What is a business bank account and do I need one?
Going freelance gives you more control over how and where you work but one of the most important decisions you need to make is whether to have a business account and if so, which one? A business bank account separates professional transactions and income, such as money you generate through sales, from your personal account. It is used to send and receive money for your business as well as for any expenses.
There is no legal requirement to have a business account if you are operating as a sole trader but if you are a limited company you will need a business bank account as your business is a separate entity. There are several different types of business bank accounts, with some offering a free business banking allowance or interest on your balance. You can get accounts set up for small firms with low turnover or corporate accounts if you generate high levels of income. There are also accounts that will support foreign currency transactions, which is helpful if you do a lot of work internationally.
For a quick and easy way to compare the best business bank accounts, try the Nerdwallet* business bank comparison tool. It allows you to compare the UK's top business bank accounts in minutes.
Business bank account vs Personal bank account
If you are unsure whether a business bank account is right for you, we list some of the pros and cons of each account to help you decide.
Pros and cons of a business bank account
Business bank account pros
- Separates transactions - It can be confusing if you combine your personal and business money as you could be mixing up funds that you are using for company expenses with funds that are going towards your mortgage. Keeping your business and personal accounts separate makes it easy to keep track of both types of income and spending. You will also need a separate business account if you want a business loan or company credit card.
- Makes it clear for tax purposes - Having a separate business account can be beneficial when it comes to working out how much corporation tax you owe HMRC or other types of bills such as VAT as well as your self-assessment tax return. It will also make things easier if you are ever subject to an HMRC inspection and the taxman wants to see your business account.
- Looks more professional - Companies you are invoicing may be suspicious if they receive an invoice just in someone’s name rather than a company and it can also look more official and professional if there is a brand on the bill.
Business bank account cons
- Fees - Many business accounts aren’t free and you will need to pay monthly fees. Some providers may offer free business banking but there can be more limits on transactions such as transfers and cash withdrawals compared with a personal account.
- More administration - Most personal accounts can be opened by any individual but banks may have stricter requirements for businesses and may not provide accounts for certain sectors. The process of opening a business account can be more time-consuming as you may also need to book an appointment with a main high street bank to set up an account and provide details of your business and estimates of your turnover.
Pros and cons of a personal bank account
Personal bank account pros
- More convenient - You don’t have to worry about managing a separate personal and business account or sitting through a branch appointment. Instead, your professional and personal income is managed in the same place.
- No fees - Most personal accounts are free so you won’t have to pay any fees to manage your business income and expenses.
Personal bank account cons
- Bank terms and conditions - Some banks don’t allow personal accounts to be used for business use so you could be in breach of the terms and conditions and lose your account.
- Risk of confusion - You will need to be very organised to remember whether each item of spending was a business expense or for personal use. Similarly, you will need to be able to separate business and personal income when it comes to working out your taxes correctly.
Best app-only business bank accounts for freelancers
Below we have provided a comparison of the best app-only business bank accounts for freelancers. You can also quickly compare the UK's top business bank accounts via Nerdwallet*. More information on the accounts can be found below the table.
| Tide* | Starling Bank | ANNA* | Wise* | Mettle | Revolut Pro | Monzo | |
| Pricing (Monthly) | Free/£12.49+VAT/£18.99+VAT/£49.99+VAT | No monthly fees/£7 business toolkit | Free/£14.90 +VAT | Free (£45 set-up fee) | Free | Free | Free/£9 |
| Fee-free spending abroad | Depends on subscription | Yes | No | Yes | No1 | Depends on subscription2 | Yes |
| Free ATM withdrawals (limits may apply) | No | Yes | No3 | Yes4 | Yes | No | Yes |
| FSCS protection | Yes | Yes | No | No | Yes | No | Yes |
| Cash deposits | Yes | Yes | Yes | No | Yes | No | Yes |
| Overdrafts/loans | No | No5 | No | No | No | No | Yes |
1Mettle doesn't support international payments, so there are no FX fees
2some transfers/foreign spending is free depending on the subscription/currency. The fees that apply for using your Pro account are the same as the fees that apply for using your Personal account. These fees will depend on what type of Personal account you have.
3some ATM withdrawals are free depending on the subscription.
4ATM withdrawals up to £200 per month are free then there is a 1.75% + £0.50 charge
5not currently available for sole traders
Tide - good for accountancy software integration 
- Link with accountancy software
- No monthly fees option
- Fee-free spending abroad with an issued debit card (paid plans only - 1.75% fee on Tide Free plan)
- FSCS-protected bank provided by ClearBank
- 20p for transfer with free account
- £1 for ATM withdrawals
- £2.50 for Post Office deposits up to £500 (0.5% thereafter) and 3% at a PayPoint
- Extra services and priority customer support can be accessed through paid-for services
Sole traders and limited companies can open accounts with Tide* but there are limits on company types. The standard account has no monthly fees but you do have to pay for transfers and cash withdrawals, as well as a 1.75% fee on foreign currency card transactions. You can pay £12.49 per month plus VAT for Tide Smart which offers 25 free transfers a month and fee-free foreign currency card transactions, £18.99 plus VAT for Tide Pro which offers unlimited transfers in and out as well as fee-free foreign currency card transactions or £49.99 per month plus VAT for Tide Cashback which also offers unlimited transfers in and out and fee-free foreign currency card transactions plus other benefits such as cashback.
