Do I need a business bank account?

You’ve started your own business. Your brand’s great, your product's looking good, and you’re ready to take on customers 🎉

But you want to get your new business’ finances in order, stay organised and have control over the money you make.

Turning to a business bank account may be a good solution. And in some cases, you might legally need to set up a business bank account.

Limited companies are considered a separate legal entity to you. If you’ve started a limited company, the money that company makes belongs to the company. This means you'll need to separate your own finances from the business', so you’ll need a business bank account.

There are certain rules that’ll stop you taking money out of the account of a limited company. Limited companies can pay salaries, or dividends (which are payments from any profits made) both of which you’ll be likely to be taxed on.

If someone chooses to take money out of the company account, that will be treated as a director loan and you’ll have to follow strict rules around repayment. There’s also often tax on a director’s loan. Read more about directors loans on the government site.

You can open a full UK business bank account with Monzo in minutes.

If you’re a limited company, you can add up to two other people (like directors, accountants and employees) to your bank account to give them access to it.

You can also optionally integrate accountancy platforms such as Xero, FreeAgent and Quickbooks, straight from the Monzo app. 

You’ll have 24/7 customer support from real humans over chat, or you can email and phone us whenever you need. 

Get a Monzo Business Account and help manage your business finances stress-free. Know when you’ve been paid immediately with instant notifications, and put money aside automatically to save for your tax bills with Tax Pots (choosing the percentage you want to set aside).

Sole traders are unlike limited companies in that your business isn’t considered a separate legal entity to you. 

You could keep to your personal account to manage your business’ finances, but you may be creating extra admin for yourself. 

A business account does make life a whole lot easier when it comes to keeping track of income and expenses, particularly for things like filling out a Self Assessment for tax returns. If you’re taking sales transactions from customers, like if you’re running a food stall or coffee popup, your bank may ask you to take out a business account.

That’s because some banks say that you can’t use personal accounts for business reasons and so you might be breaching their terms and conditions.

Read more about what you need to set up as a sole trader here.

Here are a few reasons why a business bank account might be a good idea:

If you’re using your personal account to manage income and expenses for your business, you may be going against your bank’s terms and conditions. 

If you’re a sole trader, your bank might ask you to switch from a personal account to business banking.

Personal accounts are generally free, while some business accounts come with a set of monthly fees and charges for transactions, cash deposits and withdrawals.

A business account can make it easier when it comes to filing your tax returns, as all your payments are in one place. And submitting the wrong information to HMRC during Self Assessment could lead to penalties.

So if having a business account means less time sifting through personal accounts to separate business income and expenses, and less chance of giving incorrect information, it may be worth it. 

Paying a personal name for a service or product may make some potential clients feel uneasy. But having a business account can make your company appear more professional. Plus it’s in keeping with the brand you’re building, so you’re recognised by the customer too!

To open a business bank account, you’ll usually need to provide:

Monzo is covered by the Financial Services Compensation Scheme (FSCS). Eligible deposits in Monzo are protected by FSCS up to a value of £85,000 per person. Read more about eligible deposits here.

Companies are eligible for protection and compensation under the FSCS if they’re ‘small companies’.

To be considered a small company, you have to meet at least two of the following criteria:

Sole traders are also covered. But as a sole trader, you’ll share your protection between your personal and business Monzo accounts.

Read more information about sharing your protection between personal and business accounts here and more on you’re covered for.

A healthy business credit rating could mean your company pays lower interest rates in the future if you need to borrow money. Separating yourself from your company with a business account means your company can grow its credit rating. 

This may help if you look to get a business credit card or a business loan, you may have to sign a personal guarantee in case the company is ever unable to repay the amount. This could impact your personal credit rating. But if your company has established business credit, there may not be the need for a personal guarantee. 

This may help if you want to get a business credit card or loan. Usually you need to sign a personal guarantee in case your company can't repay the amount, and this could impact your personal credit rating. But if your company has established business credit, there may not be the need for a personal guarantee.

Monzo is covered by the Financial Services Compensation Scheme (FSCS). Eligible deposits in Monzo are protected by FSCS up to a value of £85,000 per person 💰. Read more about eligible deposits here.

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