TL;DR
- Limited companies are legally required to hold a separate business bank account.
- Many banks offer free business banking for 12-24 months for new startups.
- FCA-authorised banks offer FSCS protection up to 85,000 pounds; e-money institutions do not.
- Key features for startups: online application, Faster Payments, accounting software integration.
- Anti-money laundering checks are mandatory at application - have company formation documents ready.
Last reviewed: May 2026 | Sources: FCA, FSCS, Companies House, HMRC
A business bank account is a separate account held in the name of a business. For limited companies, maintaining a separate business account is a legal requirement under company law. See the companion guide on business savings accounts for where to park surplus cash once your transactional account is set up.
Why startups need a business bank account
For a limited company, all income must be received and all expenditure paid through the company own accounts. HMRC expects business accounts to be separate from personal accounts. Mixing personal and company finances makes corporation tax accounting more complex and risks the accounts being challenged by HMRC.
Free banking for startups
Several UK banks and digital financial institutions offer free business banking for new startups, typically for 12 to 30 months. After the free period, a monthly fee applies - usually 5 to 12.50 pounds per month. Digital-first business banks have competed aggressively on startup accounts, offering fast online account opening, integrated expense management, and accounting software connections.
FCA authorisation versus e-money institutions
Business bank accounts can be provided by FCA-authorised banks (full banking licence) or by e-money institutions (EMIs). The distinction matters because FSCS protection (up to 85,000 pounds per eligible business) applies to deposits at FCA-authorised banks, but not to balances held at EMIs. EMIs are required to safeguard customer funds in segregated accounts, but this is a different regime from FSCS. Always check the FCA register to determine whether a provider holds a banking licence or is registered as an EMI.
RELATED GUIDES: Business Banking and Finance
AML checks and account opening requirements
All banks and EMIs must conduct anti-money laundering checks under the Money Laundering Regulations 2017. For a limited company, the application will typically require: Certificate of Incorporation from Companies House; proof of registered office address; details of all directors; identification and proof of address for all beneficial owners (individuals owning or controlling more than 25% of the company); and details of the nature of the business and anticipated transaction volumes.
Key features for startups
- Online or app-based account management from day one
- Faster Payments and CHAPS for same-day domestic and international transfers
- Integration with accounting software (Xero, QuickBooks, FreeAgent)
- Debit card or prepaid card for business expenses
- Real-time transaction notifications
- Ability to add additional users or signatories
- Whether a savings account or higher-rate deposit account is available alongside
Disclaimer: This article is for informational purposes only. It does not constitute financial or legal advice. Account terms, fees, and features change frequently. Verify FCA authorisation and FSCS status before opening an account. Seek professional advice on company structure and tax obligations.
Frequently asked questions
Does a sole trader need a business bank account?
Sole traders are not legally required to hold a separate business account, but doing so separates finances, simplifies self-assessment tax returns, and makes it easier to demonstrate business income and expenditure.
How long does it take to open a business bank account?
Digital business banks and EMIs can open accounts within 24 to 48 hours for straightforward applications. High street banks may take longer due to manual verification processes. Applications involving complex ownership structures or high-risk sectors take longer regardless of provider.
Are deposits in a digital business bank account protected by FSCS?
Only if the provider holds a full banking licence from the PRA and FCA. E-money institutions are not banks and do not offer FSCS protection. Confirm the regulatory status on the FCA register before depositing significant funds.
Can I use a personal bank account for a limited company?
No. A limited company is a separate legal entity. Using a personal account to receive company income or pay company expenses creates accounting and tax complications and is contrary to company law requirements.
What happens to my business bank account if the company is dissolved?
Before dissolution, all company accounts must be closed and funds distributed appropriately. Funds remaining in a business account after dissolution may be treated as bona vacantia and vest in the Crown. The account should be closed as part of the formal dissolution or strike-off process.
How this guide was verified
This article draws on FCA Electronic Money Regulations guidance, FSCS depositor protection factsheets, Companies House incorporation requirements, HMRC guidance on company accounts and tax, and the Money Laundering Regulations 2017. No secondary aggregator sites were used.
