Best Bank For Business Banking - Taking care of your money is an essential part of running a business, from understanding how business banking works to choosing the best account for your needs.
More than half (51 percent) of small and medium-sized businesses are considering switching to their main bank or banking facility provider in 2023, according to ratings website Smart Money People. If you're looking to shop, our guide is a good starting point.
Best Bank For Business Banking
Read on to learn more about opening a bank account for your business, from legal and tax considerations to key features of major and challenger banks.
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Whether you are legally required to have a business bank account depends on your business structure. Having a business bank account can be a good idea for most businesses, including freelancers and sole traders.
The main difference between personal and business bank accounts is that business accounts usually charge a monthly fee, as well as a range of fees for certain transactions. Many banks usually offer an initial fee-free period before topping up, so be sure to shop around before choosing one.
Finally, a business account is usually the best option for your business because it allows you to keep your money separate.
As a sole trader, you are not required by law to have a business bank account. Legally, you can use your personal bank account for both business and non-business transactions, or you can create a second personal bank account for your business use.
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Since a limited company is a separate legal entity, it must have its own business bank account.
If you are not sure which business structure to choose, see the difference between a sole trader and a limited company.
Although you are not legally required to have a business bank account, there are a number of reasons why creating one is a good idea.
Some banks offer a business-specific sole merchant account. This gives you the advantage of separating your money, but often with lower monthly fees tailored to the services you need.
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It is likely that somewhere in the fine print of your personal bank account documentation it states that your account should be for personal use only.
If your bank realizes that you are using the account for your business (especially if there is a lot of money going through it), it can force you to close your account and open a business account.
When you complete your tax return, you must tell HMRC how much money your business has made. You can subtract certain allowable expenses (travel and office expenses, for example) to calculate your taxable profit.
When your personal expenses mix with your business expenses, it can be difficult to make these calculations accurately.
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A business bank account not only helps with reporting to HMRC but also makes it easier for you to manage your business budget and forecasts.
It takes time to determine personal and business expenses, so having separate bank accounts will help you manage your money more efficiently.
Having an account in your business name can help you when you need to apply for a business loan in the future.
It helps build your business' credit history, which many banks look at when considering whether you qualify for business financing.
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Having a dedicated bank account can make your business look more professional because customers can make payments to an account that exists in your business name rather than to your own.
If you set up a limited company, you are required by law to have a business bank account because your business is a legally separate entity.
Do you have employees or plan to operate in the near future? If you are a sole trader managing your own payroll accounts, this can get very complicated without a separate account.
Do you need to apply for a loan? Although not essential, having a business account can help when applying for business loans and other forms of financing.
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Do you want to support the work of an expert? Many banks have separate departments that manage services for businesses. If you use a personal account, you will be lost.
Once you've done your research, opening a business account online can take between one and four weeks while the bank runs a series of checks.
You just need a few personal details and business documents to get started. Going completely digital can lead to faster business account openings.
If you decide that you need a business account, you need to research which bank offers the best account for your business needs.
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Consumer Insight Consultancy BVA BDRC conducts periodic, independent survey for the Competition and Markets Authority (CMA). In this survey, people with a business bank account are asked how likely they are to recommend their provider.
The survey, which included 18,000 small business banking customers at 15 banks, was conducted between July 2021 and June 2022.
We've used the latest data to list the best commercial banks, allowing you to compare business accounts from the best providers.
*Starling Bank, Tide and TSB were not included in this category due to their small sample sizes, while Monzo was not included because it does not offer overdrafts and loans
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Below are more details on the products themselves, allowing you to compare business bank accounts from major providers.
Challenger Starling Bank has topped the overall service quality and online banking rankings for the second time.
Starling Bank merchant account holders pay no monthly fees or UK payment fees and receive free 24/7 UK support.
The account is available to all business types and sizes, and offers benefits including integration with a range of software solutions, FSCS protection and free withdrawals in the UK and abroad.
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Handelsbanken came out on top in the survey for relationship management and transfer services. It also ranked second for services within the branch and third in terms of overall service quality.
It's called a relationship bank, with each branch operating like a local business. Commercial banks say this helps them better understand their customers and society.
The bank offers a direct line to the account manager and team at your local branch, as well as checking accounts in a number of currencies, and overdrafts (as the case may be).
There are no details about fees on their website, so you will need to contact your local branch to see what they can charge for your business.
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To open a commercial bank account with Metro Bank, you must have an annual income of up to £2m.
When it comes to fees, there are no monthly fees on daily balances over £6,000. If your daily balance ends up being less than £6,000 a month, you'll pay a £6 monthly fee.
You also get 30 free UK transactions each month, but if you go over that limit, charges start at 30p per transaction (balances under £6,000 don't get the free transactions).
Barclays, ranked ninth and fourth for mobile banking, has specialized products for businesses of all sizes.
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A "rival" bank is usually a smaller retail bank, set up with the intent of competing with long-established large national banks.
According to a survey by Smart Money People, more than half (54 percent) of small and medium businesses plan to change banks and move to a competing bank or fintech provider in 2023.
It is clear from the CMA data that competing digital banks and multi-currency accounts are becoming increasingly popular with businesses.
Starling Bank climbed the overall rankings for the second consecutive survey, with Monzo and Tide also up.
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There is also an increase in the number of sustainable banks, such as Triodos, that only fund projects and organizations that have a positive impact on society, culture and the environment.
No matter which bank you choose, it is important that you carefully research all of your options and decide what is best for you.
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Apart from these, there can be some easy units of modern technology offered to do a job. The best example of this is access to business banking solutions through the medium of the Internet.
Which Bank Has The Best Business Bank Account?
Online Business Banking solutions are a great way to use banking solutions with added benefits like convenience, ease of use, better record keeping, etc.
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