10 key benefits of opening a business bank account

Whether you’re starting a new business or turning your sole trader operation into a limited company, where you bank is one of the first decisions you’ll make. 

This isn’t just a task to tick off your to-do list, though. It’s an opportunity to set your business up for success and the chance to grow in the future. 

And we’re not just saying this because we’re a bank! The positives are true for almost all business banks. 

Not convinced there are any real benefits to opening a business bank account? We can promise you there are at least 10 - both short-term and long-term. 

 

What is a business bank account?

This is a dedicated current account that you use to make and receive payments for your business. 

It’s similar to a personal bank account, but has some unique features that help you run your business. Business bank accounts are distinct, separate products from personal current accounts.

Benefits of opening a business bank account

If you’re just starting your business (or changing how your business operates), opening a separate business bank account might sound like extra admin and expense. In fact, you’ll find that it can be low-effort and high-reward. 

 

1) Separation of personal and business finances 

Oil and water, chalk and cheese, personal and business finances. Some things just don’t mix well. 

Without separate accounts, it can be unclear how much either entity really has available. You can even start taking money from one to pay for the other’s expenses. 

Imagine needing to buy more materials for a project and not knowing whether the business can afford it. Keeping your finances separate helps prevents that. 

 

2) Professionalism and credibility 

This point goes in two directions: 

1. 1. Having a dedicated business bank account can help you feel legitimate 

   2. It will make your business seem more credible to suppliers and customers 

It’s a symbolic thing, but that doesn’t stop it being meaningful. 

 

3) Simplified accounting and bookkeeping 

Keeping your personal and business finances separate becomes even more important when you consider bookkeeping and accounting. 

Without a business bank account, finding your business transactions and reconciling them with receipts and invoices can take days. 

This alone is enough reason to open a separate business account. Anybody who’s done this in the past will confirm. 

 

4) Access to business credit and loans 

Businesses have access to exclusive financial products, with their own rates, limits and uses. Without a business bank account, you can’t access them. 

That could hold your business back from opportunities for growth or, potentially, rescue.

5) Enhanced security 

Separate business banking keeps your money safe in several ways: 

• If your personal or business account is breached, the other shouldn’t be affected 

• Using separate banks reduces your risk if one experiences issues 

• You’ll maximise your protection under the Financial Services Compensation Scheme (FSCS). The scheme protects your deposits across all accounts with a bank, up to £85,000. Use two different banks and you’ll have the full £85,000 protection for both. 

 

6) Legal compliance 

Limited companies are considered their own legal entity, entirely separate from its owners and directors. As a result, they have to have their own bank accounts. 

If you’re incorporating a company (or partnership), a business bank account is non-negotiable. 

 

7) Better cashflow management 

In the same way that a business account makes bookkeeping easier, it’s also beneficial for your cashflow. 

When your money isn’t mixed up with personal funds, you can be more confident about what you can afford and when. When you’ve got that confidence, you can make well-informed choices about budgeting, forecasting and spending. 

 

8) Integrating with other services 

Just as we mentioned with business loans and credit facilities, there are some products and platforms out there that are exclusive to business accounts. 

If you want to use accounting software (like Sage or Xero), you’ll need to connect it to a business account. 

The same goes for payroll management software, integrations with pension providers, or point of sale systems. They all need a business account. 

 

9) Building a relationship with financial institutions 

We hope your business will have a long and happy lifespan. If it does, then you’ll likely need a variety of financial services and products in the future. 

Building a relationship with a bank can make all of those future situations easier to navigate. Some banks even offer exclusive products or rates to existing customers. 

And if, like we do, your bank offers each customer a relationship manager, you’ll be able to build a close personal relationship, too. Once that’s established, your bank can work proactively for you and help you make the most of opportunities as they come along. 

 

10) Valuable and exclusive features 

Lots of banks (especially new, challenger banks) offer features like tax estimations, invoice templates and cashback debit or credit cards. These can all save you stress, time and money. 

Without an account, though, you can’t use these added extras. 

Do you need a business bank account?

If your business is incorporated as a limited company: yes, you need a business bank account. Limited companies are considered “legally separate from the people who run [them]” and “[have] separate finances from [their] personal ones”. 

If you’re operating as a sole trader: no, you don’t legally need a business bank account. There are risks involved in using a personal current account for your business, though.

Source

So, if you use your personal current account for your business, you risk breaking your bank’s rules. Plus, you’ll be missing out on all the benefits of opening a business bank account that we listed above!

How to choose the right business bank account

The right business bank account can help you feel empowered, hopeful and supported. The wrong one can leave you feeling deflated or frustrated. 

Right and wrong look different for each business, though. To find the best bank account for you, you’ll need to think about what you need from your bank. 

If you take a lot of cash payments, you might prefer a bank that doesn’t charge for cash deposits and has a local branch. If you have lots of international customers, you might want a bank that offers free or low-cost international payments. 

Why open a Business Rewards Account with Allica?

If you’ve been in business for a year and typically keep a balance above £50,000 in your bank account, then our Business Rewards Account might be a good fit for you! 

We’ve built this account especially for established businesses in the UK with 5-250 employees. It’s got: 

• No monthly account fees, plus free BACS and Faster Payments 

• A linked Savings Pot, offering up to 4.58% AER* on your instant access savings 

• Up to 1.5% cashback on all eligible debit card transactions** 

• A dedicated relationship manager who knows you, your business and goals 

We’ve taken the best of business banking how it used to be and made it faster, simpler, and more rewarding.  

Get all the details about our business current account. 

* Rate includes standard rate of 3.58% AER (minimum balance applies) plus a 0.5% boost each month if you make 15 bank transfers out of the account in the previous month, and a 0.5% boost for six months if you complete a switch with CASS. Rates correct as of 11th February 2025. ‘AER’ stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year. Subject to eligibility – see Savings Pot Key Product Information for more details. 

** Cashback is variable based on eligibility and spend. See a full list of limits and fees here. 

 

A lot of upside, not a lot of effort 

Opening a business bank account can be quick, easy and rewarding. In some cases, it’s a legal obligation. Still, even when it isn’t legally required, the benefits can be huge. 

There are plenty of options - from the oldest banks in Britain to new and exciting challenger banks. The right choice for one business is wrong for another, so you’ll have to do your own research on which one is the best fit for you. 

If you want to know more about what Allica Bank can offer your business, find your local relationship manager to start the conversation. 

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Links were live and information was correct at the time of writing the article. 

Disclaimer: This is information – not financial advice or recommendation 

The content and materials featured in this article are for your information and education only, and are not intended to take into consideration any particular recipients’ financial situation. The product details and interest rates referred to are correct at the time of writing. 

The information does not constitute financial advice or recommendation and should not be considered as such. Allica Bank will not accept any liability for any loss, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.