Choosing the right kind of banking service is a major opportunity to get your business basics right from the beginning. While it may be inconvenient to maintain a separate account for both your personal and business activities, it is good practice to do so to keep your accounts clean. Here, we’ll look at how to go about opening a business bank account in the UK and what options are out there.
The pros of having a business account
Having a business bank account is a good idea for most businesses; even freelancers and one-man-bands.
As a sole trader, you may want to open a business bank account for a few reasons. Firstly, your bank may specify that a personal account is for personal use only, and threaten to close your account if they see a large number of business-related transactions.
Secondly, if your personal costs are mixed up with your business costs, it could be difficult for you to inform HMRC about how much money your business has made. Finally, having a dedicated bank account is likely to make your business appear more professional to clients and partners.
It’s important to be aware of the process to open an account, otherwise you could waste a lot of time choosing the wrong one for your needs.
Opening a UK business account with a foreign entity
If your business has an overseas corporate identity, it’s possible that your home bank may be able to set up an account for you if it has a correspondent banking relationship with a British bank. Many major UK banks also have so-called ‘international’ accounts.
These are designed specifically for non-residents, so they’re a great option if you don’t have the documents to prove your UK address. In fact, you can even apply for an international account online. Barclays, Lloyds, HSBC and NatWest all offer international bank accounts.
However, opening a bank account from abroad or an international account may not be the right choice for you. Very often, you will have to make a big initial deposit and commit to paying in a minimum amount of money each month.
Some banks will also charge you a monthly fee in addition to these requirements. This can make your bank account expensive to open and run. There may also be other restrictions. For instance, you may not be able to close the account and switch to a better deal until a set period of time expires.
Fortunately in recent years there has been an increase in alternative finance providers to help overcome some of these barriers. With the free borderless account from TransferWise, businesses can activate international account details for free and convert and hold over 40 currencies within the one centralised platform. Money is always converted at the mid-market exchange rate as well, making them up to eight times cheaper than the banks for sending international payments. With unique international account details for the UK, US, Eurozone and Australia, they’re a great alternative option for overseas businesses looking to set up an account in the UK.
What documents and details do I need to provide to open a business bank account?
For businesses setting up a bank account in the UK, the process is relatively straightforward as long as you comply with the eligibility criteria. Make sure you have the following documents to hand when you open your account:
- Proof of ID. All named company directors will need this. You can use a passport, national ID card or photo driving license.
- Proof of address. This can be a utility bill, or recent bank statement. Alternatively, use a council tax statement.
The following details of your company will also need to be given:
- Full business address (including postcode)
- Contact details
- Companies House registration number (for limited companies and partnerships)
- Estimated annual turnover
- In some cases, you’ll need to prove your own personal financial situation, with documents to show you have a clean credit and banking history.
How to open a business account in the UK
The steps involved in opening a business account can vary between banks.
It’s advisable to start by researching the options online. While you cannot open a business bank account online for the majority of the major banks, your initial application can be made on your selected bank’s website.
Most banks will require a meeting in person before granting you access to a business account. You will be required to provide the documents listed above, and to provide photographic identification and proof of address for all directors and any substantial shareholders.
Be aware that the bank will also need to meet face-to-face at least one of your company representative’s in the UK to sign a bank mandate so the business bank account can be opened.
You should tell the bank if you have foreign shareholders and/or directors of your business and that you need a UK business bank account (rather than an international business bank account that’s held offshore).
When the bank account is open, you are free to use your local bank branch for your banking needs on a day-to-day basis.
For more information on opening a business account in the UK from abroad you can contact the government’s Invest in Great Britain & Northern Ireland hub.
Best business bank accounts in the UK
There are a variety of retail bank accounts available in the UK, including the ‘big four’ high street banks Barclays, HSBC, NatWest and Lloyds. But it’s worth being aware that the best business account for your needs may not always be one of the ‘big four’. When you look at business account comparisons it may also be worth considering newer-established ‘challenger’ banks such as Metro Bank or Starling Bank, or alternative international money transfer companies like TransferWise. Here are the key benefits of each banking option:
- 1,500 branches in UK
- Free and contactless Visa debit card as standard
- Business account free for first year and comes with a choice of financing options
- Offers a start-up business account with free business banking for the first 12 months, and an established business account with two simple price plans
- 1,100 branches around England and Wales
- Active in 80 countries
- If you bank with HSBC in your home country, they can help you set up an account in the UK before you get here
- Range of business bank accounts available
- Businesses with a turnover up to £2 million receive an annual review to ensure the best standard tariff for their business
- Around 1,300 branches in the UK
- 18 months’ free day-to-day business banking
- Three business accounts with range of tools, including reduced-price legal assistance, and accounting software
- 1,400 NatWest branches across UK
- NatWest’s Select current account is free to use and comes with a contactless visa debit card as standard
- Four business accounts to choose from, depending on the size of your business.
