Free business bank account for sole traders

If you've decided that you want to open a separate account then we've gathered some of the best free business bank accounts for sole traders available in the UK below,

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Making the decision as to whether to keep your transactions relating to your business/being self employed in a personal account or opening a business account is a key one that this guide aims to help let you know your options, the pros and cons and more.

As mentioned above, you legally do not need to open a separate business account if you are a sole trader/self employed (unless you are a limited company) but many people do choose to do this. We've set out the pros and cons below so you can quickly see your options.

Advantages of a sole trader business account

Keeping your personal and business separate has many advantages, you can see these below:

• Easier to manage your finances and bookkeeping - keeping a record of your business/self-employed transactions, your income, expenses and profit is much easier when your accounts are separated
• Gives your business a more credible and trusting look - Sending payment details to clients, customers and suppliers which has a business account rather than personal can give a more professional and serious image to your business.
• Keep on top of your tax obligations - You can sync most business accounts with accounting software so you can see your profits, estimate tax due and much more.
• Access to benefits that business accounts have - many business accounts give you perks and benefits that you wouldn’t get with a personal account
• You can start to build up a business credit rating and history - This could help in the future if you want to look into borrowing money
• You won’t be potentially breaking any of your personal banks terms and conditions - some personal bank accounts don't allow you to run business transactions through them

The main reason that sole traders decide to open a sole trader business account is that you will quickly and easily be able to see how much income you’ve brought in and how much you’ve spent as well as run reports within the business account giving you a much more accurate and clearer view of how your sole trading business is doing.

For example, you’ll be able to see how much you’ve spent on a certain supplier quickly, how much a certain week or month you made in profit, see where you can increase your income and where you can reduce your outgoings.

Disadvantages of a sole trader business account

Although many sole traders do opt for a business bank account, it’s worth noting the downsides that you can experience, these include:

• Banking costs may be more expensive - although there are many business accounts which are free to open with no monthly fees, there are some that do charge these and therefore it can be more expensive for you.
• High street business accounts can be complicated to open - some high street banks make it overly complicated to open a business account as a sole trader, so it can take time and effort to open one if you only want to open an account with a certain bank

How much do sole trader business accounts cost to open and run?

A big worry for sole traders is that it may cost a lot of money to open a business account as well as high fees associated with transactions or a monthly fee. The great news is that this doesn’t have to be the case, there are numerous options available that are free to open, no monthly fees and low transaction costs.

Tide - Free to open - + get £50 free when you do

As one of the most popular options for sole traders, you can open a Tide business account quickly and it’s got a range of features that make it a great choice, these include:

• Free to open
• Get £50 cashback when you open using this link or code: FOUNDERPASS
• No monthly fee
• Low transaction and ATM fees
• Open an account in minutes
• Sync with your accounting software
• Instant access to your account once opened
• A business card is sent to you within a few days
• Easy to use

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How long does it take to open a sole trader business account?

In the past, opening an account as a sole trader would have been a long task, often having to go into a physical bank branch and providing a lot of information, nowadays though it couldn’t be easier with newer companies making the process very fast.

Most sole traders can open a business account online within 5 minutes with instant access to your account via an app or online and with a physical card being sent to you within a few days. 

Tide for example are one of the leading companies for business accounts for sole traders and limited companies, they offer you the ability to open an account in minutes with zero costs per month and low transaction fees. 

How do I open a sole trader bank account?

This will depend on whether you want to open one online or in person, in person you’ll need to go into a bank branch, this will take time and the opening process is typically longer. 

If you want to open a sole trader business bank online then you can do this in a matter of minutes, we’ll give you a few examples of how the process works below for two popular choices for sole traders.

Opening a Tide account as a sole trader

Over 500,000 British businesses have opened a business account with Tide and so you can see they are a popular option, opening one is simple, just follow the steps below:

1. Head over to the Tide website (if you use this link you can get £50 cashback)
2. Follow the steps to sign up, typically this includes downloading the Tide app
3. Tell them about your company
4. Upload some ID and you’ll need to take a selfie on your camera to verify your identity
5. Remember to add the referral/promo code: FOUNDERPASS to get £50 credit when you open and deposit £50 in the first 3 months.
6. Wait a few minutes for your account to be approved
7. If approved, you’ll be all set, with instant access to your new account and a business card will be sent to your address in a matter of days

Opening an ANNA sole trader account

Another popular option is ANNA, over 100,000 UK businesses and sole traders use them for their business account and as with Tide they are fast to open, designed with sole traders in mind and can make your life and finances a lot easier.

