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?
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 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 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;
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:
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:
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:
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.
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.
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.
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.
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.
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.
Many banks offer an online application process, and you may, depending on the bank you choose, be required to provide:
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.
