How many bank accounts can a UK business have?

Ever wondered whether a business can have two bank accounts? Three, four, maybe more?

The very short answer is: yes, it can. The full answer has a few more specifics to explain. As with most questions around business banking, the answers aren’t black or white, but somewhere in the grey area between them.

This article goes into the particulars of opening and operating multiple bank accounts – from why some businesses do it and the benefits they see, to the trapdoors and issues you might face.

You’ll see quotes from Gareth Anderson, our Head of Business Management, throughout the piece. Gareth’s got a lot of valuable experience in business banking, so we wanted to share his insights with you.

 

Can a business have multiple bank accounts?

Yes, businesses can have multiple bank accounts.

There’s no law that limits the number of bank accounts a company can hold. The only legal restriction regarding business bank accounts is that limited companies cannot use a personal (sometimes called a retail or a consumer) current account.

You can hold current accounts with multiple banks as well. You don’t just have to stick with one bank.

You’ll need to pass the application process for each account involved, but there’s nothing to stop you having more than one business account.

 

How many bank accounts does a business need?

Every business is different – some might be fine with one bank account. Others might be operating with perfect efficiency with half a dozen current accounts. Remember the grey areas we mentioned at the start of the article? This is one of them.

It’s not a perfect rule, but as a business scales its trade and operations, the more likely it is to benefit from having multiple bank accounts.

“Having multiple accounts may be part of a deliberate strategy to better segregate funds and make saving, budgeting and managing cashflow easier. Businesses that trade in multiple currencies may elect to have multiple currency accounts to mitigate against currency exchange translation risk and simplifying accounting.”

As well as the reasons Gareth listed above, businesses might also operate multiple current accounts to:

• Safeguard their deposits

• Make use of beneficial features or products

• Separate revenue from different products and services

“Rather than be wedded to one bank account, a business owner may seek to operate multiple accounts according to the benefits each one provides.” Let’s look at those benefits in more detail.

 

What are the benefits of having two (or more) business bank accounts?

There are plenty of good reasons to have more than one business bank account. While the specifics depend on your business and its current situation, these benefits are the same no matter where you’re starting from.

Enhanced financial organisation

For some businesses, multiple bank accounts are a means of separating funds for different purposes. Dividing up cash into separate accounts means they can be sure each expense is fully accounted for.

You could open individual accounts for:

• Running payroll

• Holding future tax payments

• Payments to creditors and suppliers

Each of these accounts might offer a relevant, beneficial feature. For example, your creditors and suppliers account might offer free or low-cost transfers. Your future tax payments could be stored in a high interest account.

Improved cashflow management

With a clearer view and separation of your finances, it’s easier to manage cashflow.

If all monies reserved for tax, payroll, and operational expenditure (OpEx) are stored in separate accounts, you’ll be able to see where your business is relative to your future plans. Whether you’re changing plans or sticking with your strategy, you’ll be doing it from an informed position.

Increased fraud protection

Fraudsters get more sophisticated every year. Even experienced business owners can get caught out by today’s financial criminals.

Holding multiple bank accounts can prevent the worst effects of fraud. If your company’s reserves are spread across several banks and a criminal gains access to one of them, you limit the damage they can do.

This isn’t a failsafe and it’s not much comfort if you are the victim of fraud, but multiple accounts can be another safety net around your money.

Bank failure safeguards

“If a UK-authorised bank, building society or credit union fails,” the Financial Services Compensation Scheme will “automatically compensate each eligible company depositor up to £85,000.”

Importantly, that compensation covers all of your accounts with a bank, not each individual account. Consider the following scenarios:

£100,000 balance split equally in two accounts with one bank that has failed.
Compensation: £85,000.

£100,000 divided equally in two accounts with two banks that have failed.
Compensation: £100,000.

If your balance usually sits above £85,000, diversifying your money across multiple banks would protect more of your funds in the event of a collapse.

Tailored banking benefits

Take savings products as an example. If your business has a strong cash position, opening an account with a market-leading interest rate can put your money to work for you.

Allica Bank’s 4.33% AER* (variable) instant access Savings Pot, attached to our Business Rewards Account, is the joint-best on the market at the time of writing. £500,000 saved in that account would earn £21,650 annually – enough to pay almost an entire full-time salary.

