Article contents
To put simply, yes! You do need a business account as a sole trader. Although it’s not a legal requirement, it’s against the terms and conditions of pretty much every personal bank account, meaning you’re not allowed to use your personal account for business. However, business accounts are much better anyway! They can be free, and have a range of useful features to help you manage your business finances, such as invoicing.
Setting up a business of your own? Or just looking to manage your business finances better? In either case, you’ll need a business bank account as a sole trader, and there's a few reasons why…
In a rush and need a business account? Scroll down or click best sole trader business accounts.
Let’s quickly get on the same page with what a sole trader is. A sole trader is someone running a business under their own name, they’re self-employed, rather than registering their business as a company (often called a limited company). Although technically speaking, the name of the sole trader business can be anything, not just your name.
A limited company (ltd company) means the business is legally separate from the owner of the business, and any assets (e.g. machinery or property), debts (money borrowed), and profit (money earned), are the company’s, rather than the owners.
This is called ‘limited liability’, and means that if the company went out of business and owed money, the owners wouldn’t personally be responsible.
Nuts About Money tip: if you’re thinking about opening a limited company, check out Tide¹. They offer a great free business bank account, and will set up your company for free.
A company will have an owner, or owners, normally called shareholders (if the company is run for profit), and are entitled to the profits of the business – just the same as a sole trader (self-employed). Each share represents a share of the company.
People who run the company are called directors, and these are often also the owners of the business (shareholders), but they don’t have to be.
It’s often the preferred way of forming and running a business in the UK, particularly if there’s more than one person involved with the business (for instance an employee, or a partner).
Note: there’s also different taxes paid for a limited company vs a sole trader. A sole trader will pay Income Tax on all of their profit, just like a regular full time job. Whereas a limited company would pay Corporation Tax (on profit). The business owner could then pay themselves via a salary (and pay Income Tax), or dividends (and pay Dividend Tax, which can be lower tax overall). It can get a bit more complicated and it’s worth speaking to an accountant or financial advisor if you need advice.
Let's talk money. If you’re a sole trader running a business, you get to keep all the profit you make (whoop), apart from paying tax (boo). That means it can often seem like a good idea to use your own existing bank account, called a personal account.
And, you can use your personal account legally speaking. Only limited companies are legally required to open a business bank account, as the business finances belong to the business and not the owners.
However, a sole trader is required to keep ‘business records’, which is a record of business income and expenses. This can get very complicated to separate out from your personal finances, and so a very smart idea is to open a separate business bank account. You’ll need all of the information to file a Self Assessment tax return every year (how much you’ve earned, and how much tax you need to pay). If you want help, TaxScouts¹ can help you, their service is rated 5 stars.
There’s lots of software tools that can help you manage this, which only link with a business bank account. Particularly if you are registered for VAT and need to work out how much to pay to the Government regularly.
There’s also another problem, which is that almost all banks don’t want personal accounts used for business purposes – it can cause a bit of an issue when it comes to things like fraud checks and money laundering.
You’ll likely find in the terms and conditions of your personal account, that it says you ‘can’t use the account for business purposes’ – and you don’t really want your account closed and your money stuck for any period of time, you might have suppliers and partners to pay (alongside personal bills like a mortgage).
So, ultimately, although you don’t legally need a business account, in reality, it’s often a good idea to use a separate account for your sole trader business. There’s loads of advantages and really no negatives to using a business account, some are even free too.
Ready to get your business account? Here’s our top picks of the best business accounts for sole traders.
Tide is the best option, get £75 with a business account (deposit £100) and £100 with a saver account (deposit £5,000).
Get £175 for free
Tide is a super popular business account – with over 10% of all small and medium sized businesses in the UK with accounts, including tonnes of freelancers and contractors (and there’s over 1 million businesses using Tide globally).
It’s an easy to use and straightforward account that is free to open. You simply pay as and when you use it (e.g. a small fee per transaction), and the fees are low overall.
The app itself is great, and although it’s easy to use, it’s packed with features to help you manage your business finances and admin, such as invoice management, expense cards, accounting integrations, admin tools and more.
You can even find loans suitable for your business, and if you’re an in-person business Tide has a range of payment solutions available such as card reader terminals, tap to pay and payment links to take payments.
