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Going self-employed in 2017? A comparison of the best business accounts

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Written by: Paloma Kubiak
05/12/2016
If you’re planning to start up your own business in 2017, it’s prudent to open a separate business bank account. Here’s a comparison of the best available.

There are an estimated five million self-employed people registered in the UK and the numbers have been largely growing since the early 2000s.

If you’re looking to go it alone in the new year, it’s a sensible idea to open a separate business bank account in addition to your everyday personal banking account.

Mike Cherry, national chairman at the Federation of Small Businesses (FSB), says Business Current Accounts (BCA) are specifically designed to offer a range of services that aren’t available to personal current account holders.

“Your BCA will also help you to separate and protect your personal assets as your business develops. In terms of your compliance responsibilities, HMRC must be able to distinguish between personal and business earnings. A BCA makes this far more straightforward and helps to avoid complexity further down the line.”

You can view the Business Banking Insight page where users rate the services and post reviews offered by lenders.

Andrew Hagger of Moneycomms says the business banking market is “less straightforward” than personal bank accounts though most banks will have a range of accounts to choose from. Some may even offer free banking for a year.

“It depends on the size of your annual turnover, but for most small businesses there are a choice of tariffs,” he says. “If you mainly use online banking and receive electronic payments then these accounts are cheapest – but very expensive for non-electronic transactions.

“If you pay in a lot of cheques and/or cash, this can be very expensive and you may want to see if the bank has a more suitable charging tariff if this is how you pay in most of your business income.”

Comparison of business bank accounts

The table below compares a number of business bank accounts:

business_bank_table-002

Tina Riches, national tax partner at Smith and Williamson, says another advantage of opening a separate business account is that it should make things simpler especially as HMRC moves towards making ‘tax digital’.

“It will be a lot more important going forward when HMRC makes tax digital and we’ve already seen accounting software launch. If you link your business account to the app, it will look at all your transactions, such as a professional subscription direct debit, put it in the right folder which should make things a lot simpler.”

She adds that a credit card for business use may also be worthwhile. Hagger says that with business credit cards, the majority come with an annual fee, typically £30 – £35, but you don’t get any rewards as you do with personal credit cards.

Here’s a comparison of business credit cards by Moneycomms:

  • Barclaycard Business: £32 annual fee, 23.2% APR for purchases
  • HSBC: £32 annual fee, 15.9% APR for purchases
  • Lloyds Bank: £32 annual fee, 22.4% APR for purchases
  • Metro Bank: No annual fee, 13% APR for purchases
  • Santander: £30 annual fee, 23.7% APR for purchases.

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