How do I set up a business bank account?

Opening a business bank account is one of the first steps to getting your new business up and running. It allows you to keep your personal and business finances separate, making it easier to manage income, expenses, and tax.

Whether you are a sole trader, partnership, or limited company, having a dedicated business account provides professionalism and simplifies accounting. Setting one up is usually straightforward, but it helps to understand what information and documents you need before applying.

This article explains how to set up a business bank account, what banks look for, and how to choose the best account for your needs.

Do I need a business bank account?

Whether you need a business bank account depends on your business structure.

• Limited companies and LLPs: You must have a business account because your company is a separate legal entity. All income and expenses must go through a dedicated company account.

• Sole traders: You are not legally required to have a business bank account, but it is strongly recommended. Keeping your business transactions separate makes bookkeeping and tax filing much easier.

• Partnerships: If you operate under a partnership name, a joint business account ensures all partners can access and manage funds transparently.

Even if you are not required to open one, a business bank account offers clear benefits for managing your finances professionally.

Benefits of having a business bank account

A business bank account helps you:

• Keep personal and business finances separate.

• Track income, expenses, and cash flow accurately.

• Prepare accounts and tax returns more easily.

• Look more professional to clients and suppliers.

• Access business banking tools, credit, and funding.

• Comply with HMRC and Companies House regulations if you are incorporated.

It also makes it easier to show a clear financial record if you ever apply for a business loan or mortgage.

What you need to open a business bank account

Each bank has its own process, but most require similar documents. Be prepared to provide:

• Proof of identity: A passport or driving licence.

• Proof of address: A recent utility bill or bank statement.

• Business details: Business name, trading address, and contact information.

• Nature of your business: What your business does and where you trade.

• Company registration number: If you are a limited company or LLP.

• Expected turnover: An estimate of how much you expect to earn annually.

Some banks may also ask about your source of funds and the countries you trade with to comply with anti-money laundering regulations.

How to choose the right business bank account

Before opening an account, it is worth comparing providers to find one that fits your business needs. Consider the following factors:

• Fees and charges: Some banks offer free banking for the first year, while others charge monthly fees. Check transaction charges and cash deposit limits.

• Online banking: Look for user-friendly mobile apps and online access to manage payments easily.

• Integration with accounting software: Many banks integrate directly with Xero, QuickBooks, or Sage to simplify bookkeeping.

• Customer support: Choose a bank that offers reliable support, especially if you prefer phone or in-person assistance.

• Business tools and extras: Some accounts include invoicing tools, overdrafts, or access to business advisors.

Digital banks such as Tide, Starling, and Revolut are popular among small businesses for their quick setup and low fees, while traditional banks like Barclays, Lloyds, and NatWest offer in-branch support and broader services.

The process of setting up a business bank account

Once you have chosen a bank, setting up your account involves a few simple steps.

1. Apply online or in-branch
   Most banks let you apply online, which usually takes 10 to 20 minutes. You will need to enter details about your business and upload documents for verification.

2. Provide identification and business details
   The bank will verify your identity and business information. Limited companies can expect the bank to check Companies House records to confirm ownership and registration.

3. Undergo compliance checks
   Banks must follow anti-money laundering laws, so they may ask additional questions about your trading activities, suppliers, or customers.

4. Wait for approval
   Approval can take anywhere from a few hours to a couple of weeks, depending on the complexity of your business and the bank’s processes.

5. Receive your account details
   Once approved, you will receive your account number, sort code, and access to online banking. You can then begin accepting payments and making transactions.

Can I open a business account with bad credit?

Yes, but your options may be more limited. Some banks offer basic business accounts that do not include overdrafts or credit facilities.

Online banks are often more flexible, and as long as you can provide proof of identity and business legitimacy, you can still open an account. Maintaining this account responsibly can also help improve your credit record over time.

How to switch business bank accounts

If you already have a business account but want to move to a different provider, you can use the Current Account Switch Service (CASS).

This service automatically transfers your balance, direct debits, standing orders, and incoming payments to your new account within seven working days. Most UK banks participate in this scheme, and your new bank will guide you through the process.

Switching accounts can help you access better rates, features, or customer service without disrupting your business operations.

Tips for managing your business bank account efficiently

• Keep personal and business spending separate to simplify bookkeeping.

• Reconcile transactions regularly using accounting software.

• Review statements each month to spot errors or missed payments.

• Save for taxes by transferring a percentage of income into a dedicated savings account.

• Maintain a good credit record by managing overdrafts and loan repayments carefully.

A well-managed account helps you stay on top of your finances and prepares you for business growth.

How an accountant can help

An accountant can assist you when setting up and managing your business account by:

• Recommending the best type of account for your business size and structure.

• Setting up accounting software linked to your bank for accurate record keeping.

• Helping you track income, expenses, and tax obligations.

• Advising on cash flow and budgeting.

Professional advice ensures your financial systems are efficient, compliant, and ready to support your long-term goals.

The bottom line

Setting up a business bank account is a vital step toward running your business professionally and efficiently. While sole traders are not legally required to have one, every business benefits from keeping finances separate.

By preparing the right documents, comparing banks, and maintaining good records, you can open an account quickly and start trading with confidence.

A clear separation between personal and business finances not only helps with tax and accounting but also builds credibility with clients, suppliers, and lenders.