What is a Sole Trader Business Bank Account?

A business bank account for sole traders is very similar to a regular business bank account.

Although not required by law, sole traders make up around 60% of the UK workforce and having a business bank account can certainly look more professional and give you access to benefits such as cashback, vouchers, chequebooks and a company credit card.

Business accounts are similar to current accounts, although they usually come with monthly fees of £5 to £25 and offer lower interest rates on savings.

However, the biggest benefit is the ability to organise your PAYE calculations and file your annual self-assessments with the HMRC.

 

Do I need a business bank account as a sole trader?

As a sole trader, you do not require a business bank account by law and many will continue to use their own personal current accounts.

However, this can make calculating your income and expenses more confusing when you are putting together your tax return and self-assessment for HMRC – hence keeping them separate can be more practical and time-saving.

In addition, it looks more professional when you are invoicing your clients from a sole trader’s company name, rather than your own individual name.

Having a business bank account as a sole trader can also come with benefits such as cashback, vouchers and access to loans from your bank if you need it.

 What comes with an account?

 

  • Debit card
  • Credit card
  • Cheque book
  • Online banking
  • Customer support
  • Overdraft facility
  • Access to loans
  • Business manager and networking

 

Nic Redfern, Finance Director at KnowYourMoney.co.uk

“In the past, it wasn’t uncommon for a sole trader to double up their personal bank account as their business bank account, however nowadays a sole trader business bank account can offer numerous advantages.

Sole trader bank accounts generally involve different perks to personal bank accounts. Whilst the latter may offer vouchers or cash back offers, the perks of sole trader bank accounts revolve more around access to a business bank manager, free business advice and discounts on business products and services, such as online accounting software.”

 

Use a sole trader business bank account to grow your business

As a sole trader who may be looking to grow their business, having a business bank account can be useful if you need to use an overdraft facility to help with cash flow, or if you would like faster access to cash through bank loans. Being an account holder with a bank can fast-track you with various business loan products.

If you are looking to make that transition from sole trader to a limited company, having a business bank account in place will be a natural move.

Although a bank account may come with monthly fees, you may be able to get this for free if you pay a certain amount into the bank account each month e.g £1,000

In addition, you can consider using a challenger bank such as Tide, Monzo or Starling Bank which are free to use and offer no FX or ATM fees.