If you're a sole trader who needs a bank account to manage their business finances, several options are available to you, each offering unique advantages and disadvantages. Operating from a dedicated bank for your sole trader business can help you manage your business finances effectively, but what are the best options for doing so, and what's required to open one in the UK?
As a sole trader, do I need a business account?
There is no legal requirement for sole traders to open a dedicated bank account- before, during or after you begin working as a sole trader. You have the option to utilise your personal bank account to manage your company finances, such as receiving payments from customers and paying your suppliers, but this may not be the most effective way to manage your business' finances.
The best business accounts for sole traders
The following banks are some of the best options to use for sole traders, and an excellent place to start when opening a sole trader business bank account:
Online Banks
Online banking is a modern solution that offers individuals and businesses access to digital banking only. They do not provide physical branches and instead operate via their software. The following online banks offer a variety of services that are great for sole traders;
Starling
- Starling lets you easily set up a sole trader bank account in minutes.
- Users can keep track of their business's expenses and income through an easy-to-use app and accounting software.
- Services are FSCS regulated, without any monthly fees or payment charges.
Monzo
- Monzo is a fully FSCS-regulated bank.
- The Lite version gives you access to a business debit card, money sorting and budgeting options.
- It also provides free and instant UK bank transfers.
Tide
- Tide is a fully FSCS-regulated bank.
- It offers the user an extensive free plan, with the ability to open up as many as five different business bank accounts to be used for various purposes.
- Tide provides access to several business perks such as workshops and office space memberships.
High Street Banks
Many traditional high-street banks also offer business bank accounts that are perfect for sole traders, with the added benefit of providing face-to-face banking and physical branches should you need them, such as:
NatWest
- NatWest has an award-winning app through which you can conduct your business banking.
- They have well over 3,000 branches across the UK.
- A NatWest business bank account provides you with access to free accounting software, mentoring resources and learning tools.
- Physical branches give you the option of face-to-face banking should you need it.
Barclays
- Barclays offers the user 24/7 online, mobile business banking.
- They offer a sole trader-specific plan for accepting cheques and cash.
- They also offer 12 months of free banking for sole traders in their first year of trading.
HSBC
- HSBC offers the user 24/7 online, mobile business banking.
- They offer 12 months of free business banking when you switch.
- They also offer 12 months of free banking for sole traders in their first year of trading.
If you're unsure of some of the options available to you, there are several comparison tools available to help you understand which bank will be the best fit for your business, such as:
What are the main benefits of a sole trader bank account?
As a sole trader, you will find that your personal brand, assets, finances and life will become inevitably linked with your business. While this level of responsibility is in itself a benefit, sole trader bank accounts allow you to make a clearer distinction between your personal and business finances, which will lead to more efficient management of your money and other advantages such as:
Separation & organisation
Opening a sole trader bank account for your business can be an excellent way to separate yourself and your personal assets from the company. By doing so, you may find that your ability to organise and report on your business dealings will be heightened significantly. A key responsibility as a sole trader is the requirement to report on your sales and expenditures properly. Having a separate bank account will help you keep track of all these transactions much more efficiently and effectively. You won't need to work around potentially confusing or irrelevant personal transactions and financial activities.
Accessibility
Many sole trader bank account providers offer you a much more modern and accessible service for business owners. Purely digital banking options for businesses are widespread and provide valuable tools and features, such as apps and online portals to help you handle your banking, transfers and payments online.
A more professional image
When using a sole trader business bank account instead of your personal one, you also gain the advantage of presenting a much more professional image to the business world and your clients. This can help to strengthen your reputation and the amount of trust that clients will put into your business, as any invoices and receipts will be made out to your business rather than you personally.
Building strong credit ratings
Opening up a sole trader business bank account is an excellent way to build up a strong credit rating for your business. This can be advantageous in many future scenarios, for example, if you find yourself needing to take out a business loan. Taking out a business account and managing it well will help to improve your eligibility for situations such as these, much more so than if you were just using a personal account.
A stronger relationship with your bank
Sole traders have no legal requirement to have a sole trader business bank account. However, this does not mean that all banks will accept you using a personal bank account for your company. In fact, many banks actually prohibit you from doing so within their terms and conditions. If your bank discovers that you have been using a personal account for a business, then they may even close your account. You can avoid this from happening by choosing to open a sole trader bank account whilst also benefiting from the other advantages we have listed here.
Additional features, perks & benefits
A dedicated sole trader bank account may bring you specific features and benefits that are unavailable to personal users. Your sole trader business account provider may offer various helpful features, including invoicing and reporting tools, tax calculators and other business-relevant products and services. These additional and oftentimes exclusive features can end up saving your sole trader business both time and money in the future.
How do I open a sole trader business bank account?
Many banks offer an online application process, and you may, depending on the bank you choose, be required to provide:
- A form of documentation to prove your identity, for example, your driver's licence or passport.
- Proof of address, most commonly in the form of your latest Council Tax bill, a recent utility bill or phone bill, or even just a bank statement.
- The details of your sole trader business, such as the official name and address.
- Your estimated yearly revenue or turnover.
- A summary of your average expected levels of monthly expenditure and revenue. This will help the bank to identify any suspicious transactions or activities in the future correctly.
How UK Postbox can help
We provide virtual UK addresses that can be used when registering for most banking services in the UK. If you're not a UK resident, or you live in the UK but need a dedicated address for your sole trader bank account, a virtual address offers a solution that offers many other benefits.
- With our virtual address services, you may be able to use one of our addresses in your sole trader bank account application in the form of a correspondence address; instead of a residential address.
- You will need to check with your bank directly if they accept correspondence addresses when signing up for an account. If they only take residential addresses, then no virtual addresses are not applicable.
- Our business address service can also be used by sole trader businesses as a trading address, allowing you to effectively operate in more areas by giving you a virtual presence in different locations, such as London.
- Using our addresses will also provide you with access to our digital mail management platform, helping sole traders to manage all their business mail online and separate it from day to day personal mail.
- Our virtual addresses also provide sole traders with a much more professional-looking address. This address can be used on billing and equipment such as stationery and business cards to improve the brand reputation of your business.
- If you're displaying your address on equipment, stationery or invoices, a virtual address can help you protect your privacy by allowing you to avoid using your personal address.