 

How to open multiple business bank accounts

While some banks limit how many accounts one business customer can open,there’s no legal reason for a bank to reject you for having an account elsewhere – nor is there even a good reason for them to ask.

If you need more information, check our guide to opening a business bank account.

 

How to manage multiple business bank accounts

For all the advantages they offer, more bank accounts mean more work. If you want to make the most of multiple current accounts, you’ll need a clear strategy.

Here are a few tips and tricks to master your money management.

Set each account's purpose

When you open a new bank account, everybody in your business should be clear on its purpose.

Clarity doesn’t just mean agreeing that your new account is for payroll, it means setting up defined processes for all users.

If a few of your tax savings transfers accidentally end up in your payroll account, you’re going to have a real administrative headache when 5th April comes around.

Categorise your transactions

If you open an account for managing outbound payments, categorisation is essential.

HMRC rates different expenses as deductible and your own records will need to be accurate for your annual accounts.

Not all expenses are created equal, after all. Being able to clearly separate your marketing spend from your energy bills is a non-negotiable

Consider a bank with a dedicated relationship manager

Relationship managers used to be a mainstay of every bank, but many banks have been reducing their numbers, closing branches and directing customers towards general enquiry numbers. You now often can’t count on having somebody in-branch or on the phone who knows your business and can offer valuable advice and support.

Some banks are pushing in the other direction, though. At Allica Bank, every customer has a local relationship manager. Other banks offer relationship management for businesses of a certain size.

Keep track of who has access

Managing access permissions within the business should be a top priority. You’ll undoubtedly be on top of this already, but, as you open more bank accounts, it can be harder to keep track.

Maintaining an up-to-date list of personnel and their permissions, as well as conducting regular reviews, will mitigate security risks. It’s unlikely that an employee will go rogue, but you’d rather not be the unlucky business to which it happened.

 

Legal and tax considerations for multiple business bank accounts

In terms of the legal implications, Gareth is clear. Other than the Companies Act of 2006 requiring businesses to open a business bank account, “there are no specific legal considerations to operating multiple current accounts.”

There is some more nuance to the tax situation, though. “Interest earned on savings and current accounts is paid gross (without tax deducted),” Gareth said. “As a result, the business will need to declare any interest earned as part of its tax returns.”

Also, “if each limited company in a group structure has its own bank account, then tax considerations will apply to each entity. A holding company with multiple subsidiaries may be able to claim some tax relief by offsetting tax losses in one company against the profits of another.”

Gareth was keen to stress that it’s “vital to consult with a qualified accountant or tax advisor before making these decisions.”

 

Why use Allica Bank for your business banking?

We’ve mentioned a few features of the Allica Bank business current account (our Business Rewards Account) throughout this article, like our 4.33% AER* (variable) instant access Savings Pot and relationship managers. If you’re in the market for an additional business bank account, we’d like to put our hat in the ring.

Allica is built to serve Britain’s established SMEs – the businesses that are too small for bespoke corporate accounts but too big for an off-the-shelf product.

Our Business Rewards Account offers:

• No monthly account fees*

• Integrations with Sage and Xero

• 4.33% AER* (variable) instant access Savings Pot

• Fee-free BACS, Faster Payments, and bulk payments

• 1% cashback on monthly spend up to £10,000 and 1.5% above £10,000

• A local relationship manager to support your business in its plans

Apply for a Business Rewards Account or explore it in more detail.

 

More positives than negatives

Businesses can open as many current accounts as they like, but there’ll always be a tipping point from useful to overkill.

If you’re clear about how and why you’ll use additional current accounts, there’s nothing wrong with exploring the market in closer detail.

For some businesses, multiple bank accounts are a safety net. For others, they’re about achieving maximum efficiency and returns on their cash. Whatever your reason for considering it, we’d recommend making a clear plan of action and operation.

And if you’d like to make an Allica Bank Business Rewards Account your next current account, we’d be glad to have you on board.

Apply now for a Business Rewards Account.

 

*Our Business Rewards Account is a current account designed for established businesses who:

- are incorporated for a minimum of 12 months
- keep a balance of £50,000 or more in their account
- or have a loan product with us

See a full list of limits, fees, and industry restrictions here, or our current account key product information, or terms & conditions, or savings pot key product information, or supplemental terms & conditions.

Rate correct as of 1st March 2024. 'AER' stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year. Businesses keeping less than £50,000 in the account may earn a reduced rate of interest and may incur fees.