Do I Need A Sole Trader Bank Account?

As a sole trader, the law sees your personal and business finances as one and the same. This means there is no legal requirement for you to open a business account. Nevertheless, many banks have introduced new rules to encourage the UK’s 3.5 million sole traders to open business bank accounts. Today, some even prohibit using a personal account for business purposes.

But that’s not necessarily a bad thing — business accounts are much more than a place to store cash, offering benefits such as accountancy tools, entrepreneurial support and easier access to finance. You’ll also benefit from being able to separate your businesses cash flow from your own, making taxes easier to file each year. 

Plus, with sole trader profits suffering somewhat of a decline in recent years — down 21% since 2008, according to the Institute for Fiscal Studies — if you haven’t found a sole trader bank account for your business, you may be losing out.

So, how do you select the best business bank account as a busy, self employed sole trader? Simple: we’ve found 6 of the best sole trader bank accounts and summarised them in this handy review. 

Best 6 Sole Trader Business Bank Accounts

  • Metro Bank has one of the most competitive offers available on the high street, with no monthly account fee if your account balance stays above £5,000. You’ll also get 50 transactions free if you stay above this balance.
  • If you go below £5,000, you’ll pay £5 per month, plus a £0.30 transaction fee for ATM withdrawals, automated credits, bill payments, cheques, direct card payments, direct debits, faster payments and standing orders. Metro’s charges are transparent and easy to understand, being helpfully summarised in this document.
  • 69% of SMEs would recommend Metro Bank to another business, ranking Metro Bank 2nd in an independent CMA survey of business banking providers.
  • All branches are open 7 days a week, which is great for cash-heavy businesses.
  • Metro has fully-featured online banking and mobile apps, including a helpful Business Insights tool, which analyses your cash flow.

Metro Bank is the only new high street bank to open in the UK in over 150 years, and it has entered the arena fighting.

Not only does Metro have one of the best online offerings we’ve reviewed, but this bank also has branches across the UK open 7 days a week, 362 days a year. If you’re a sole trader who needs to deposit cash regularly, or just prefer in-person service, this is a huge benefit.

More often than not, business bank account fees can be confusing and require length decoding — but Metro’s fees are not only highly competitive, they are also completely transparent. If your credit balance remains above £5,000 for the month, you’ll pay no monthly fee and no transaction charges for your first 50 transactions.

If you have a low transaction volume, this is the business bank for you. On the other hand, if you tend to complete a high number of transactions, carefully review the fees associated with this account — at £0.30p per transaction, this will add up.

  • On the Business Directplus Current Account, for the first 30 months, you’ll pay no monthly account fee if your balance stays above £1000 for the whole month. Automated credits, automated debits and debit card purchases are also free if you stay above this balance. If you go below £1000, you’ll pay £5 per month, plus various charges on most transactions. Co-ops fees are easy to understand and summarised here.
  • On the FSB Business Current Account, you’ll get free banking services with no monthly fee. Charges apply on some transactions, such as paying 75p per £100 of cash deposited over £2000 per month. If you are a Federation of Small Businesses member, you’ll get £25 cashback each year.
  • Ranked 11th in an independent CMA survey of business banking providers, with 48% of SMEs likely to recommend their business current account provider to other SMEs.
  • Co-op’s tariff structure allows you to tweak your banking to suit your business. For example, the Co-operative Bank’s Business Current Account Cash Tariff offers the lowest cash deposit fees in this review.

The Co-operative Bank follows an ethical and social code, refusing to conduct business that would harm the planet or society. It has also made public commitments to promoting human rights and equality, supporting social development in Britain and protecting animal welfare. This makes them the only ethical bank in this review — and one you may choose to bank with, if your a values-driven sole trader.

Co-op’s business account offers are among the best in the review; the Business Directplus Current Account promises 30 months of free business banking. Just make sure you read the smallprint: this deal is only available to businesses keeping £1000 in the account and there’s numerous charges for transfers and cash paid in and out of the account.

This bank also has an account specifically designed for small businesses, named the FSB Business Current Account. With this account, sole traders can avoid a monthly fee but charges do apply for some special transactions, detailed here.

Despite caveating its deals with added smallprint, the Co-operative Bank has received many awards, including being awarded “Best Service from a Business Bank” by Business Moneyfacts.

  • Barclays offers an account specifically for businesses under 12 months old, called the “Start-up business account”. This provides 12 months of free business banking, followed by £6 per month with the mixed transaction tariff and £6.50 with the e-Payments tariff.
  • Established sole traders with turnover up to £400k won’t get a free banking period, plus certain businesses are not eligible (including agriculture and social housing).
  • Barclays has won the ‘Business Start-up Bank of the Year’ in 2017, 2018 and 2019
  • 59% of SMEs would recommend Barclays to another business, ranking Barclays 7th in an independent CMA survey of business banking providers.
  • As well as standard telephone banking, Barclays offer access to a Business Direct team, who provide advice and support for small businesses from 7 am to 8 pm, Monday to Friday.
  • Barclays has fully-featured online banking and mobile banking available.

