ElyseI’ve had lots of people ask me questions about setting up bank accounts for their business, so I’ve put together a comprehensive Q&A that I hope you will find helpful!
How do I setup a business bank account?
There are two broad categories of banks that offer different types of accounts – high street banks and digital banks. High street banks generally have more in depth application processes and take much longer to open (a few weeks to a month or more), while digital banks can actually see you with an account open within about 10 minutes.
Should I choose a high street bank or a digital bank?
Lets look at some of the differences between high street and digital banks.
HIGH STREET BANKS
Can easily handle cash and cheque deposits as they have physical premises
Longer slower application processes from a few weeks up to a month or more
Much larger institutions and are less likely to just disappear
DIGITAL BANKS
Can’t all easily handle cash and cheque deposits, although some you can do through the Post Office
Very quick application process, you can have a bank account within 15 minutes and cards within 24 hours
Smaller companies and newer to the market place, some digital banks are actually just pre-paid cards, so are a slightly different service.
Which banks are high street and which are digital?
There are loads of Banks out there, and the choice can be overwhelming. Here’s two lists of banks who offer business banking that I have used either myself or through clients:
HIGH STREET BANKS
- HSBC
- Barclays
- Santander
- Lloyds
- Natwest
- Co-operative Bank
DIGITAL BANKS
- Starling
- Tide
- Mettle
- Monzo
- CountingUp
- Revolut
My favourite high street bank is probably HSBC, but I haven’t had a particularly bad experience with any of those high street banks. My favourite Digital banks are Starling and Mettle – and while I am currently using Tide, I do intend moving away from them as it’s costing me a few £ every month in fees (with Starling there wouldn’t be any) and bank transfers aren’t always immediate (Starling they always have been).
Which bank is best to use with Xero/QuickBooks Online?
With the Open Banking regulations, most banks will now feed into both Xero and QuickBooks, and if they don’t now, they will very soon!
A couple of helpful hints:
- If you open a Natwest or Mettle Account, they give you a free FreeAgent Account => Click here for more about FreeAgent
- If you’d like to use Xero, I can offer a great deal on your subscription and also 1 to 1 training or you could join me on one of my masterclasses => Click here for more on my Xero packages
- What’s the difference between the accounting packages?? => Click here for my “Guide to Accounting Packages”!
Can I open more than one bank account for my business?
Yes! There is no limit to the number of accounts that you can open. I always recommend having more than one account anyway. I always have current accounts with 2 separate banks, usually one with a high street bank and one with a digital bank.
I also have savings accounts setup, one for VAT and tax, one for salaries and wages, one for profit that I plan to issue as dividend, and one as a general overflow so that the current account never has too much money in it (that’s wishful thinking at times!!).
I’m Self employed – do I need a business account?
Short answer is no, but I’d recommend it!
You don’t need to use an official ‘business’ bank account, it can just be a personal account, but I’d recommend you have a separate bank account for your business transactions. As a Self Employed person, there is no differentiation between you and your business, but when you have to submit a Self Assessment Tax Return, it is much easier to see the wood from the trees if you have all your business transactions in a different account.
The Bank says I have to have a personal account before I open a business account?
That’s fine, just open the personal account, you don’t need to do anything with it, you don’t even need to hold any cash in it. Once you have that personal account open, you’ll be able to open the business account.