Business Bank Accounts in the UK (2026): When You Need One and How to Open It

Opening a business bank account is one of the first jobs after you register a business, and one of the most confusing. Do sole traders actually need one? What will the bank ask for, and why do some applications stall for weeks? How much of your money is protected if the provider fails, and is an app-based e-money account the same as a bank? This guide answers those questions for UK businesses in 2026. It covers the legal position for sole traders, partnerships and limited companies, the ID checks banks run, FSCS cover at the new £120,000 limit, the fees worth comparing, switching, and your rights if an account is frozen or closed. It doesn't rank banks or quote promotional rates, which change too often to be useful.

Quick answer

Sole traders don't legally need a separate business account, but many personal accounts ban business use and a separate account makes tax records far easier. Limited companies and LLPs are separate legal persons: GOV.UK says company money must be kept clearly apart from the directors', so in practice they need an account in the company's name. Bank deposits are FSCS-protected up to £120,000 per person per bank; e-money accounts are not.

• Banks check ID for every director, owner and person with significant control

• A company gets its own £120,000 FSCS limit; a sole trader shares one limit with their personal accounts

• Compare monthly fees, per-transaction charges and cash-handling costs, not just the free period

• Switching takes 7 working days with payments redirected for at least three years

Do you need a business bank account? Sole trader vs limited company

The answer depends on your legal structure, because that decides whether the business is a separate person in law.

Sole traders. As a sole trader you and the business are the same legal person. There is no law and no HMRC rule that says you must have a separate business account. You must keep records of business income and expenses for Self Assessment, and keep them for at least five years after the 31 January filing deadline for that tax year. Your bank, though, may have its own rule. Many personal current account terms say the account is for personal use only. If the bank sees regular business payments, it can ask you to move to a business account or close the personal one. Read your account terms before you start invoicing customers to it.

Partnerships. An ordinary partnership isn't a separate legal person in England and Wales, so there's no statutory requirement either. But you're sharing money with at least one other person, and a joint business account in the partnership's name is the cleanest way to show who paid what. Your partnership agreement may already require one.

Limited companies and LLPs. A company is a separate legal person from its directors and shareholders. GOV.UK's guidance on running a limited company says there must be a clear division between the company's finances and those of its owners and directors, and that opening a business bank account is the simplest way to achieve it. Money the company receives belongs to the company. If a director pays company income into a personal account or takes cash out without recording it, that creates a director's loan, which has its own tax consequences. In practice you can't run a company without an account in its name: customers pay the company, HMRC collects Corporation Tax and PAYE from it, and your accountant needs the company's statements to prepare its accounts.

There's a practical tax point for sole traders too. Making Tax Digital for Income Tax started on 6 April 2026 for sole traders and landlords with qualifying income over £50,000, falling to £30,000 from April 2027 and £20,000 from April 2028. Quarterly updates come from digital records, and most bookkeeping software builds those records from a bank feed. A feed from an account that mixes groceries with materials means you sort every line by hand. Our Making Tax Digital guide explains who's in scope and when.

What banks ask for: ID checks and business details

Every UK bank and e-money firm must check who you are before it opens an account. Money-laundering rules require them to identify the business, verify the people who own or control it, and understand what the account will be used for. That's why the application asks far more questions than opening a personal account.

For a sole trader the checks are mostly about you: your identity, home address, what the business does, where it trades and roughly how much money will go through the account. For a limited company or LLP the bank checks the company itself on the Companies House register, then each director and every person with significant control (PSC), broadly anyone holding more than 25% of the shares or voting rights. If the company is owned by another company, expect questions about who sits behind that parent.

Since 18 November 2025, Companies House has also required new directors and PSCs to verify their identity with Companies House itself. That's a separate check from the bank's. Passing one doesn't excuse you from the other, but having verified with Companies House means the register already shows your details correctly, which helps the bank match its records. Our Companies House filing guide explains the identity verification rules.

What to have ready before you apply

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• Photo ID (passport or driving licence) for each director, partner or owner
• Proof of home address for each of them (recent bank statement, council tax bill or utility bill)
• Companies House registration number and registered office address (companies and LLPs)
• Names and dates of birth of every person with significant control
• Trading address, website and a short description of what you sell and to whom
• Expected annual turnover, typical payment sizes and whether you'll handle cash
• Where money comes from and goes to, including any overseas customers or suppliers
• UTR or VAT number if you already have one (not usually required to open)

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App-based banks and e-money providers usually verify identity digitally: you photograph your passport or driving licence and record a short selfie video. High-street banks increasingly do the same online, though some still ask for a branch visit or certified copies if the digital check fails. Applications get stuck for predictable reasons: a home address that doesn't match the electoral roll or credit file, a director missing from the Companies House register, an unclear description of the business, or overseas owners or customers that need extra checks. Answer the "nature of business" question in plain, specific words. "Freelance web design for UK small businesses, paid by bank transfer" is better than "IT services".

