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Running a company is demanding and making space for anything beyond the daily to-do list can be tricky, but when it comes to choosing a savings account there’s a good reason to make the time: it can mean extra money for your business.
Thinking about savings can often take a backseat, but they can often make business challenges easier to overcome and better equip you to take advantage of opportunities.
In this article we’ll cover how to choose the savings account your business needs, the information you’ll need for an application and the key benefits. Your research will pay you back many times over – with the right account, your business can earn a significant return on its spare cash.
Contents
Contents
Contents
What is a business savings account and why do you need one?
A business savings account is a type of bank account that pays interest on your balance.
For example, £10,000 in an account that pays 5.00% AER* would be worth £10,500 one year later.
Savings accounts are less flexible than current accounts and can’t be used for everyday banking. They exist separately from your current account and can even be with a different bank.
You need a savings account if you want to earn a return on your spare cash or if you want to keep money separate from your operating expenses. They’re a great way to get your money working for you.
You could use a savings account to store your general cash reserves, budgets for future projects, or money put aside for your tax bill.
How to open a business savings account online step-by-step
Every bank has its own process and we can only speak accurately about our own savings accounts.
For the sake of making this explanation clear and easy-to-follow, we’ll use our 12-month fixed term savings account as the example whenever we need to reference specifics.
1) Research and choose a bank
You’re not short on options when it comes to savings accounts, so you’ll need to do your research to find the best possible savings account for your situation.
Some business owners like to stick with the bank where they have a current account, others prefer streamlined digital banks and some search solely for the highest rates. Work out what you need most from your savings account, then use that information to narrow down your search.
When you’re comparing specific accounts, you might want to consider:
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Interest rates: this is the big one, as it determines the returns you’ll earn on your deposit
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Withdrawal limits: some accounts only allow a set number of withdrawals in a year
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Terms and notice periods: some accounts lock your money away for a period of time to guarantee the interest rate
2) Understand eligibility criteria
Each bank has its own way of doing things, but almost all of them will have a set of criteria that determine who can and can’t open accounts.
You’ll need to check for criteria like:
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Being based in the UK
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Minimum and/or maximum deposits
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Accounts exclusive to existing customers
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Rates exclusive to new customers
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Age of business (usually required to be incorporated over one year ago)
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Whether only company directors and secretaries can open an account
3) Gather required documents
Once you’ve chosen your bank, you’ll need to get ready to submit your application. To do that, you’ll need to get your paperwork organised.
For our 12 month fixed rate account, we need the following:
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Business details, including address and company number
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Business activity details, including industry and turnover
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Proof of identity and address for two directors, shareholders or persons of significant control in the company
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Details of the account from which you'll be paying money into your savings account
4) Fill out an online application
With your account chosen and your paperwork ready, you’re ready to start your application.
It’s rare to find an account that doesn’t have an online application form. This can be a dealbreaker for some business owners, as they don’t have the time to spend time travelling to a branch to make an application.
Follow the instructions in the application form and contact the bank if you run into any issues.
5) Review and submit
This step is simple: you just need to make sure the information you’ve provided is correct. Dot your Is and cross your Ts, and make sure there aren’t any typos or old addresses that have slipped through.
6) Verification and approval
Every bank is obliged to check the identity of new customers, for the sake of anti-money laundering. The process is usually called Know Your Customer (KYC) checks.
The bank will verify your business, as well as the identity of the applicant(s). We have to be sure that you are who you say you are and that you have the right to open the account. We also need to know that nobody in the business is disqualified from directorship or convicted of financial crimes.
It’s possible that you’ll be asked to provide some more evidence, but this is a normal part of the process and shouldn’t necessarily mean your application is at risk.
Once you pass those checks, you’ll be ready for the next step.
7) Fund your account
To get your account up and running, you’ll need to make a deposit from your nominated account.
Your bank might have asked you to estimate your initial deposit in the application process. Either way, your deposit will need to be in line with the minimum or maximum limits set out in the account terms.
Key benefits of a business savings account
Saving is never a bad idea, but with the higher interest rates available in the last couple of years, it now pays the most it has since the mid noughties.
1) Making your money work for you
Rather than sitting in your current account, keeping your cash reserves in a savings account means your money is earning you more money (in the shape of interest).
2) Keeping things separate
If you’re saving for a particular reason (like tax or equipment purchases), it can be useful to have savings accounts for each goal. That way, your tax savings can’t get mixed up with operating expenses and April 5th will stay stress-free.
3) More financial protection
If your current account balance and savings are over £85,000, some of your money could be at risk if your bank fails. This is because the Financial Services Compensation Scheme (FSCS) only guarantees deposits up to £85,000 per bank – not per account.
If you open a savings account with a second bank, you’ll have another £85,000 protected by FSCS. For a quick explainer, check this example:
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£100,000 with Bank One = £85,000 guaranteed by FSCS
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£100,000 split equally between Bank One and Bank Two = £100,000 guaranteed by FSCS
4) Funding future projects
If your savings balance is high enough, you could plan to use the interest you earn to fund a future plan without having to cut costs elsewhere. That could be paying for an internship, buying new equipment or covering a big team Christmas party.
Why choose Allica for your business savings account?
As the bank built for Britain’s SMEs, you might not be surprised to hear we offer a range of savings accounts that offer a lot to businesses.
Options for all savers
At the time of writing, we’ve got five dedicated savings accounts you can choose from:
Whether you need instant access to your funds or are able to leave it locked away for a full year, you can get it with Allica.
Leading interest rates
You could earn as much as 5.01% AER* (variable) with an Allica savings account (that’d be with our 180-day notice account).
Our Great British Savings Squeeze campaign has put more focus on the huge gap between challenger banks and high street incumbents. Comparing instant access accounts, the best rate offered by challengers in October 2024 is 2.98% AER* higher than the average from the big six banks. Allica’s instant access account is 2.94% AER* higher.
Quick, efficient and purpose-built
We built Allica from the ground up before launching to the public in March 2020. Unlike the big banks, we aren’t tied down with clunky technology that was made in the 1990s. We move quickly and have systems that are fit for the modern way of working, specialising in helping established businesses.
A simple process with a great end result
If we’ve done our job in this article, you should feel a lot more confident about opening and using savings accounts for your business. The process is simple and could be one of the best returns on your time you’ll ever find. Spending half an hour filling out an application could earn your business tens of thousands of pounds in a year.
If there’s one thing to take away from this article, apart from a better understanding of the process, it’s this: you’ve got a lot of choices and can afford to be selective. Before you start shopping around, think about what matters most – is it the interest rate? The ease of online banking? Something else?
Once you know what you want and need, you’ll be ready to make a move and start getting a return on your hard-earned cash.
Links were live and information was correct at the time of publishing.
*'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.
Disclaimer: This is information – not financial advice or recommendation
The content and materials featured in 'How to open a business savings account online in the UK' 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.
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