How To Get Free Banking For Your Business
If you're starting a new UK business, then you'll need to open a dedicated bank account to handle credits from your customers and debit transactions to your suppliers. Existing established businesses may be looking to switch providers to gain additional benefits or make savings on monthly fees.
Business Banking Table of Contents
- Lloyds Commercial Account
- The Award Winning Santander Business Bank Account
- Barclays Business Bank Accounts
- Major Banks Summary
- Other Ways to Minimise Costs
- UK Banking Guide
You may also have other requirements such as international payments, financing, working capital, company insurance, merchant services or private banking.
There's a limited range of options for commercial customers, offering completely fee-free accounts. These are typically available for sole traders, limited companies and limited liability partnerships. Here are the most popular accounts:
Lloyds Commercial Account
Lloyds Bank offers new businesses fee-free banking for 18 months, and switchers six months. You can apply directly online and manage your account using their telephone or Internet services. You get the following from Lloyds:
- Day to day banking for 18 months for new businesses with up to £1-million turnover.
- Online Internet Banking.
- Telephone banking.
- 30 day trial of the Business Toolbox suite.
- Support from the business management team.
- Apply online or over the telephone.
- Click here to apply for this account online.
The Award Winning Santander Business Bank Account
The Santander business bank accounts have won numerous awards for its simplicity to small business customers and can be opened online in minutes. We recommend this account for new and existing business owners.
With this package, you receive the following at no cost:
- Day to day banking for up to 18 months.
- Online Internet Banking and telephone banking.
- Cash deposits up to £3,000 per month.
- Interest paid on credit balances.
- Apply online or over the telephone.
- Click here to apply for this account online.
Existing personal Santander customers receive 18 months fee-free banking. If you don't hold a personal current account, you'll receive 12 months. The only transactions you'll have to pay for on either of the Start-up Business current accounts are non-standard account transactions such as CHAPs, Change Giving and any other non-standard transactions.
During the initial period, you receive unlimited direct debits, standing orders, bill payments, debit card payments and unlimited automated BACS credits.
This offer is available for new businesses and existing businesses wishing to switch their account. Opening a business bank account is easy as you can do it online or via the telephone.
Barclays Business Bank Accounts
The Barclays account is perfect for all types of businesses, especially new startup business customers. You can open this account online. You get the following services during the first year for turnovers of up to £2 million:
- Day to day banking for up to 12 months.
- Unlimited phone support from the Barclays Business Team 24/7.
- Internet, mobile and telephone management 24/7.
- Credit management services to aid bad debt recovery and manage cash flow.
- Initial consultations from accountants, solicitors and marketing professionals.
- Secure data backup service.
- Legal and tax advice.
- Apply online or by telephone with a guaranteed switch in seven days.
- Click here for more information and to open an account.
After the 12 months introductory period, you'll be placed on a regular pricing plan.
Major Banks Summary
The other main institutions also offer free banking, but for a limited period of time, then after that they'll make various charges. Be aware that the FSCS (Financial Services Compensation Scheme) introduced by the government covers deposits for individuals and businesses up to £75,000 per institution (from January 1, 2016).
- Santander - 18 months.
- HSBC - 18 months.
- Barclays - up to 12 months.
- Natwest - 24 months.
- Lloyds TSB - 18 months.
- Co-operative Bank - 18 months.
- RBS - free if you don't need to use a branch (For example, by operating your account via telephone or the Internet).
- Yorkshire Bank - 24 months for startups and 18 months for switchers.
Other Ways to Minimise Costs
If you approach the banks direct, then you'll get the offers outlined above. Members of various clubs and associations may provide a better deal.
- The Federation of Small Businesses (FSB) offers free business banking for life via the Cooperative bank. There are no fees at all so long as you're an FSB member and apply via their site. FSB membership costs from £175 per year for 1-4 employees with other great benefits included.
- Operate your account directly online or via telephone banking to reduce fees. If you never need to use the facilities of a branch network, then HSBC and RBS offer fee-free automated banking. The automated tariff is useful if you only interact with them via the phone or Internet. There are no monthly charges either.