How to open a business bank account, step by step

The process is similar at every provider. What differs is how much happens online and how long the checks take, which can be anything from the same day to several weeks.

Opening a business account

1. 1

   Register the business first

   Set up as a sole trader with HMRC or incorporate your company at Companies House. Banks need the company number before they'll open a company account.

   Limited company set-up guide
2. 2

   Decide what the account must do

   List how you'll be paid (card, transfer, cash, cheques), how many payments you'll make a month, and whether you need overseas payments, multiple users or an overdraft.

3. 3

   Check eligibility and the tariff

   Read the provider's eligibility rules (turnover limits, UK residency, sector exclusions) and its full tariff before applying.

   Tip: Some providers won't open accounts for certain sectors or for companies with overseas directors.

4. 4

   Apply and verify identity

   Complete the application for the business and each director or owner, then pass the ID and address checks.

5. 5

   Answer follow-up questions quickly

   Banks often come back with questions about your business or a PSC. Slow replies are the most common cause of delay.

6. 6

   Set up the account properly

   Add users and limits, connect your bookkeeping software, update invoices with the new details and tell HMRC if it repays you by bank transfer.

Once the account is open, put the details on your invoices and tell regular customers in writing. Fraudsters target this moment with fake "change of bank details" emails, so ask customers to confirm by phone if they ever receive a request that seems to come from you. Most UK banks now run Confirmation of Payee, which checks that the name on a payment matches the account. That's another reason the account should be in the business's exact registered name.

FSCS protection: how the £120,000 limit works for businesses

The Financial Services Compensation Scheme (FSCS) protects deposits with UK-authorised banks, building societies and credit unions if the firm fails. From 1 December 2025 the limit rose from £85,000 to £120,000 per eligible person, per authorised firm. The FSCS aims to pay within seven working days.

How that limit applies depends on your structure:

• Limited company or LLP: the business is a separate legal person, so it gets its own £120,000 limit at each authorised bank. You personally keep a separate £120,000 limit for your own savings at the same bank.
• Sole trader: the business isn't separate from you, so there's one £120,000 limit covering your personal and business accounts at that bank combined.
• Partnership: a business account held by the partners gets a single £120,000 claim for the partnership, not one per partner. Each partner keeps their own limit for personal deposits.

Two details catch businesses out. First, brands that share a banking licence count as one firm, so money split between two brands of the same group may share a single limit. The FSCS website has a checker that shows which brands share a licence. Second, certain one-off temporary high balances are protected up to £1.4 million for six months, but most of the qualifying events are personal ones such as a house sale or an inheritance. A large customer payment landing in your business account isn't automatically covered above £120,000.

Worked example. A design studio trading as a limited company keeps £150,000 in its business current account at one bank. The director has £40,000 of personal savings at the same bank. If the bank failed, the company would be protected up to £120,000 and the director's £40,000 would be covered separately. The company's remaining £30,000 would be at risk. If the same person traded as a sole trader with £150,000 of business money and £40,000 of savings at that bank, all £190,000 would count towards one £120,000 limit, leaving £70,000 unprotected. A business that regularly holds more than the limit, for example to cover VAT or a Corporation Tax bill, can spread its cash across banks with separate licences.

E-money accounts and other alternatives to a bank

Many popular business accounts aren't bank accounts at all. Some app-based providers are authorised by the FCA as e-money institutions or payment institutions, not as banks. They give you a sort code, account number and card, and day to day they work in much the same way. The big difference is what happens if the provider fails.

E-money firms don't take deposits, so the FSCS doesn't cover them. Instead they must safeguard customer money: keep it separate from their own funds, usually in a segregated account at a bank, or cover it with an insurance policy or guarantee. If the firm becomes insolvent, an administrator returns money from that safeguarded pool. The FCA's tougher safeguarding rules (policy statement PS25/12) came into force on 7 May 2026. They add daily reconciliations, monthly reporting to the FCA, annual audits for most firms and "resolution packs" so money can be returned faster. Firms must also tell customers plainly that safeguarded funds aren't FSCS-protected. Better safeguarding reduces the risk, but you may still wait months, and the administrator's costs can come out of the pool first.