Barclays is one of the biggest banks in the UK, founded in 1690. As one of the biggest banks in the UK, this bank has accounts in all shapes and sizes, with something for every kind of business, ranging from sole traders to global corporations.

Its offering is attractive to startups and young SMEs, with 12 months free day-to-day business banking for businesses less than a year old. Barclays also has a unique ‘loyalty reward’, which repays a proportion of your charges depending upon your turnover and time with the bank. For example, with a turnover of £100,000, you’ll get 5% of your charges back in the first year and 10% back in years 1 to 5.

For established sole trader businesses, there’s two tariffs to choose from. The mixed tariff offers competitive fees on cash and all transaction types and is ideal for sole traders who use all payment methods. If you take payments predominantly electronically, consider the e-Payments tariff.

  • TSB gives new businesses and Switchers a generous 25 months free banking period. It’s free day-to-day, within set account limits and if you don’t incur an unarranged overdraft. After 25 months, it’s £5 per month, unless your average balance exceeds £10,000 each month.
  • You’ll get a free portable card reader from Square, so you can take credit card payments. Plus card processing fees are waived for the first £1000 of sales.
  • Get specialist business support from Enterprise Nation and Funding Options.
  • No fees on transactions using your TSB debit card.
  • Fraud cover, with a guaranteed refund if you are an innocent victim of fraud.

TSB is part of the Spanish banking giant Sabadell but has over 4.6 million customers in the UK. TSB has one of the more unique offerings in the review, with a range of unorthodox benefits available, including a free card reader and business support from Enterprise Nation, a small business community that usually costs £10 per month. Its 25-month free period is generous, with no fees for cash, cheques, standing orders and direct debits.

With over 500 branches and access via Post Offices, TSB is a good choice for sole traders who prefer branch service. If you can’t make it to a branch, there’s also telephone and online banking to take advantage of.

  • If your business has been trading for less than 12 months, you’ll get 18 months of free business banking, after which you’ll pay £7.50 per month.
  • For established businesses, Santander has a 1|2|3 Business Current Account: you’ll pay £5 per month in fees and receive cashback on turnover (£100 for turnover of less than £200,000, £200 for turnover of £200,000+ and £300 for £300,000+).
  • Santander has been awarded Best Business Current Account Provider for the last 17 years by Moneyfacts.
  • Online banking offers a unique delegation feature, so you can add colleagues and accountants to your account to let them manage finances and payments.

Santander is a newer name on the high street, but has a long history in the UK through its acquisitions of Abbey National, Bradford & Bingley and Alliance & Leicester.

Despite having won Best Business Current Account Provider from Moneyfacts, it has struggled with its customer service record, being ranked one of the worst banks in the UK for customer service, according to the J. D. Power UK Retail Banking Satisfaction Study from 2007 to 2011. Yet, it seems the bank has improved what it’s product and customer service approach, scoring 7th of customer service in a 2019 Which? Money customer survey.

Santander has a standard high street business banking offer. If you’ve been trading for less than 12 months, you’ll get 18 months free, otherwise, you’ll pay £7.50 per month. As these fees are reasonable, we’d consider Santander a safe bet for most sole traders.

  • NatWest has two products, depending upon when you started trading. For new sole traders, the ‘Start-Up’ product promises 18 months free day-to-day banking if your turnover is below £1 million. For established businesses, you can take an everyday account with a minimum monthly charge of £5.
  • Both accounts include a free NatWest Business Credit Card for 12 months (usually £30 per card issued).
  • You’ll get access to FreeAgent: a top-rated cloud-based accountancy package. This usually costs £20 per month and handles sole trader self-assessment filing, invoicing and receipts, making taxes much easier.

NatWest is a well known high street bank in the UK and has been part of the RBS group since March 2000. At first review, this seemed to be a standard high street business banking offer. However, there are a few key differences.

Firstly, NatWest’s monthly charge is a minimum charge. This means up to £5 of your transaction fees are covered by the monthly charge. To see if this would save your business money, review the NatWest account charges to calculate whether you’d save versus a fixed banking fee.

Secondly, NatWest passes on a lot of benefits to its customers. You’ll get the award-winning FreeAgent software, making tax for sole traders simple. You’ll also get a 60% discount on international shipping with DHL, for one year; perfect if you’re expanding globally.

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