UK Banking Guide
Why Do You Need a Business Account?
Banks won't allow you to deposit personal funds into a business account or add business funds into personal accounts if you're a limited company.
If you're a sole trader, then you can continue to use your current account as normal. However, you'll need to split the business and personal expenses for your accounting records. It's easier to manage your accounts especially if you deal with other currencies such as the Dollar or Euro.
What Type of Account Should I Choose?
If you think you'll need to be in contact with your bank on a personal level, then you may need the services of a business advisor. To find what's best for you, simply walk down your local high street and meet with all the banks concerned.
Ask what they can do for you and if you like the people in your branch.
For the majority of businesses, telephone and Internet Banking services are sufficient for their daily needs. Precluding branch visits keeps the banks and your costs as low as possible.
How Can I Open My Bank Account?
Once you've chosen the bank you wish to use, you'll need some documentation to take along when you open it to prove that you've a viable business. Ask your bank what documentation they require. Most require the following:
- Certification of Incorporation for Limited Companies.
- VAT Registration Certificate.
- Copies of previous accounts.
- Current business plan.
- Information about signatories (who can sign cheques etc.).
When opening an account online copies of these documents will be requested to be posted into a central mailing house for processing.
Are There Any Incentives?
Banks are in the business to make money so only take a product if you really think you'll need it. Some may try to sign you to a form of "business club" with additional benefits. There are usually better alternatives that offer business planning or accounting software.
Remember The Federation of Small Businesses offers lifetime free banking with the Co-op bank, including legal advice from just £175 per year.
Ask about the different types of accounts that are available. For example, HSBC offers an automated tariff if you only transact over the Internet or telephone. This account saves money on regular fees which is vital for any organisation where profits and cash flow are everything.
What Are Typical Fees and Charges?
Once your introductory period has come to an end, you'll incur charges for every transaction made from your current account. Here are the most typical amounts.
Banks change their fees from time to time during normal operations. Increases occur at least once a year in addition to when the Bank of England changes base interest rates. They should send you a booklet when things change in your bank account. Most charges are similar, but we have compared charges for the main standard fees below:
Monthly Account Fees
Most accounts incur a monthly account maintenance charge for turnovers under £1.5 million. Here are some common charges:
- HSBC - £3.15 - small business tariff up to £500,000 turnover.
- Barclays - £5.50 - standard business tariff.
- Natwest - £6.00 - standard menu tariff - minimum charge of £10/month.
- Lloyds TSB - £5.00 - Business Extra Tariff.
- Santander - Free for start-up for up to 18 months - monthly fee dependent upon turnover for other accounts.
Standard Fees and Rates
The most common types of payment and receipts all incur a charge with the banks if you're on their standard tariffs. Some paid services such as a Business Plus account incur lower or no fees, but will incur a monthly "membership" fee.
- Payments out - manual (40p).
- Standing orders (40p).
- Direct Debits (40p).
- Other automated debits (40p).
- Automated receipts (70p).
- Cash received in a branch (60p per £100 deposited).
- Cheques paid into a branch (30p).
- Telephone and Internet payments (40p).
Other likely Fees
Apart from the standard items shown above, there are other transactions that a bank will charge for, and here are some of them:
- Night safe deposits (£2).
- Stopped cheques (£10).
- Special cheque clearance (£15).
- Duplicate statements (£5).
- Certificates of balances (£8).
- CHAPS (£20).
- Bankers drafts (£12).
- Unauthorised borrowing (£15).
- Unpaid items (£35 each).
What Other Institutions Offer Business Banking?
We've selected the five most popular financial institutions to compare prices for this exercise. There are others out there you may want to research before making a decision. Here are other institutions worth exploring:
- Abbey business banking - now Santander.
- Clydesdale Bank.
- Royal Bank of Scotland.
- Allied Irish Bank.
- Bank of Scotland.
- Cater Allen.
- Co-operative Bank.
- Bank of Ireland.
- Halifax (HBOS).
- Ulster Bank.
- Yorkshire Bank.