You'll also get a business savings account with one of the highest savings rates out there, perfect for any extra cash you might have lying around, and you can send money to and from your Tide current account and savings account in seconds whenever you need it.
*Get £75 for free after spending £100 within 30 days, and an extra £100 when depositing at least £5,000 into the savings account and keeping it there for at least 2 months. Use the code NUTSABOUTMONEY when registering to claim your cashback.
• Low cost overall
• High interest rate on savings
• Apply in minutes
• Free debit card
• Great mobile app
• Accounting integrations
• Take payments in-person
• Often quick to open
• 24/7 in-app support
• £1 ATM withdrawal cost
• Can’t receive or hold multiple currencies
• £2.50 fee for cash deposits (or up to 3% through PayPoint)
ANNA is a business account with a few extras. If you’ve got a simple business, this might be the only account you’ll need to manage everything.
You’ll get tools to manage your business finances, such as creating and sending invoices (and they’ll send chasers automatically too), expense tracking and sorting your tax.
Love it, or hate it, the card even makes a Meow sound when you use it. Yes really!
Overall cost: low
Account cost: free to £49.90 (plus VAT) per month
Bank transfer cost: 20p (free on paid plans)
ATM withdrawal cost: £1 (free on paid plans)
Multiple currencies: no
Debit card: yes
Cash deposits: no
Accounting integrations: yes
Save or invest cash: no
Tide is the best option, get £75 with a business account (deposit £100) and £100 with a saver account (deposit £5,000).
Get $100 cashback
Airwallex is a business account for global payments – within one Airwallex account you can send and receive over 20 different local currencies across over 150 countries.
Essentially, you can act like a local business, without having to open an account in every different country you operate in (or receive payments from) – you simply use your Airwallex account, and you’ll have local account details to use for each country.
It’s low cost, and you’ll avoid a range of fees (e.g. currency conversion fees), and transfers are typically the same day, or shortly after.
If your business runs internationally, Airwallex is a great option to manage all your payments.
Overall cost: low
Multiple currencies: Accept in 20+ currencies and pay out in 60+ currencies
Debit card: yes
Cash deposits: no
Accounting integrations: yes
Save or invest cash: no
Get $100 cashback
WorldFirst is well established, and a popular choice for online sellers and importers.
WorldFirst is an excellent business account for businesses operating globally, especially if you’re dealing with suppliers in China, where WorldFirst is a very established option, and used by a lot of businesses – meaning a trusted network where you can benefit from an escrow service and reduce costs by dealing directly with suppliers (which also reduces fraud).
It’s also a very common option for online sellers, as it partners with pretty much every marketplace (e.g. Amazon and eBay), and provides everything you need to receive your money from your sales – which means you could expand into new markets (countries) quickly and easily.
Having said that, it's really suited to all types of businesses, and if you’re looking to send or receive money in a different currency, it’s a top option – especially as there’s no ongoing monthly fees. Instead, you pay a fee per transfer (or sometimes no fee at all).
The website and app is easy to use, and you can benefit from team management features, alongside issuing cards for spending.
There’s also advanced features to help you reduce the fluctuation of multiple currencies, with their forward contracts options (setting a fixed exchange rate in the future).
The customer service is also excellent, and operates over the phone (and email too).
Tide is the best option, get £75 with a business account (deposit £100) and £100 with a saver account (deposit £5,000).
If you’ve got a fair bit of cash in your business account, you could earn interest (money) from it. Here’s your best option.
Wise business is the best option for multiple currencies. Send and receive money in over 40 different currencies, including Euros and US Dollars, all for a low cost (it’s the cheapest option).
You can even store multiple currencies in one account, meaning you don't have to keep swapping currencies and paying exchange fees.
Another great feature, is being able to save and invest your business money, so instead of your money sitting in your account doing nothing, you can invest it to grow more over time (with the help of experts) – adding a whole new revenue stream to your business – and still allowing you to spend it whenever you need to.
Overall cost: low
Account cost: £45 set up fee
Bank transfer cost: From 0.43% to send. Free to receive
ATM withdrawal cost: free up to a limit (£200)
Multiple currencies: 40+
Debit card: yes
Cash deposits: no
Accounting integrations: yes
Save or invest cash: yes, 4.49% after fees
Tide is the best option, get £75 with a business account (deposit £100) and £100 with a saver account (deposit £5,000).
Not yet convinced a business account is right for you? Let’s run through the pros of using a business account as a sole trader.
