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.
You may also have other requirements such as international payments, financing, funding and borrowing needs, 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 Bank offers new businesses fee free banking for 18 months, and switchers six months. You can apply for your account online and manage your account using their telephone or internet services. You get the following from Lloyds:
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 business owners and existing businesses. With this package, you receive the following at no cost:
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.
The Barclays account is perfect for all types of businesses and especially for new start-up small business customers. You can open this account online and it's useful for new business owners or existing businesses looking to switch.
You get the following services included at no cost during the first year for companies with a turnover of up to £2 million:
After the 12 month introductory period, you'll be placed onto a regular pricing plan.
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 £85,000 per institution.
If you approach the banks direct you'll get the offers outlined above. Members of various clubs and associations may provide a better deal.
Banks won't allow you to deposit personal funds into a business account, nor 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 but will need to split the business and personal expenses for your accounting, especially if you deal with other currencies such as the Dollar or Euro - it just makes it easier if you have a separate account.
If you think you'll need to be in contact with your bank on a personal level then you may need one of the banks business advisors or banking managers to help you with your project for a longer term then it may be that you simply walk down your local high street and meet with all the banks concerned and see what they can do for you and your business and if you like the people in your branch.
For most businesses, telephone and internet banking services are sufficient which keeps the banks and your costs as low as possible.
Once you have chosen the bank you wish to use, you'll need some documentation to take along when you open it and prove that you have a viable business. Ask your bank what documentation they require, although most will ask for the following:
When opening an account online copies of these documents will be requested to be posted into a central mailing house for processing.
Banks are in the business to make money so only take a product if you really think you'll need it. Some will try and get you into a form of "business club" but there are generally better alternatives that can offer you business planning or accounting software. And the Federation of Small Businesses offers lifetime free banking with the Co-op bank, including legal advice for just £170 per year.
Ask about the different types of accounts that are available. For example, with HSBC they offer an automated tariff option if you only transact over the internet or telephone and have your statements sent to you every 3 months. This saves money on regular fees which is vital for any startup organisation or regular businesses where profits and cash flow are everything.
Once your introductory period has come to an end you'll get various fees and charges for every transaction made from your current (checking) account. Here are the most common and typical amounts.
Banks will change their fees from time to time and not just when interest rates are changed by the Bank of England but at least once per year. 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:
Most accounts incur a monthly account maintenance charge for turnovers under £1.5 million. Here are some common charges:
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.
Apart from the standard items shown above, there are other transactions that a bank will charge for, and here are some of them:
We've selected the five most popular financial institutions to compare prices for this exercise, but there are others out there you may want to research before making a decision and we've listed them below:
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