A free business bank account is one that doesn’t charge monthly maintenance or opening fees, nor will it tend to charge anything for standard day-to-day transactions. However, some services, like international payments or cash deposits, may still incur costs.

Unlike premium business bank accounts, free business accounts typically offer fewer perks and advanced features. However, they’re often a great option for startups, sole traders, and small businesses looking to minimise expenses while managing finances efficiently.

How to choose the best free business bank account?

When choosing a free business bank account, it's important to look consider the details and fine print. While many banks offer fee-free accounts, there are often other costs and fees that can add up depending on how you manage your business finances.

Here's a breakdown of the various fees and features to consider before making your decision.

Fees

Monthly fees: Some accounts are fee-free only for a limited time, or come with charges after a certain number of transactions. Make sure to confirm if there’s a fee after a promotional period ends.
Opening/one-time fees: Some banks may charge a one-off fee to set up the account or for initial administrative processes. These fees can sometimes catch you off guard, so check carefully before opening an account.
Local/international ATM withdrawals: Not all free business bank accounts allow unlimited ATM withdrawals without fees. Be aware of any charges for withdrawing cash, both domestically and abroad. International ATM fees can be particularly high.
Bank transfer fees: You may incur fees for transferring money to and from your business account, especially for same-day or international transfers. Some accounts may offer free domestic transfers, but charge for international transactions.
Foreign transaction fees: If you deal with international clients or suppliers, check whether the bank charges fees for foreign transactions, currency exchanges, or payments made in different currencies. These can add up quickly.

Features

Additional charges for advanced features: While the account itself may be free, some advanced features — access to credit, overdraft protection, extra business tools — may come with additional costs.
Customer support: Free accounts can come with limited support, so check if the bank provides adequate customer service channels (e.g., chat, phone, or email).
Online and mobile banking: For most businesses, regardless of size or age, easy access to online and mobile banking is essential. Some banks provide more robust, user-friendly apps and platforms that can help streamline your day-to-day business transactions.
Integration with business tools: If your business uses accounting or invoicing software, look for a bank account that integrates with these tools.
Transaction limits: Be sure to understand the number of free transactions allowed per month and what happens if you exceed those limits. If your business frequently handles large volumes of transactions, you may need to find an account with higher thresholds.

Is your small business eligible for a free bank account?

Eligibility for a free business bank account depends on the provider, but common criteria include:

Business type: Most accounts are available to sole traders, freelancers, and limited companies. Some may exclude certain industries.
Annual turnover: Providers often set turnover limits, typically for businesses earning less than a specified amount per year.
Account activity: Free accounts may have limits on the number of monthly transactions or cash deposits.
Residency and registration: You’ll usually need to be a UK resident, and limited companies must be registered with Companies House.

Sole traders and freelancers may face fewer restrictions due to lower transaction volumes, while limited companies may need to meet stricter criteria, especially for free business banking beyond an introductory period.

Be sure to check the terms and conditions with your chosen provider before opening an account. Some accounts may have restrictions on free services or fees that apply after an introductory period.

What are the benefits and drawbacks of a fee-free business bank account?

Fee-free business bank accounts come with several advantages, but also some limitations. As your business evolves, you may find that some of these limitations become more relevant. The key is to understand what you need at this stage of your business, and what you can do without.

Pros:

No monthly or annual fees: Ideal for startups and small businesses looking to minimise costs
Helps separate personal and business finances: Makes managing cash flow and taxes simpler
Easy access to online and mobile banking: Convenient for day-to-day transactions
Perfect for low-volume businesses: Suitable for those with smaller transaction volumes, like freelancers or sole traders

Cons:

Limited services and features: Fewer perks compared to paid business accounts (e.g., lower levels of customer support, less comprehensive tools)
Transaction limits: You might (depending on the provider/account) be charged if you exceed the number of transactions or deposits allowed each month
Cash deposit charges: Some free accounts charge for cash deposits, which can add up if you're a cash-heavy business
Overdrafts and credit options: These might not be available, or only at higher rates compared to paid business accounts

What are the key differences between free and paid business bank accounts?

While free accounts can be an excellent starting point for smaller businesses, paid accounts often provide additional features and services that may better suit the needs of larger businesses or those looking for advanced tools.

Here's a breakdown of what you might expect from each type:

Free business bank accounts

Free accounts can be a great option for startups or small businesses looking to minimise costs. However, they may come with some limitations, which could affect your business in the long term.