How do you tell which you're dealing with? Look for the regulatory statement at the foot of the provider's website. A bank says it's "authorised by the Prudential Regulation Authority". An e-money firm says it's "authorised by the FCA under the Electronic Money Regulations 2011". You can confirm either on the FCA Register. Some fintech brands offer a bank-backed account in partnership with a licensed bank, in which case FSCS protection comes from the partner bank, and your money counts towards your limit with that bank.

A sensible pattern for many small firms is to use an e-money account for day-to-day payments if its features suit you, and to keep tax reserves and larger balances in an FSCS-protected bank or building society account.

Business bank account fees: the charges to compare

Business accounts cost more than personal ones because banks charge for handling business volumes. Free banking for the first 12 to 24 months is a common startup offer, but what matters is the tariff afterwards. Read the full tariff document, not just the headline.

To compare fairly, take three months of real or forecast activity (number of payments out, payments in, cash paid in and any foreign currency) and price it against each tariff. A café paying in £2,000 of coins and notes every week will care far more about cash charges than about the monthly fee. A consultant with ten invoices a month may be better off with a low-fee digital account. If you take card payments, the card processing fees from your terminal provider usually cost much more than the account itself. Our payment fee calculator helps you work out what a provider's percentage plus fixed fee really costs.

If you handle cash, check where you can pay it in. With so many branches closed, most banks let business customers deposit cash at Post Office counters, and shared banking hubs are opening in towns that lost their last branch. Ask whether your provider supports these, what each deposit costs and what the daily limits are. E-money accounts often charge more for cash, or don't accept it at all.

Switching business bank accounts

You can move your account whenever you like. Small businesses can use the Current Account Switch Service, run by Pay.UK, if they have fewer than 50 employees and annual turnover of up to £6.5 million. Small charities and trusts can also use it. The switch takes 7 working days, on a date you choose that isn't a weekend or bank holiday.

The service moves your Direct Debits, standing orders and balance, then redirects payments sent to the old account for at least three years. Each time it redirects a payment, it tells the sender your new details. The Current Account Switch Guarantee means your new bank refunds any interest or charges caused by an error in the switch. The catch: the service closes your old account. If you want to keep it open, you have to move payments yourself and you won't get the guarantee.

Before you switch, list the things that don't move automatically: card payments set up with your old debit card (subscriptions, software, fuel cards), bank details printed on invoices and your website, payroll and HMRC payment references, and your bookkeeping software's bank feed. Check whether your old bank's overdraft or loan is linked to the account, and arrange new facilities first.

Fraud, frozen accounts and complaints: your rights

Authorised push payment (APP) fraud. If you're tricked into sending a Faster Payment or CHAPS payment to a fraudster, rules from 7 October 2024 require your provider to reimburse you up to £85,000 per claim, usually within five business days. The rules cover individuals, charities and micro-enterprises: businesses with fewer than 10 employees and turnover or balance sheet of no more than €2 million. Larger businesses aren't covered and depend on their bank's own policy. You must report within 13 months, and the provider can deduct an excess of up to £100. Cases of gross negligence, such as ignoring clear specific warnings, can be refused.

Your protections at a glance

£85,000

Max APP fraud reimbursement

Individuals, micro-enterprises, charities

13 months

Time limit to report APP fraud

90 days

Notice before an account is closed

Accounts opened from 28 April 2026

Account closures. For payment accounts opened on or after 28 April 2026, a bank or payment firm must give at least 90 days' notice to close the account (up from two months) and explain why in enough detail for you to understand and challenge the decision. There are exceptions where financial-crime law applies. Accounts opened before that date are on their original terms, although some providers apply the new notice period to everyone. If your account is frozen for checks, respond to the bank's questions promptly and in full, and keep copies.

Complaints. Complain to the provider first. If you're unhappy with its final response, or it hasn't replied within eight weeks, most small businesses can go to the Financial Ombudsman Service for free. It covers micro-enterprises and small businesses with turnover under £6.5 million and either a balance sheet under £5 million or fewer than 50 employees.

