You've registered your company. Now everyone's telling you to open a business bank account. But do you actually need one?
The short answer: legally, no. Practically? Yes, almost always. Here's what you need to know about business bank accounts, when you really need one, and how to choose the right one for your company.
Is a business bank account legally required?
Short answer. No.
There's no UK law that says you must have a dedicated business bank account. Even if you're a limited company, you can technically use a personal bank account to receive payments and pay expenses. But here's the thing: just because you can doesn't mean you should.
Why most founders open a business account anyway
Even though it's not required by law, opening a business bank account is one of the smartest early decisions you can make. Here's why:
1. It keeps your finances separate
When you're a limited company, your business is legally separate from you. Keeping personal and business money in the same account defeats that separation. It makes accounting harder, tax calculations messier, and compliance riskier. A business account keeps everything clean and clear from day one.
2. It makes tax and accounting much easier
When tax time comes, you'll need to show HMRC what your business earned and spent. If business transactions are mixed in with your personal spending, you'll need to go through every transaction and separate them manually. That's time-consuming, frustrating, and increases the chance of errors. A business account means your business finances are already organised. You can export statements, connect to accounting software, and file returns without the headache.
3. It protects your limited liability
One of the main reasons to form a limited company is to protect your personal assets. But if you mix personal and business finances, you risk "piercing the corporate veil." This is when courts decide you've treated the company as an extension of yourself, rather than a separate entity. If that happens, your personal assets could be at risk if the business faces legal or financial trouble.
Keeping your accounts separate strengthens the legal separation between you and your company.
4. It looks professional
When you send an invoice, clients expect to pay a business account in your company's name. If they see a personal account instead, it raises questions.
Are you legitimate? Are you actually a registered company? A business bank account builds trust and credibility, especially when working with larger clients or partners.
5. Many personal accounts don't allow business use
Here's something most people don't realise: using a personal account for business purposes can actually breach your bank's terms and conditions. Most personal accounts are designed for personal use only. If your bank notices business activity (frequent payments from clients, invoices, large transfers), they can:
- Ask you to open a business account
- Freeze or close your account
- Limit your access to certain banking services
It's not worth the risk.
When you might not need one (yet)
There are a few situations where you can delay opening a business account.
1. If you're a sole trader
Sole traders aren't legally separate from their business. You and the business are the same thing in the eyes of the law. That means you can use your personal account without the same risks as a limited company.
However, even as a sole trader, a separate account still makes accounting and tax much easier.
2. If you haven't started trading yet
If you've registered your company but haven't started trading, billing, or receiving payments, you can wait a bit. But once you start doing business, open the account.
Most banks take a few days to a few weeks to approve business accounts, so applying early saves you stress later.
What you need to open a business bank account
Opening a business bank account is straightforward, but you'll need a few documents ready. Most banks ask for:
- Your Certificate of Incorporation (proof your company is registered)
- Photo ID for all directors (passport or driving licence)
- Proof of address (utility bill or bank statement from the last 3 months)
- Details of what your business does (a short description or your business plan)
- Your registered office address
How to choose the right business bank account
Not all business accounts are the same. Here's what to look for.
1. Free banking period
Many banks offer free banking for the first 12-24 months. This can save you hundreds of pounds while you're getting started. After that, charges usually kick in, so check what the ongoing fees will be.
2. Monthly fees and transaction limits
Most business accounts charge a monthly fee, and some charge per transaction after a certain number. If you're planning to invoice regularly or pay lots of suppliers, transaction limits matter. For example:
- £5-£10 per month for basic accounts
- 20-100 free transactions per month, then 40p-£1 per transaction
3. Integrations with accounting software
Does the account connect with tools like Xero, QuickBooks, or FreeAgent? If it does, your transactions sync automatically, saving you hours of manual entry.
4. Online and mobile banking
You'll want easy access to your account from anywhere. Check that the bank has a decent app and online platform. Look for features like:
- Instant notifications for transactions
- Easy transfer and payment setup
- Clear transaction history and statements
5. Speed of approval
Traditional high street banks can take 2-4 weeks to open a business account. Digital banks and challengers (like Tide, Starling, or Revolut Business) often approve accounts within days, sometimes hours. If you need to start trading quickly, this matters.
6. Additional features
Some accounts offer extras like:
- Invoicing tools
- Expense categorisation
- Multi-currency accounts
- Cash flow forecasting
- Overdraft facilities
These aren't essential, but they can be useful as your business grows.
In Summary
You don't legally need a business bank account, but you really should get one.
It keeps your finances separate, makes tax easier, protects your limited liability, and looks professional. Apply early, so you're not stuck waiting when you need to start trading. Choose an account that fits your business: low fees, good features, and easy integrations with accounting software. And remember: starting clean from day one saves you stress, time, and money later.
