Best Bank Accounts for the Self Employed in 2024

Having a business account is not a legal requirement for sole traders. You can simply use your personal bank account for business transactions – HMRC treats personal and business income as one when calculating your tax liabilities.

It’s a different case for limited companies, though. As a legal entity, the money it generates must be kept separate from the personal accounts of the business owner or director.

In any case, HMRC will need to see how much money your business makes, as well as the allowable expenses you may wish to claim. If your business and personal account are the same, it may be difficult to ascertain your earnings and expenses.

Plus, for a nominal fee, business accounts offer tools that can automate a lot of your admin work when conducting business and offer better rates for international payments.

Most institutions provide slightly different products from their competitors, but there are some common things you can do with a business account:

✔️ Receive payments from customers or clients.

✔️ Pay bills and expenses related to your business.

✔️ Transfer money to other bank accounts, including international bank accounts.

✔️ Set up direct debits and standing orders.

✔️ Apply for a business loan or overdraft.

✔️ Access online banking services to manage your account.

✔️ Get a debit or credit card for your business.

What Are You Not Allowed to Do With a Self-Employed Bank Account?

On the other hand, there are certain things that you cannot do with a UK business bank account, such as:

❌ Use it for personal transactions.

❌ Use it for illegal activities or to launder money.

❌ Overdraw your account without prior arrangement with the bank.

❌ Use it to issue cheques that exceed the balance in your account.

❌ Use it to receive payments that are not related to your business.

As we said before, the majority of business accounts come with monthly maintenance fees in addition to common banking charges. Here’s a quick summary of the common fees:

• Setup Fees – Most banks and e-money institutions offer free setup, with Wise being one of the exceptions on our list with a £45 setup fee. However, Wise doesn’t charge a monthly account management fee and you only pay for what you use once your account is up and running.

• Monthly Fees – Monthly fees range from £0 to £50. Many banks, including Starling and Monzo, offer basic free plans.

• Overdraft Fees – Although rare, some banks may charge for setting up overdrafts.

• International transaction Fees – Banks usually charge for converting one currency to another. Many online banks including Wise, use the interbank rate and don’t charge any additional fees. For those that do, the average stands at 2.75%.

• Deposit Fees – Many banks, especially those without a physical presence, begin to charge for depositing cash. It can come as a flat fee, like Monzo’s £1 per deposit fee, or a percentage fee ranging from 0.7% (Starling) to 2.50% (Monese).

To open a business bank account, which includes accounts for the self-employed, you need to be either a registered sole trader, in a limited liability partnership, or run a limited company. Here’s a list of common eligibility criteria:

• Business status – You need to be registered as a sole trader with the HMRC, be in a limited liability partnership, or run a limited company registered in the UK.

• Credit Checks – Most banks run a credit check at some capacity to approve your application. These checks are usually “soft”, meaning that they don’t appear on your credit rating and don’t affect it. Some banks, such as Monese, require no access to your credit history.

• UK Residency – More often than not, sole traders are required to prove that they are regular UK residents and registered as self-employed with the HMRC. Some banks, most notably Monese, allow persons residing outside of the UK as long as they have a company registered in the company.

• Annual Turnover – Some banks may have minimum or maximum annual turnover limits for business account applications.

Many of the banks featured on our list are online-only banks. They offer feature-rich apps that many traditional banks lack, and they don’t have physical branches. To be able to use them, you need to be comfortable doing all your banking in apps – which is not everybody’s cup of tea.

While many digital banks offer in-app customer support, human access is limited when compared to traditional banks. Consider how often you visit your local bank branch, and how much you think you will need expert help in person.

Bank accounts for sole traders usually provide integrations with accountancy apps, tax calculation solutions, and even communication applications such as Slack. As a sole trader, you can save hours of work with free app integrations. These types of bank accounts don’t necessarily come with invoicing tools, but many of the top brands offer invoicing services, tools, or integrated apps. Some, like ANNA Money, pack these features within the app without the need for integrations.

Multi-currency accounts are essential for sole traders who are often on the move or who work with global clients. In this case, Revolut might be your best choice as it offers a multicurrency account which, normally, is treated as and paid for as separate accounts in other banks.

When it comes to international payment pricing, institutions such as Wise offer debit cards with zero foreign transaction fees. Wise also offers local accounts so clients can make cheap payments in their own currency. If you receive foreign payments regularly, Wise also provides you with fee-free services for receiving payments.

Only fully licensed banks can provide business loans and overdraft products, and even then, it can be difficult to get them as sole traders. If you want at least the possibility of an overdraft, e-money institutions will not be the right fit.

On the other hand, you should be wary of banks that give out loans and overdrafts lightly, as sole traders have fewer business protections.