Read our Tide review to see the full features of its account.
Starling Bank - good for no monthly account fees
- Open an account via the app within 10 minutes
- No monthly fees
- Free spending at home and abroad with debit card
- Free ATM withdrawals
- Starling Bank Marketplace to access business products and services
- Spending alerts and categorisation
- Accounting tools
- FCA-regulated and protection from the Financial Services Compensation Scheme
- Send invoices
- Receipt capture
Starling Bank is fully regulated by the FCA and provides a free app-only business account that also integrates with accountancy software and lets you categorise expenses, photograph and upload receipts and access other services through the Starling Bank marketplace. For business accounts, cash deposits are charged 0.7% with a minimum of £3. It is open to limited companies and sole traders of any size, although it has in the past hinted it may eventually start charging large firms.
Read our full review of Starling's business bank account.
ANNA Money - good for cashback
- 1% cashback on selected business spending
- No monthly fee on the Pay As You Go account (but you pay for the services you use)
- Add all of your personal and business accounts within the app
- 24/7 customer service
- Attach receipts to transactions
- E-money account so no FSCS protection
ANNA* offers two business freelancer plans at £0 or £14.90 + VAT a month. The ANNA Pay As You Go account has no monthly fee but you do have to pay for what you use including 20p per bank transfer and £1 per ATM withdrawal. You can pay £14.90 + VAT per month for ANNA Business which offers 50 free bank transfers per month and 3 free ATM withdrawals per month, plus other benefits. Both plans offer 1% cashback on selected business spending.
Read our full ANNA business bank account review.
Wise - good for being paid like a local in 23 different currencies
- Local account details in 23 currencies so customers can pay you like a local
- No monthly fee (but you pay a on-off set-up cost of £45)
- 0.5% cashback on eligible transactions on debit card purchases
- Fee-free spending abroad
- Can't deposit cash into your account
- No FSCS protection
Wise* is a business account with no monthly fee, just a one-off set-up fee of £45. You can benefit from 0.5% cashback on debit card purchases, fee-free spending abroad as well as accountancy software integration. Wise Business is particularly suited to those operating with multiple currencies and in several different countries as you can hold account details in 23 different currencies allowing customers abroad to pay quickly in their local currency.
Read our full Wise business bank account review.
Mettle - good for free accounting software
- No-fee business banking
- Designed for small businesses and freelancers
- Earn 1.46% AER interest on deposits from £10 up to £1,000,000 in savings pot
- Free accounting software
- Free in-app invoicing so you can send invoices on the go
- FSCS-protected bank account backed by NatWest group
Mettle is a NatWest-backed app-based business bank account aimed at self-employed individuals and small businesses. It offers free business banking as standard and gives access to free accounting software, free in-app invoicing, plus you can earn 1.46% AER in interest on deposits from £10 up to £1,000,000 if you use a savings pot.
Read our full Mettle business bank account review.
Revolut Pro - good for managing business and personal finances in the same place
- Revolut Pro account for freelancers and sole traders
- Must already hold a personal Revolut account
- Free to open but there are associated fees and charges
- Sits within the Revolut app
- Earn up to 1.2% cashback on eligible spending
- Create invoices from your Revolut Pro account
- Accepting online customer payment - fees start from 1% + 20p per transaction
- Revolut Reader or Tap to Pay on iPhone to accept in person payments (fees from 1.5% per transaction)
- E-money account so no FSCS protection
Revolut Business is no longer available to freelancers. Instead, freelancers can open a Revolut Pro account via their personal Revolut app. Revolut Pro is free to open, but operates a pay-as-you-go model meaning there are fees and charges associated with it. You can also earn between 0.4% to 1.2% cashback depending on your Revolut personal plan. Other limits and fees depend on which personal account you hold with Revolut already. You can choose between the Standard, Plus, Premium, Metal, and Ultra accounts and they all come with their own monthly fees and limits.
Read our full Revolut business account review.
Monzo - good for spending categorisation 
- FCA regulated
- Accountancy tools (paid plans only)
- Spending alerts
- Tax money pots (paid plans only)
- Categorised payments
- Earn up to 1.60% AER interest with a Business Instant Access Pot
Monzo is perhaps one of the most recognisable banking apps with a popular personal account and it only launched its business account in March 2020. It offers a Pro version for £9 a month that includes use of accountancy tools and tax pots so that you can set aside money owed to HMRC. Its free Lite version doesn’t offer the accountancy tools or tax pots but provides everything else such as a debit card, spending categorisation and customer support. It costs £1 to pay in cash at PayPoint or Post Office and ATM withdrawals within the European Economic Area (EEA) are free, subject to a £400 daily limit. You can also take out £200 cash for free every 30 days outside the EEA with a 3% charge when you exceed that.