By the way, business accounts work exactly the same as your current personal account – you’ll be able to use online banking via an app (or website) to manage your money, you’ll get a card to spend in store, or online, and withdraw cash from an ATM (additional cards can be requested too).
Here’s the advantages a business account offers:
Let’s dive into a few of those in more detail.
With the best business accounts (such as our recommendations above), you’ll have loads more features than your personal account – all designed to help you manage your business finances easily.
Business accounts don’t have to be expensive – it all depends on what features you’d like. So, definitely don’t think a personal account is your only option because you don’t want to spend money on a business bank account.
Lots of the modern business accounts are free. Well, they’re not entirely free, instead of paying a monthly or annual fee like you would with traditional accounts, some business accounts will simply charge you for what you use – normally per transaction, which can work out to be very cost effective.
For instance, with Tide¹, the account is free, and you’ll simply pay 20p per transaction, and that’s it. It’s also similar with Anna¹, and you can simply upgrade to a monthly plan if you want more features later on.
You could accept payments from customers directly into your bank accounts without any middlemen (who would likely charge you more fees) – you can even create a unique link for each customer, which you can send over to them via email or SMS (text message). They simply click the link and it opens up their online bank account with all your bank details and the amount already entered.
Or you can receive payments in-person with a QR code, on your phone, or a card reader, and they can send money straight to you, instantly. And on your website too if you have one.
With modern business bank accounts, you can also produce invoices for customers who aren’t paying instantly, for instance other businesses. These are essential to keep your records in order, and legally required if you are charging VAT – so having a business account that can produce invoices easily and quickly is a pretty handy benefit.
If your business is a bit larger, or you’ve got lots of business transactions coming and going, then in order to keep your finances in a single place (easily understandable and trackable), you could use accounting software.
Accounting software will also produce all the financial statements you need, such as how much money you made within the year (profit and loss statement), and how financially healthy your business is (e.g. the amount of debt, or assets you have (things like computers)), which is called a balance sheet.
If (or when) you do use accounting software, you can integrate your business account(s), and all your transactions will appear in the software (e.g. your sales and expenses), which will populate all the reports you need to manage your business, and work out how much tax you need to pay. It’s really pretty great. You wouldn’t be able to do this with a personal account.
Nuts About Money tip: if you are running a limited company, or planning to register your company soon, check out the best small business bank accounts.
If your business is trading internationally, for instance has customers in Europe, who pay in Euros, you can set up a business account that’s perfect for international payments – with low fees, and is easy to use.
Lot’s of high street banks and personal accounts prefer not to deal with international payments, or they charge (very) hefty fees for the privilege.
With a modern business account, such as Airwallex¹, you’ll be able to send and receive currencies from across the world, including US Dollars and Euros, all for a very low cost.
As your business grows, the cash in your account will hopefully grow a lot too – and you’ll probably need to keep it there to help pay for expenses. But, if it’s building up to quite a lot, you might be missing out on making more money from it, rather than just sitting in your account not doing much – which is likely to happen if you use a regular personal current account.
Well, with certain business accounts (unfortunately not many of them), you can actually earn interest on your money while it’s just sitting around waiting to be used for expenses. If this sounds interesting to you, check out Wise¹, you’ll be able to earn a top interest rate on all of your cash in the account.
To sum up, yes you will need a business account as a sole trader, although it’s not a legal requirement – but you’ll likely be going against the terms and conditions of your personal bank account, which could mean big issues in future, such as your account being blocked and not being able to access your money when you need it.
There’s also no need to use your personal account – business accounts are far better. They’ve got a wide range of different features to help you grow your business and manage your finances, such as invoicing, and easily receiving payments directly from customers, and for a low cost (or free). You could even earn interest on your money with our best business account for savings.
Best of all, business accounts are not expensive! There’s lots of free business accounts out there, and some very low cost, with all the features you need. Our top recommendations can be viewed by scrolling up or clicking best sole trader business accounts. And if you need to make international payments, scroll up or click best business accounts for international payments.
And that’s it, good luck growing your business! If you’re keen to learn more about business accounts, check out our guide to the best business bank accounts, or visit our banking home page.
We’d love to hear from you, and it will help others too.
Tide is the best option, get £75 with a business account (deposit £100) and £100 with a saver account (deposit £5,000).