No monthly fees: Free business accounts typically have no monthly fees, making them cost-effective for businesses with a limited budget.
Transaction limits: Free accounts may limit the number of transactions you can make per month. Once you exceed the limit, fees may apply, or you may need to upgrade to a paid plan.
Balance thresholds: Some free accounts have minimum or maximum balance requirements, which could limit how much cash you can keep in your account at any given time.
Limited overseas payments: Free accounts might have restrictions on international payments, either by limiting the number of payments you can make, or by charging extra fees for international transfers.
Limited access to credit: Unlike paid accounts, free business accounts often don’t offer access to credit or overdraft facilities.
Basic customer service: Free accounts generally offer customer service, but may not include premium support or direct access to a relationship manager.

Paid business bank accounts

Paid business accounts often come with additional features that can be beneficial for growing businesses, especially those with more complex financial needs.

Extra benefits: Paid accounts may offer features such as accounting software, free business advice, or integrated card payment solutions, which can enhance how your business operates.
Higher transaction limits: These accounts will generally offer higher transaction limits – ideal for businesses with a high volume of payments or large transactions.
Advanced tools: Paid accounts will often come with advanced features, such as tools for cash flow management, reporting, or detailed financial analytics.
Designed for larger businesses: If you’re running a growing business, a paid account might offer a range of comprehensive features you need, such as payroll services, employee expense cards, and dedicated account managers.
Access to credit: Many paid accounts come with access to business loans, overdraft protection, and credit facilities, which can be useful for managing cash flow.

Additional features to consider

When evaluating business bank accounts, there are some additional factors to keep in mind.

Introductory period: Some banks offer a free period for paid accounts, allowing businesses to enjoy premium features at no cost for a set amount of time.
International trade: If your business deals with international transactions, you may want to choose an account that offers multi-currency support, better foreign exchange rates, or lower international transaction fees.
Relationship manager: Larger or paid accounts may offer the option of a dedicated account manager, providing a more personalised level of service and support.
Employee expense cards: Some paid accounts provide the ability to issue expense cards to employees, making it easier to manage and track business spending.

See our best business bank accounts.

Our expert says

“For startups, freelancers, and small businesses looking to cut costs, a free business bank account can be a simple, effective way to separate personal and business finances without the burden of monthly fees.”

Andy Elder -

SME Expert

How to open a free business bank account UK

Opening a free business bank account in the UK is a straightforward process. Sole traders and freelancers typically need less documentation than limited companies, but all applicants should have the necessary identification and details to hand to speed up the process. Follow these steps to get started:

Compare free business bank accounts to find one that suits your needs. Look at fees for transactions, overdrafts, and international payments.

Proof of identity (passport or driving licence), proof of address (utility bill or bank statement), business details (registered name, address, and company number if applicable & proof of business activity (such as invoices or business plans for new businesses)

Most banks offer a quick and convenient online application process. While the exact form varies depending on the provider, they’re generally designed to be completed in just a few minutes.

You may need to upload copies of your ID and proof of address, or verify your identity via a video call.

Approval times vary, but can be as quick as a few hours. Some banks may request additional information before opening the account. Once approved, you’ll receive account details and can start using your business bank account immediately.

FAQs

Can I open a free business bank account as a sole trader?

Yes, sole traders can open free business bank accounts. These accounts help separate business and personal finances, making it easier to manage expenses and prepare for tax season.

Sole traders may also face fewer eligibility restrictions compared to limited companies, but it's important to review the provider’s terms and conditions to ensure the account suits your needs.

Is a free business account covered by the FSCS?

Most free business bank accounts in the UK are covered by the Financial Services Compensation Scheme (FSCS), which protects eligible deposits up to £85,000. However, coverage depends on the provider and account type, so it's essential to check the specific terms and conditions of your chosen account.

How to switch business bank accounts

By using the Current Account Switch Service, which covers most UK banks and building societies, switching a business bank account is straightforward. If your business has fewer than 50 employees and a turnover of £6.5 million or less, you can switch in just seven working days.

To prepare, review and cancel any unnecessary payments, request a copy of your account history, and select a switch date that suits you. On the switch date, your balance, Direct Debits, and standing orders will transfer to your new account, and your old account will close.

The Current Account Switch Guarantee protects you from any issues during the process. If needed, you can opt for a partial switch, allowing you to keep your old account open for specific features or overdraft support.

Can I use a personal bank account for my small business?

Sole traders can legally use a personal bank account for their business in the UK, as they and their business are considered the same legal entity. Limited companies, on the other hand, must use a business bank account because they are legally separate from their owners.

Do free business bank accounts have any fees?

Free business bank accounts don’t usually charge monthly maintenance or opening fees, but you may still incur other costs. These can include fees for cash deposits, international payments, exceeding transaction limits, or using an overdraft. Always check the account’s terms and conditions to understand any potential charges.

What happens if I exceed the free account limits?

If you exceed the limits of a free business bank account, such as the number of free transactions or cash deposits, you may be charged additional fees. These charges vary depending on the provider, so it’s important to check the account’s terms and conditions to avoid unexpected costs.

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