The account is available for sole traders and limited companies but not partnerships. There are some types of businesses that can’t hold accounts such as those involved in gambling, lending or defence and weapons.
Find out more in our Monzo business review.
Pros and Cons of app-only business bank accounts
Pros of app-only business bank accounts
- Easy to open - Most will let you apply and set up an account through an app where you will just need to upload documents and possibly provide a selfie. This should speed up the process and means you could have an account set up within minutes rather than weeks.
- Banking on the move - You will be able to access your account and manage your business finances from wherever you are as long as you have your phone.
- Same business banking features - An app-only bank gives you the same features as a high street branch meaning you'll have a debit card and the ability to send and receive payments.
- Fintech benefits - App-only banks offer extra features such as spending alerts and categorised spending.
Cons of app-only business bank accounts
- Different types of regulation - Not all app-only accounts are registered as fully-fledged UK bank accounts. Instead, many are e-money lenders so you do not get the same Financial Services Compensation Scheme (FSCS) protection if they go bust. Most will still ringfence funds to keep them secure.
- No branches available - You can’t walk into a branch to make withdrawals or get support and instead need to rely on phone or email contact. Additionally, not all app-only brands offer features such as deposits, cheque payments or overdrafts.
- Reliant on technology - Not everyone is necessarily comfortable with managing everything on a smartphone and what happens if your phone battery runs out or if the account is hacked?
- Balance limits - Most app-only accounts will have limits on the balance you have to hold as well as on transactions, which can be lower than high street banks.
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Best high street business bank accounts for freelancers
In the following comparison table, we have summarised some of the major high-street business bank accounts. You can also quickly compare the UK's top business bank accounts via Nerdwallet*. Additional information on the high street business bank accounts can be found below the comparison table.
| Lloyds Bank | HSBC | NatWest | |
| Pricing | First 12 months free (£8.50 per month thereafter) | No maintenance fee for 12 months (£6.50 per month thereafter) | No monthly account fee |
| Fee-free spending abroad | No | No | No |
| Free ATM withdrawals^ | Yes | No | Yes |
| FSCS protection | Yes | Yes | Yes |
| Cash deposits | Yes | Yes | Yes |
| Overdraft | Yes | Yes | Yes |
^ charges may apply after free banking period
Lloyds business bank account - good for sending and tracking invoices
- 12 months free day-to-day business banking for new businesses
- Dedicated support from a UK-based business management team
- Mobile Business Banking app to access your accounts on the move
- Free accounting software
The Lloyds business account offers a 12-month free-banking period, as long as the account is in credit, that covers cheques, cash, electronic payments, deposits and withdrawals. After this, there is a monthly fee of £8.50 per month. Accounts can be opened by directors of companies, partnerships or sole traders.
NatWest business bank account - good for free accounting software
- Free access to FreeAgent accounting software
- 24/7 Everyday banking support online, by phone and mobile
- No monthly account charge
- No transaction fees for the first 24 months
NatWest business holders can access dedicated business guides and events to help develop and grow their businesses. Its startup account is open to sole traders or limited companies that have been trading for less than a year with a turnover below £1m.
After the free period, NatWest’s standard charges are £0.35 per automated payment in or out and £0.70 per £100 for cash payments at bank branches or the Post Office, additionally there is a £0.35 charge for withdrawals.
HSBC Kinetic business bank account - good for overdraft
- No account maintenance fee for 12 months
- Overdraft available
- Cashflow and spending insights
- Scan and deposit cheques within the app (limits apply)
- Business banking app
HSBC Kinetic business account users don't have to pay an account maintenance fee for the first 12 months. After 12 months you will be charged a monthly current account maintenance fee of £6.50. HSBC also allows you to scan and deposit cheques within the app, as well as make payments of up to £25,000 per day.
Pros and Cons of High street bank accounts
Pros of high street business bank accounts
- Physical presence - You can walk into any branch of the bank to make deposits or withdrawals rather than having to rely on a Post Office or PayPoint.
- Face-to-face contact - Account holders don’t have to wait on hold with contact centres and can visit a branch where in some cases you may have a dedicated relationship manager.
- Access to other products - Having a business account with a bank can also give you preferential access to their other products such as loans and overdrafts.
- Fully regulated - All high street banks are regulated by the Financial Conduct Authority. They have certain rules to follow to treat customers fairly, plus you get deposit protection of up to £85,000 from the Financial Services Compensation Scheme if the provider goes bust.
Cons of high street business bank accounts
- Legacy systems - Many banks are still catching up with fintech firms when it comes to the quality of their apps so you may not get as much functionality.
- Limited to branch opening hours - In most cases, high street banks will require you to open an account in-branch during their own opening times, which can be time-consuming.
- Higher fees - It may be slightly easier to withdraw and deposit cash with a high street bank business account but the monthly fees tend to be higher than an app-only bank as someone needs to pay for that branch structure.
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