Common mistakes to avoid

• Opening the account in the wrong name. A company account must be in the company's exact registered name. An account in your own name with "trading as" added is a personal account and doesn't separate company money.
• Treating the company account as your wallet. Taking money out without recording it as salary, dividends or expenses creates a director's loan that has to be repaid or taxed.
• Leaving tax money in an unprotected account. Set aside VAT, PAYE and Corporation Tax as you go, ideally in a separate pot or savings account that's FSCS-protected.
• Choosing on the free period alone. Model your real transaction pattern against the full tariff before signing up.
• Ignoring account messages. Unanswered requests for information are a common reason accounts get restricted. Update the bank when directors, owners or your business activity change.
• Keeping records only in the banking app. Download statements regularly. Companies must keep accounting records for six years from the end of the financial year they relate to, and the bank may not keep online history that long after an account closes.

Official links

• Company and accounting records (GOV.UK)Keeping company money separate; record-keeping rules
• Self-employed business records (GOV.UK)What sole traders must keep and for how long
• FSCS: banks and building societiesDeposit limit and shared-licence checker
• FCA RegisterCheck whether a provider is a bank or an e-money firm
• Current Account Switch Service (business)Eligibility and how switching works
• APP fraud reimbursement (PSR)Who's covered and how to claim
• Financial Ombudsman: small businessesCheck if your business can complain

What to do next

If you haven't registered yet, start with our sole trader registration or limited company set-up guide, then open the account as soon as you have a UTR or company number. Not sure which structure suits you? Our sole trader vs limited company comparison sets out the tax and admin differences. Once the account is running, use the budget planner to set aside tax each month and the invoice generator to send invoices that show your new bank details clearly.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

Is a business bank account a legal requirement in the UK?

Not for sole traders: you and the business are the same legal person, so HMRC doesn't require a separate account, although many banks' personal account terms ban business use. A limited company is a separate legal person and GOV.UK says its money must be kept clearly apart from the directors' money; in practice every company needs an account in its own name to receive payments and pay tax.

Can a sole trader use a personal bank account for business?

Legally yes, but check your bank's terms first: many personal current accounts forbid regular business use, and the bank can ask you to move or close the account. Mixing business and personal spending also makes records harder to keep for Self Assessment and, above £50,000 of qualifying income, for Making Tax Digital quarterly updates.

How much of my business money is protected if my bank fails?

The FSCS protects eligible deposits up to £120,000 per person per authorised bank (the limit rose from £85,000 on 1 December 2025). A limited company or LLP has its own limit, separate from its directors'. A sole trader has one £120,000 limit covering personal and business accounts at the same bank. Banks sharing a licence count as one.

Are e-money business accounts FSCS protected?

No. Money held by an e-money or payment institution is safeguarded, meaning it must be kept separate from the firm's own money or covered by insurance, but it isn't covered by the FSCS. If the firm fails, customers are repaid from the safeguarded pool after the insolver's costs, which can take longer and may not return everything.

What documents do I need to open a business bank account?

Photo ID and proof of address for each director or owner, your Companies House number (for a company or LLP), details of anyone with significant control, your business address, what the business does, expected turnover and where money will come from. Many app-based providers verify you with a passport or driving licence photo and a selfie instead of paper documents.

How long does it take to switch business bank accounts?

Through the Current Account Switch Service it takes 7 working days, and incoming payments to your old account are redirected for at least three years. Businesses with fewer than 50 employees and turnover up to £6.5 million can use it. Larger businesses switch by moving payments themselves.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 8 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.Running a limited company: company and accounting records — GOV.UK · accessed 8 October 2026
2. 2.Business records if you're self-employed: how long to keep your records — GOV.UK · accessed 8 October 2026
3. 3.Banks, building societies and credit unions — what FSCS covers — Financial Services Compensation Scheme · accessed 8 October 2026
4. 4.Small businesses and limited companies — FSCS protection — Financial Services Compensation Scheme · accessed 8 October 2026
5. 5.APP fraud reimbursement protections — Payment Systems Regulator · accessed 8 October 2026
6. 6.Current Account Switch Service — business common questions — Pay.UK · accessed 8 October 2026
7. 7.Financial Ombudsman Service — who we can help (small businesses) — Financial Ombudsman Service · accessed 8 October 2026
8. 8.The Payment Services and Payment Accounts (Contract Termination) (Amendment) Regulations 2025 — A&O Shearman (law firm commentary on SI 2025/688) · accessed 8 October 2026
9. 9.UK FCA safeguarding changes: new rules for e-money institutions and payment firms — Saffery · accessed 8 October 2026
10. 10.Do you need a separate business bank account? — NatWest · accessed 8 October 2026
11. 11.People with significant control (PSCs) — Companies House / GOV.UK · accessed 8 October 2026