Business banking monthly fees
It is typical for there to be monthly fees charged for business bank accounts and users should be aware of this before they open an account. Most UK business bank accounts come with an introductory offer such as free banking for 12 or 18 months. While these are tempting, always make sure you know how much you will end up paying once the introductory period is over.
As a general rule, the more transactions you make on the account, the higher the charges are likely to be.
Some business current accounts require a regular monthly or quarterly standing charge. This will typically cost you around £15 to £20 per quarter, but a there are plenty of accounts that don’t charge this fee at all.
Here are some of the fees and free business account periods to bear in mind. Pricing information provided within the table is correct as of August 5th.
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For those businesses operating internationally or based overseas wishing to gain quick and easy access to UK banking details without the need for a corresponding overseas address, the TransferWise Borderless account is a good option. Whilst it’s not got all the typical features that a business bank account with the ‘big four’ could offer, the borderless account comes with a host of features that could be particularly cost effective and useful for businesses operating internationally. Features of the account include:
- Make international payments up to eight times cheaper than high street banks
- Convert your money at the mid-market exchange rate
- Hold over 40 different currencies in one account and convert between them quickly and easily
- Get unique international account details for the UK, EU, AUS, and US (so you can invoice customers in those geographies like a local and get paid in these currencies for free)
- No subscription or monthly fees. The only fees you’ll pay is a small, transparent fee on the value of the transfer
- FCA regulated
- Open an account quickly with typical verification times around 2 – 5 working days
How long does it take to open a business bank account in the UK?
It can take anything from three weeks to three months for a bank account application in the UK to be approved and meetings to be arranged, so make sure you factor this time into your business planning process.
With some operators, for example Metro Bank, it is possible to walk into a branch and make an appointment that day. Opening an account with TransferWise can be quicker still. You can sign up for an account within a few minutes and typically it takes 2-5 working days for your business account to be verified.
Business bank accounts for non UK residents
There are increasing number of foreigners wanting to open or are opening companies in the UK, where they may also want to have a corresponding UK bank account.
Non UK residents who don’t have the necessary ID documents can still succeed in opening an account, as in recent years banks have shown greater flexibility when it comes to the documents they will accept as proof of address.
Opening a business account as a non UK resident
It is not necessary to live in the UK to open a UK business bank account, although it’s advisable to acquire UK residency before applying for one, as most banks will not entertain an application unless they have UK residency.
To open a UK business bank account, you will need two documents, one to prove your identity (usually your passport or National Identity Card) and one to prove your address, which applies to both in branch and online.
It’s usually easier to open a bank account with one of the UK’s largest banks i.e. Barclays, Lloyds, HSBC. This is because they have lots of experience dealing with non-residents, so they can be flexible with their requirements.
Contact customer support before trying to open a bank account.
The TransferWise borderless account – the easier way to open UK account details for non UK residents
In recent years, finance disruptors have made it even easier for overseas businesses to gain access to UK bank details. Companies such as TransferWise, founded by the first employee of Skype and backed by Sir Richard Branson, are an example with their borderless account. Their multi-currency account provides business owners with access to international banking details for the UK, US, Eurozone or Australia without the need for a corresponding overseas address.
With the account businesses can activate international account details for free and convert and hold over 40 currencies within the one centralised platform. Money is always converted at the mid-market exchange rate as well, making them up to eight times cheaper than the banks on international payment fees. With no monthly fees or minimum deposits required, they offer a cheaper and easier alternative for businesses with international banking needs. The only fees charged are on a small, upfront fee on the value of each transfer. FCA regulated and kept to the same stringent regulations as banks, disruptors such as TransferWise have increasingly been coming onto the scene.