What the account actually has to do
Plenty of owners open a business account because it feels like the responsible thing to do, then discover six months later that half their transactions carry a charge. The starting point is legal, not emotional.
Government guidance is straightforward: sole traders and ordinary partnerships are not legally required to hold a business bank account. A limited company is a different matter. Company income paid into a personal account blurs the records you need for Corporation Tax and makes an accountant's job harder, so in practice most limited companies need a dedicated account from day one.
Beyond that, the pressures are practical. A tradesperson taking cash every week needs deposit routes that do not eat the margin. A consultant paid in euros needs a decent exchange rate rather than a surprise markup. A shop with three staff needs a second card and read-only access for the bookkeeper.
Then there is the question almost nobody asks at signup: what happens if the provider fails? Banks covered by the Financial Services Compensation Scheme protect eligible deposits up to £85,000. E-money institutions, which include several app-based names, do not carry that protection. Customer funds are safeguarded in segregated accounts instead, which is a different legal promise. Both models can be perfectly sound, but they are not the same thing, and one is often described in the marketing as if it were the other.
Comparing the main options
| Provider | Monthly cost | Protection | Suits | Watch out for |
|---|
| Starling Business | £0 | FSCS up to £85,000 | Owners who want free day-to-day banking plus built-in bookkeeping | Cash deposits handled through Post Office counters |
| Monzo Business Lite / Pro | £0 / £5 | FSCS up to £85,000 | Solo directors and small teams wanting clean app controls | Cash paid in at PayPoint or Post Office costs £1 per deposit |
| Tide (Free plan) | £0 | FSCS up to £85,000 | New businesses testing the water | Around 20p per bank transfer on the free tier; paid tiers add support and cashback |
| ANNA Money | £0 pay-as-you-go; £14.90 + VAT Business; £49.90 + VAT Big Business | E-money safeguarding, no FSCS | Freelancers who want invoicing and tax reminders in one place | Not a bank account in the compensation sense |
| Revolut Business | Plan-based; comparison tables list around £120 a year on entry tiers | E-money safeguarding, no FSCS | Businesses sending and receiving multiple currencies | Per-transaction fees on lower tiers; check where funds are held |
| High street banks (Barclays, HSBC, Lloyds, NatWest) | Often £0 for an introductory period, then roughly £100–£120 a year in published comparisons | FSCS up to £85,000 | Cash-heavy trades, lending, face-to-face support | Introductory pricing expires quietly; branch access varies by region |
Figures reflect published pricing at the time of writing. Always confirm on the provider's own pricing page before applying, because tiers and allowances change.
Where the costs actually hide
The headline monthly fee is the least interesting number on the page. Three charges do most of the damage.
Per-transfer fees. Starling and Monzo include unlimited UK Faster Payments on their free plans. Tide's free tier charges around 20p per transfer, which is trivial once a month and noticeable at forty supplier payments. Multiply your real transaction count, not a tidy estimate.
Cash handling. Online-first accounts lean on Post Office counters and PayPoint terminals. Monzo charges £1 per cash deposit, Tide charges £1 per ATM withdrawal, and Starling's limits are generous but tied to Post Office locations. A market trader in a rural county should check the nearest counter before signing up, not after.
Foreign exchange. A "free" account can still take a margin on every euro invoice. If more than a tenth of your revenue arrives in another currency, the FX spread matters more than the subscription.
Priya, a freelance illustrator in Bristol, ran her business from a personal account for two years. Forty invoices later, a part-time bookkeeper quoted her more hours to untangle the records than a business account would have cost in fees. She moved to a free sole trader account, set up a tax pot, and now sends her accountant a view-only login at year end. The saving was not the monthly fee. It was the four hours of unbilled admin.
A different pattern shows up in limited companies. Two directors sharing one login is fine until one leaves, and then access control becomes a legal headache. Look for multi-user permissions before you need them, and check whether read-only accountant access is included rather than sold as an upgrade.
Setting it up properly
- Map one month of transactions. Count incoming payments, outgoing transfers, cash deposits, card refunds and anything in a foreign currency. That gives you a realistic cost model instead of a guess.
- Decide what is essential. Free UK transfers and accounting integration are baseline for most owners. Invoicing, tax pots, multi-user access and cash deposit routes are the variables.
- Check the protection status. Read whether the provider is a bank or an e-money institution, and where client money is held. If your balance regularly sits above £85,000, spreading funds across two providers is the simple fix.
- Confirm eligibility. Some providers restrict industry, residency, turnover or cash intensity. A quick check before you upload documents saves a week.
- Run the switch in parallel. Keep the old account open for a month to catch late payments and forgotten subscriptions, and update invoice templates, marketplace payouts and direct debits in the same week.
- Turn on the tax tools. Making Tax Digital for Income Tax is pushing sole traders towards quarterly digital records, and Starling's free bookkeeping tools, Monzo's accounting exports and ANNA's tax reminders all reduce the amount of manual work later.
One more habit worth forming early: reconcile weekly, not annually. Ten minutes on a Friday keeps the ledger honest and makes the January filing a formality rather than a reconstruction exercise.
Start by listing what your business actually does with money in a normal month, then match that list against two or three providers rather than the full market. Open the account, run it for a quarter, and read the statement properly when it arrives. The fees will tell you whether the plan still fits, and switching is far easier once your direct debits and invoice templates are already tidy.
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