Quick answer
Do I need a business bank account?
As a limited company, yes. The company is separate from you, so its money must be in an account in the company's name.
As a sole trader, not by law, but it's a very good idea, and your personal bank's terms might not allow business use. One account for the business makes your records, tax and checking far easier.
The jargon
The words you'll come across, in plain English.
- Business account: a bank account in your business's name, used only for business money.
- Transaction fee: what the bank charges each time money goes in or out, on some accounts.
- Two step verification: a second check when you log in, like a code sent to your phone.
- FSCS: the Financial Services Compensation Scheme, which pays back money you hold with a UK bank if the bank goes bust, up to a limit.
- Electronic money firm: a payments company that isn't a bank. Your money is protected differently (safeguarding), not by the FSCS.
- Tax pot: a separate savings space where you put money aside for your tax bill.
Why separate?
Why keep business money separate?
- Easier to match payments to invoices
- Easier to see business costs
- Personal spending doesn't clutter your books
- Tax and VAT money can be kept apart
- Cleaner records for your accountant
- Customers see the same name when they pay
Separate and checked
Customer payments go into one business account, costs come out of it, and you check it every month.
One mixed account
Food shopping, fuel, deposits and transfers all mixed together, so missing money is hard to spot.
Choosing one
How do I choose a business bank account?
Compare accounts against how you actually get paid:
- Do you get paid in cash or cheques?
- Do you need bank transfers, card payments or payment links?
- What are the monthly and transaction fees?
- Does it link to your bookkeeping software?
- Can someone else use it safely?
- What help is there if a payment's blocked?
- How is your money protected?
Don't choose on a free introductory period. Check the normal price.
Opening one
What do I need to open a business bank account?
Banks check your ID, address and business. They may ask what you do, how much you expect to take in a year, where your money comes from and who your customers are.
Be accurate. A vague or inconsistent answer can hold things up.
Keep it safe
How do I keep my business account safe?
- A unique password and two step verification
- Recovery details kept up to date
- Other users only get what they need
- Check any supplier bank detail change by phone, using a number you already have
- Turn on payment alerts
- Check it regularly and look into anything you don't recognise
Tax money
How much of the money is mine to spend?
Not all of it. Put aside money for Income Tax, National Insurance, Corporation Tax, VAT or payroll, whichever apply. The right amount depends on your profit and situation; work it out with HMRC's figures or your accountant.
A separate tax pot makes it visible, but it doesn't work out the amount for you.
If it goes bust
Is my money protected if the bank goes bust?
With a UK bank or building society, the FSCS protects up to £120,000 per person, per bank (since 1 December 2025).
- Sole trader: you and the business are the same person, so your personal and business money at the same bank share one £120,000 limit.
- Limited company: the company is protected separately from you.
- Electronic money firms aren't covered by the FSCS. They have to keep your money safeguarded instead, which works differently.
Sources
Where this guide comes from.
Checked against these official pages on 27/10/2026. Next check due 27/01/2027. Rules and figures can change sooner, so check the official page again before making a tax, legal or money decision, and ask a qualified adviser about your own situation.
FAQs
Frequently asked questions.
Can a sole trader use a personal account?
There's no general legal requirement for a business account, but check your bank's terms first.
Must a limited company have its own account?
Yes. The company's money belongs to the company and must be kept separate.
Are app based business accounts banks?
Some are banks, some aren't. Check who regulates them, and how your money is protected.
Should I open a tax pot too?
It helps stop you spending it by accident. You still need to work out how much to put in.
Can customers pay into my personal name?
It confuses things and may break your bank's terms. Use business details, consistently.
Are Starling or Monzo business accounts worth a look?
They're options alongside the high street banks. Compare fees, cash handling, links to bookkeeping software, support and how your money's protected.
How is my money protected if the provider goes bust?
Banks are covered by the FSCS , up to £120,000 per person, per bank. Electronic money firms use a different FCA safeguarding regime . Check which yours is before keeping big sums there.
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