Best business savings accounts | December 2024 interest rates

Working like a personal savings account, a business savings account lets you keep your money in a separate account to your business current account, where it could generate more interest than it might in a standard current account.

With a business savings account you can potentially see a return on your savings while also, with some types of savings accounts, keeping the money easily accessible for when it’s needed.

Having a business savings account helps you earn money on any funds you don't need to use right away.

Why do you need a business savings account?

A business savings account offers a range of features which, when combined, could benefit your business’s ability to deal with unforeseen events.

1. Interest

Your business could earn interest on any money deposited into the savings account and the rates are usually always better than what you might find on a standard business current account. This allows you to grow your savings over time too.

2. Keep your finances separate

Keeping your business finances separate from your personal finances helps maintain a clear line between the two - meaning you can be far more organised when it comes to accounting and financial management.

3. Security

Keeping your money in an account is far safer than keeping large amounts of cash on hand. Plus most savings account providers are part of the Financial Services Compensation Scheme (FSCS), meaning should the bank or building society fail, the FSCS will compensate you up to £85,000. Keep in mind that if you are a sole trader, the £85,000 cover is across all personal and business accounts across the institution and not separated out as it would be for a limited company or partnership.

4. Planning

Keeping funds in a business savings account allows you to plan for future investments, emergencies and the expansion of your business.

5. Access your money

Depending on the type of business savings account you opt for, funds can remain accessible for when you might need them, whether it’s for an unforeseen expense or to seize an opportunity.

If your business is a limited company then you will not be able to use a personal savings account in just the same way a limited company cannot use a personal current account. This is because a limited company is a separate legal entity and so its finances must be kept separate.

How to apply & eligibility criteria

The eligibility criteria will differ depending on the account provider, but in order to be eligible for most business savings accounts you'll need to be:

Over 18
A UK business
A UK resident
Able to provide contact details and address information

As some interest rate offers may be time-sensitive, it’s a good idea to have this information to hand and to check any additional eligibility requirements with the provider you want to go with.

Once that’s all in hand - you can usually apply to open a business savings account online or in branch. The bank or account provider will take you through a series of steps, asking for details about you and your business. Once that’s all complete and you’ve provided the relevant documentation the account should be open and ready to use within a couple of days.

Paying tax on business savings accounts

As with anything relating to business finance, understanding your tax obligations is crucial. Not only can it help you maintain cash flow without any unforeseen shocks, it helps you keep your business finances organised all year round.

Any interest made on your business savings is paid without any tax being deducted. That means you will have to declare any interest earned as part of your annual tax return and then pay any tax you owe on it.

There are a couple of additional distinctions, depending on whether you’re a sole trader or a limited company.

Sole traders pay tax on any money made above the standard tax-free personal allowance, which is currently £12,570 for the 2024/25 tax year. That means you can earn up to £12,570 - including any interest made on savings - before you have to pay any tax. If your income (excluding savings interest) is less than £17,570, then you can earn up to £5,000 in interest without being taxed on it - this is known as the starting rate for savings. Any tax you owe will be due to HMRC by 31 January, following the end of the tax year.

Limited companies pay corporation tax on any profits and that includes any interest made on savings. Typically you pay your tax bill to HMRC within nine months of the end of your accounting period.

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