The benefits of having a separate bank account for your small freelance business

Freelancer sat on a window sill smiling as she looks down at her iPad.

As a small business owner or a self-employed professional, you may wonder if opening a dedicated business bank account, separate from your personal bank account, is necessary and if so, how it can benefit you.

  • what a business bank account is exactly
  • if opening a business bank account is a legal requirement for small businesses
  • how a business bank account differs from a personal bank account
  • the advantages of opening a business bank account
  • what to consider when choosing a business bank account

What is a business bank account?

A business bank account is a bank account that you use solely for your business finances – for example receiving payments from clients and buying business equipment or paying for business expenses.

Is opening a business bank account a legal requirement for small businesses?

If you have set your business up as a limited company, you are legally required to use a business bank account for business expenses, rather than a personal account. This is because a limited company is a separate legal entity from its owners and directors, therefore its accounts and financial affairs need to be kept separate.

Sole traders on the other hand are not required by law to open a business bank account. This is because their business is not legally separate from them. Despite this, some sole traders may still prefer to use a business bank account and it is generally seen as best practice.

What’s the difference between a business bank account and a personal bank account?

As the names suggest, the key differences between these two types of accounts are that business bank accounts are solely for your business expenses while a personal bank account is intended for personal spending. Some bank accounts in fact prohibit the use of a personal account for business transactions.

A business bank account can help you to track your business’ financial outgoings, profit and money owed.

The advantages of opening a business bank account

As well as making it easier to separate business and personal spending, business bank accounts can offer a range of benefits and services which we will cover below.

1. It makes your business look more credible

Using a business bank account to receive payments from clients looks more professional than giving details of your personal bank account. This will show them that you’re a legitimate business and in turn help to build trust.

2. The opportunity to apply for business loans and credit

Business loans can be vital to growing your business but many banks will not offer you a loan or line of credit for business purposes without a separate business account.

3. Enjoy added rewards and features

Business bank accounts often come with rewards and features - for example if a Markel Direct customer opens a Tide business bank account, they are eligible for an exclusive £100 cashback and 1 year of free bank transfers*.

Find out more

Other features can include accounting integrations, invoice tools, expense receipt matching, the option to schedule payments and more.

4. Easily organise your finances

When your personal expenses and business expenses are mixed, it can make it more difficult to keep on top of your business finances and calculate how much your business is spending and receiving. With a separate business account, you’re likely to benefit from faster and more accurate bookkeeping.

5. Create accurate tax returns

When it comes to filling out your self-assessment tax return each year, it will be much easier to work out your taxable benefits and deductions if you have a separate business account. If your business expenses are mixed with your personal expenses, you’ll have to sift through all of your personal spending to find your business expenses.

Additionally, if HMRC requests more information on your business finances, they can simply look at your business account statements and not your personal finances.

6. Build your business credit score

With a separate business bank account, you can begin building a credit history and your business credit score. If in the future you need to secure a business loan or apply for a credit card, having a good business credit score will increase your chances of being accepted.

7. Avoid breaking any terms and conditions

As we touched on above, in the terms of conditions of some personal bank accounts, it will state that business transactions are not allowed through your personal account. To avoid any issues with your bank, it can be wise to open a separate business account.

What should I look for in a business bank account?

Here are some of the key points to consider when choosing a business bank account:

• Approved by regulators

First and foremost, choosing a bank that’s credible is crucial. Like us, banks are financial service providers and need to be authorised by the Financial Conduct Authority (FCA). When regulated by the FCA, businesses have to meet certain standards and be fair, honest and effective in their approach to ensure customers get a fair deal. Usually, if a firm is regulated by the FCA, they will state it on their website – often in the footer with an FCA reference number included - but you can check this for yourself on the FCA’s website here.

• Fees and charges

Ensure you consider what the monthly service fee is before opening a business bank account, as well as taking into account fees charged for cash withdrawals, overdrafts, transfers and so on.

• Bonuses and introductory incentives

Look out for sign-up bonuses and other incentives offered with new accounts. For example, as we mentioned earlier, Tide offer Markel Direct customers £100 cashback* when opening a Tide business bank account plus one year of free bank transfers*. Of course, with any incentives offered, make sure you carefully read all of the information provided, particularly any small print, to double-check that it’s right for your business needs.

• Online banking

For many of us, accessing your banking from your mobile is a must. Given this, you may want to ensure the bank you choose has a reliable and user-friendly app that’ll make it easy to manage your business banking wherever you are. With online and mobile banking accessibility, it will make it easier for you to quickly and securely authorise payments.

• Customer service

When you experience an issue with your banking, whether it’s fraudulent activity on your account or an incorrect charge, you’ll want to easily and quickly speak to the customer support team. When considering a bank account, check to see what customer support they offer – do they have a phone line or is it all online through an app or email? Do they state that they’ll respond within a certain time frame? To get a true reflection of the customer service provided, it may help to read customer reviews.

• Transaction limits

Find out what limits the bank account you’re considering has on transactions, such as the number of withdrawals you can make within a month, and ensure it is enough for your business to function without facing costly fees.

• Accounting integrations

Some banks will offer integration with your current accounting software, which can make managing your business’ finances easier. It means you can manage your accounting in one place and can more easily create reports for tax returns and other purposes.

About Tide

Tide logoAt Markel Direct, we are delighted to introduce Tide as our exclusive business banking partner to help save you time and money managing your business admin.

Tide is one of the UK’s leading business financial platforms and is trusted by over 500,000+ members. Tide provides free FSCS-protected business bank accounts* that include in-app features such as expense receipt matching, free Mastercard usage, and accounting software integrations to make managing your finance admin simple.

Whether you’re a limited company or a sole trader, you can easily open a business bank account with Tide in a few simple steps.


This article is for information purposes only and provided in conjunction with Tide, one of our business partners. If you choose to open a bank account with Tide using the links in this article, we do not receive a commission or incentive from Tide. Before opening a bank account, you should  read all bank account information and terms and conditions to ensure it meets your business needs.

*Terms and conditions:

- To benefit from the £100 cashback reward, make sure to use the code MARKEL when signing up and credit your new Tide account with a minimum £100 within 3 months of your account opening.

- Transfers to non-Tide accounts are free for one year and then 20p per transfer thereafter.

- ‘Free business bank account’ refers to it being free to open a Tide business bank account. It does not refer to separate charges that may be incurred by expenses cards, ATM withdrawals and other additional services.

- Tide offers bank accounts provided by ClearBank. ClearBank Ltd is Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register number: 754568). Registered Address: 4th Floor, Prologue Works, 25 Marsh Street, Bristol, England, BS1 4AX.

- See the full offer T&Cs for further details.

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