Do you need a separate business bank account?
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Keeping business money in its own account is one of the simplest ways to make your bookkeeping, tax return and Making Tax Digital updates easier. Whether you must have one depends on how your business is set up.
Limited companies: yes
A limited company is a separate legal person, so its money belongs to the company, not to you. It needs its own bank account, and money you take out has to be recorded properly as salary, dividends or a loan.
Sole traders: not legally required, but worth it
There's no law saying a sole trader must have a separate account. But many banks' terms don't allow business use of a personal account, and mixing the two makes it hard to see what the business earns. With Making Tax Digital, every business transaction needs recording digitally, so a separate account that feeds straight into your software saves hours.
What to look for
- Fees: monthly fee, and charges for transfers, cash and card payments
- Software link: a feed into your accounting software
- Receipts and tax pots: some accounts let you snap receipts and set money aside for tax automatically
- Protection: check whether your money is covered by the Financial Services Compensation Scheme; some business accounts are e-money accounts, which work differently
- Support: how you reach a person when something goes wrong
Accounts built for small businesses
App-based accounts such as Tide*, ANNA* and Countingup* are designed for sole traders and small companies, with features like receipt capture and tax estimates. High street banks also offer business accounts, often with branch access. Compare the fees and features above against how you actually work.
General information only, not professional advice. Rules and products change; check GOV.UK or with an accountant before acting.