Do I need a separate business bank account?

Switching business bank accounts can be a tedious and time-consuming task.

But if you're a small business with less than 50 employees and an annual turnover of less than £6.5 million, you'll benefit from a simpler and quicker process-by using the Current Account Switch Service. This free-to-use service is part of Pay UK, and enables the transfer to be completed within seven days.

You'll need to take the following steps:

• Check that your bank or building society is participating in the scheme
• Get your paperwork sorted out. Use this resource to obtain a checklist of the documents you need.
• Apply for a new business bank account. After the security checks have been completed, you'll be able to choose a switch date.
• You'll be able to use the services on your present bank account as usual until the switch date-after which you can then begin using your new account.

The process for opening a business bank account will vary, depending on the bank you choose to open an account with.

Certain banks may require an in-person meeting, while others may require just an online registration to complete the sign up (we tested out several challenger banks, and found Revolut and Tide to have the smoothest account opening process).

In general, you'll need to prepare the following documents for the sign up:

• Proof of ID
• Proof of address
  

You may also need to provide the following information about your company:

• Full business address
• Contact details
• Companies House registration number (for limited companies and partnerships)
• Estimated annual turnover
• You may be required to show proof of your personal financial situation, and provide documents to show you have a clean credit history

• How to choose the right account
• Challenger banks
• Starling, Revolt, Tide and Metro bank overview

The financial services sector has an enormous effect on the economy, people, and businesses.

In 2017, the financial services sector accounted for 6.5% of the total economic output in the UK. The sector added £119 billion to the economy and offered 1.1 million employment opportunities.

In the 2016/2017 financial year, the financial services sector remitted £27.3 billion in taxes. In addition to these benefits for the economy, the financial services industry has huge benefits for businesses. Notably, banks are prominent for helping both big and small businesses to thrive and guarantee their success and survival in the long-term.

Through commercial banking, banks have an array of products and services for enterprises ranging from lending money to foreign exchange, basic accounts, investment banking, and payment and transaction payment. Business bank accounts help businesses manage their finances and cater for expenses.

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For small business owners, freelancers or contractors, there are four important factors you need to consider when choosing a business bank account: features vs cost, sign up process, day-to-day banking experience and customer service.

If you're running a limited company, you'll need a separate business bank account as the company is its own legal entity, and its finances must be kept separate from the business owner or director.

While you're not legally required to have a business bank account as a sole trader, there are benefits to doing so. For instance, it enables you to keep your business finances separate, and your business accounting records organised.

We road tested the best business bank accounts out there so you do not have to.

Starting with the four contenders with the best features and costs on paper, we put them through their paces testing usability, ease of sign-up, response times and the day to day banking experience.

The full details are below, so you can experience what each one is like from the inside, without having to go to all the trouble of opening accounts with each of them.

It's a long article, so let's get to the conclusion and summary first for those who just want to see the results.

Conclusion

At the end of the day, different businesses have different needs and there isn't a one-size-fits-all bank account.

Freelancers and contractors have two strong options: I personally recommend you to go with Starling given its ease of use and low fees.

However if you are more of a traditionalist and like the support that a physical branch provides, go with Metro Bank.

For a small business, Revolut is the clear winner.