1. Head over to the ANNA website
2. Click the Sign Up button
3. Tell them about your business
4. Have your ID ready so they can verify your identity
5. Accounts can take under 10 mins to be approved
6. You’ll get instant access to your account with a virtual card as well as a debit card sent to your address

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Revolut is the final option that could be worth exploring, this offers both personal and business accounts and you can get a Revolut sign up bonus on either of these as an incentive to join.

Should I open a business account as a sole trader?

When it comes to deciding if you should open one, we recommend taking into consideration the following factors:

• Your businesses size - If you’re doing a good amount of turnover then you may want to consider using a business bank account as it could make your businesses and your own life easier and more simple to operate
• Transaction volume - If you do lots of transactions then it can be a lot easier to have them all going through a business account, rather than mixing with your weekly food shopping, drinks with friends etc
• Who you do business with - Some companies will only do business with other businesses that have a business account so it’s worth bearing this in mind
• Your business goals - If you plan to grow your business then you may want to consider opening a business account as you may need one as you grow. If at some point you decide to open a limited company you’ll then legally need to open one so if you already have one you won’t need to do this step.

This is ultimately down to your own choice, remember legally you only are required to open a business bank account when you are a Limited company, if you have a ltd company then the law states that you must keep the money that your limited company generates separate to your personal transactions, however if you are a sole trader there is now legal responsibility to do this. 

So you can run your self-employed business via your personal bank account and be fine, many people do however many also opt to open a business account, and it really comes down to your own personal choice after weighing up the pros and cons.

What do I need to open a sole trader account

Each business account that you can open may require slightly different requirements however in generally you’ll find that you’ll need the below:

• Details of your business - name, turnover, what you do etc
• Proof of ID - Driving License, Passport etc
• Your businesses address
• Your personal details
• Some may require history of trading

What is a sole trader?

If you’re unsure if you are a sole trader then if you fit any of the two points below then you will be classified as one:

• You are self-employed

or

• You run a business but are not a limited company, partnership or LLP

According to recent stats almost 75% of business in the UK are soletraders, these can range from those who do work for themselves from gardeners, window cleaners, barbers, taxi drivers and so on. 

If you are a sole trader, you should have already informed HMRC that you are self employed, if you’ve previously submitted a self assessment tax form then they will already know you are but if you are just starting out, it’s important to inform them. 

As a sole trader you will need to make sure you keep a record of all your income and expenses, as well as account for any profits you make which will then be liable for profit when declared as your income. 

Remember as a sole trader you will be responsible for debts or losses the business and will be liable for them, as apposed to a limited company that has the protection of the company and you therefore have limited liability. 

If in doubt, get professional advice

If you’re not sure about whether to open an account, then you can speak to someone such as your accountant who can give you advice based on your business and it’s history as to whether you should open a business account or not.

Frequently Asked Questions

Can a sole trader use a personal bank account?

Yes, you can use your own existing personal bank account or a new one to run transactions from your business through, there is no legal requirement to have them going through a business account, however many choose to use one as it can look more professional, help you manage your finances better and a number of other reasons too. 

Is my money protected in my business account?

Check that the business account you are opening have FSCS protection, we recommend opening one that does as this will protect you up to £85,000 in case anything happens to the bank/company. 

How much is it to open a limited company instead?

If you're considering open a limited company so you can have more business bank accounts then check out our guide on the costs of setting up a limited company and how to do it.

Whats the tax situation with a business bank account?

Much like if you were getting the income into a personal account, you need to make sure that you have money set-aside whether this is physically in another account or just mentally that is for tax. 

As you’ll be paying the tax at the end of the year rather than like many employed people where the tax is taken off their wage, it’s essentially that you account for the tax due and not be left in a position where you get a big tax bill which you can’t afford to pay. 

I’m having issues with my sole trader business account, what to do?

If you are having problems with your business account then the first port of call is to contact the company/bank in question and see if they can be fixed. If you believe that this hasn’t been done or you have an issue that you’d like to raise then you can get in touch with the Financial Ombudsman Service and submit a complaint through that.