

• No branch network — cash deposits, where available, are usually handled via the Post Office

• Built-in invoicing and bookkeeping tools, and integrations with accounting software

• More limited access to overdrafts or business lending compared with traditional banks

Because introductory offers, monthly fees, and even which accounts are available to new customers change fairly often (and can vary significantly depending on your business's turnover, structure, and how long it's been trading) it's worth comparing current, provider-specific details directly before choosing. See our best business bank accounts guide for up-to-date options.

How business current account providers compare on service quality

Every year, the Competition and Markets Authority (CMA) requires business current account providers to take part in an independent customer service survey, so businesses can compare providers before choosing where to bank. The results below are for "overall service quality" — how likely SME customers said they'd be to recommend their provider to other SMEs.

According to the CMA's independently-run business banking survey (published August 2026), Monzo, Starling, and Mettle were ranked as the top business current account providers in Great Britain for overall service quality, with scores of 85%, 83%, and 82% respectively. Santander (48%), Bank of Scotland (53%), and a three-way tie between The Co-operative Bank, Barclays, and TSB (56% each) ranked lowest. HSBC UK scored 60%, placing it in the middle of the table rather than among the lowest performers.

These results are from an independent survey carried out between July 2025 and June 2026 by Ipsos, published in August 2026, as part of a regulatory requirement. The survey also covers online and mobile banking, overdraft and loan services, relationship/account management, and branch services separately.

Providers can rank differently across these categories (for example, Handelsbanken ranks highest for relationship management, despite being 4th for overall service quality). This is intended to help businesses compare providers; it is not advice or a recommendation.

Rankings are updated every six months (February and August), so it's worth checking the current results directly before making a decision, as standings can shift between survey waves.

Do I legally need a business bank account?

If you run a limited company then having a separate business bank account is not required legally but there must be a clear division between the company’s finances and those of the owners and directors. This is because the company is a separate legal entity. For example, your company’s banking must be separate from your personal banking.

For a sole trader or partnership, a business bank account could make your life easier and save time. Also, some personal bank accounts don’t allow business transactions so using your personal account for your business may be breaching your bank’s terms and conditions.

What are the pros and cons of using a business bank account?

There are many benefits to opening a business bank account. The main advantages are as follows:

• Accounting is simplified. Invoices will be paid into your business bank account making accounting easier and quicker. Using a separate business bank account simplifies the preparation of year-end accounts, because all business transactions will be accurately recorded in one dedicated place. This makes it easier to match up bank statements with accounting records. And your accountant is likely to have fewer queries for you if there aren't any personal transactions mixed in with business transactions.

• Personal accounts kept private. Your personal and business finances will be kept separate. Your accountant or HMRC won't need to trawl through your personal transactions.

• Build credit history for future funding needs. Having a separate business account will build up your business’s credit history which may make it easier to apply for other finance in the future, such as a loan, the Growth Guarantee Scheme (GGS) or even a business credit card.

• Paying employees. Managing payroll accounting from a personal bank account adds complexity, since business and personal transactions become mixed together.

• Get more features. Business bank accounts often have extra features like a relationship manager or free invoicing software.

• Abide by the rules of personal accounts. There's a good chance that the fine print of your personal bank account stipulates that the account can't be used for business. If you use your personal account for business, but it's against the rules, the bank could close your account.

• Understand your business budgeting. Having a separate business account makes it easier to keep an eye on incomings and outgoings for your business.

• Look professional. Clients may feel more comfortable sending money to a bank account in a business's name, rather than an individual.

How to choose a business bank account

It’s important to compare business bank accounts to choose the one that best suits your business’s needs. Most business bank accounts come with additional features and many charge monthly admin fees. These vary significantly between providers.

Here are some of the common factors to consider when you’re thinking of opening a business bank accounts:

• Overdraft - this is useful if your cash needs regularly fluctuate. You may need to pay suppliers or wages before you receive sales. Check to see how much interest you will be charged and if there are any overdraft fees. Some simple business bank accounts don’t include an overdraft facility.

• Interest on your account balance - this is important if you sometimes hold a large amount of cash.

• Convenience - if you need to pay in physical cheques then check that there is a local branch.

• Business support - some accounts offer access to business and tax advisers. This can be particularly useful during the early stages of running a business.

• Invoicing, accounting or payroll software - some business accounts offer free accounting or payroll software that’s linked to your bank account. This can save time and money when it comes to preparing your year end accounts.

• Account fees - many business accounts charge monthly fees and some charge transaction fees. Some simpler business accounts don’t charge fees but they may not offer other features like an overdraft or business support.

Business banking tips

Here are some tips for how to get the most out of a business bank account:

• Running all business transactions — payroll, invoices, and incoming cash — through the business account keeps year-end accounting simpler.

• Overdraft usage and cost are worth monitoring regularly. Overdraft costs can mount up over time and aren’t always the cheapest way of borrowing. Other forms of flexible or short term business loans may be cheaper.

• A business bank account that no longer meets a growing business's needs can be changed. You may have started your business with a simple cheap business account with no overdraft facility. It may make sense to pay a small monthly fee for more account features as your business grows.

• Free banking support offered with a business account can be a useful first port of call before seeking paid professional advice.

How to apply for a business bank account?

The application process for a business bank account will depend on the lender and the type of account you’re applying for. Bank will carry out a credit search on you and your business. They will also usually ask for the following information:

• Personal details and proof of your identity.

• Details of the business owners.

• Information about your business including the address.

• Financial records or financial details of your business.

Application times and service levels now vary drastically between providers. While challenger banks like Monzo and Starling often allow users to open an account in minutes via an app, traditional lenders can take much longer. Service quality also varies by provider; see the service quality comparison above for current rankings.

Frequently asked questions

Do I need a business bank account?

Whether you need a business account depends on your circumstances. If you run a limited company then there must be a clear division between the company’s finances and those of the owners and directors. This is because the company is a separate legal entity. The simplest way to keep your finances separate is to open a business bank account.

It can also make sense for sole traders to open a separate business bank account as it helps simplify your admin if you keep your personal and business transactions separate.

Do I need a business bank account as a sole trader?

Legally you do not need to have a business bank account as a sole trader. However, you may be breaching the terms and conditions of your personal bank account if you use it for business transactions.

Can I open a business bank account if I have bad credit?

Banks make lending decisions on an individual basis so it may be possible to get a business bank account if you have bad credit. Consider getting hold of your credit report to see if you can improve your credit score before applying for a business bank account.

What’s the difference between a business and personal bank account?

Business bank accounts are designed for businesses rather than individuals. Many personal accounts don’t allow business transactions. Take a look at the terms and conditions in your personal account to see if this is the case.

Many business bank accounts also have additional features like a larger overdraft facility, a relationship manager and free accounting software.

What extra features does a business bank account have?

A business bank account often includes extra features like a relationship manager, business and tax support and free invoicing or accounting software.

Can you get a business bank account as a startup or new business?

Some business bank accounts are designed for new businesses. These may be simple accounts that don’t offer an overdraft facility.

Does a business bank account offer an overdraft?

Most business bank accounts offer an overdraft facility. Some of the most simple business bank accounts don’t offer an overdraft facility. These accounts are usually designed for small or new businesses and charge low or no admin fees.

Details correct as of 09 September 2026. Terms, rates and features are subject to change — always verify current details before applying. This article is for general information only and does not constitute financial advice.