Choosing a business bank account

May 1, 2023

Written by Greg Hanton. Greg is co-founder of Joy Pilot, No Worries Accounting, No Worries Red Umbrella, and Capital City Accountancy. He has over two decades of experience in providing tax and accounting support to contractors, especially those working in the UK. Greg holds a BE (Hons) in Chemical & Process Engineering from the University of Canterbury and a BSc in Chemistry from the University of Otago. He is also a Chartered Accountant (ACCA), member of AAT, and a Chartered Engineer (IChemE). With a passion for innovation and client-focused solutions, Greg continues to lead the charge in transforming the accounting landscape. See more on LinkedIn.

Updated on: Dec 3, 2023

With there being so many options now for opening a business bank account, we wanted to provide you with a list of all the business bank accounts currently used by our clients. We will also filter those results by accounts opened within the last two years, to give you a good idea of the banks that our clients are currently using to open a new business bank account.

Typically for our new clients as soon as their new limited company has been formed (or they have registered with the HMRC as a sole trader), the next step will be to get a business bank account opened.

A Business Account

Here we are looking at business accounts that have been opened by our contractor clients. Most of our clients work through their own limited company, and we also have a smaller number who work as sole traders. Regardless of the business entity type, and contrary to popular opinion, a separate bank account is not required for your business. You could just use your personal bank account, but we would NEVER advise our clients to do this. It would make your bookkeeping messy and tracking of transactions near impossible.

So please, if you are starting up your own business regardless of whether it’s a limited company or a sole trader, ALWAYS open a separate bank account to handle the transactions for your business.

Most Popular Business Bank Accounts of all time

As one of the few contractor accounting firms in the UK who own and maintain our own cloud accounting software, we are in an ideal position to determine who the most popular business banks are that our clients use. This is because nearly all our clients use Joy Pilot, the accounting software that we have offered for free to clients since 2005. Our clients use Joy Pilot to create their business invoices, record their expenses, track how much tax they currently owe, and a huge range of other tasks that help them keep their accounting transactions up to date and ensure they are keeping on top of their admin.

Included in our Joy Pilot accounting software is a bank reconciliation feature and bank feeds, so we have an accurate record of all the business bank accounts that are held by our clients. Note that we do not steer our clients in a particular direction when it comes to choosing a business bank account, so our data is free of this kind of influence.

The graph below shows the eight most popular banks used by our clients currently. This data covers a huge number of clients, many of whom have been trading for a long time, and so it represents a mixture of traditional banking options that were popular over five years ago, along with some of the newer banks that have become popular with our clients more recently.

Popularity of each bank offering a business bank account across our entire client base.

Because we have historical knowledge of all our clients, we can help you interpret the data presented above.

(1)    HSBC has always been an extremely popular bank with our limited company clients. Several years ago, this bank worked extremely hard to help get our clients set up with a new business current account, and over the years it was always the default “go to” bank for a large number of limited company contractors;

(2)    Metro Bank was also a very popular bank for our client several years ago where the account opening process was straightforward, and clients really liked the “Open seven days a week” that this bank offered (and still do). In recent years though it is fallen out of favour as the new banks such as Starling and Tide attract new clients.

(3)    Barclays, Lloyds, NatWest, and Santander have also been very popular banks for our clients over the years and this is often due to clients having personal bank accounts with these same banks. Several clients still prefer to run their business current accounts through the same bank that they use for personal banking.

(4)    The “Other” bar is still significant and represents 16% of all the banks used by our clients. While there are many banks that are used by a very small number of clients (these tend to be more niche banks where our client may have an existing personal relationship) this “Other” bar also represents the emergence of the new challenger banks such as Monzo, Revolut, and Wise. You will see these banks better represented further below in this article.

Most Popular Business Bank Accounts over the past two years

We’ve looked above at the most popular bank accounts used by our clients going back to when this data became available within our Joy Pilot software (which was from around 2017 onwards). Obviously, things have changed a lot in banking over the past 10 years with the rise of new online challenger banks, and the introduction of open banking. With that in mind we thought it would be interesting to look at the popularity of business banks where the client has started their business (or opened a new bank account) within the last two years.

The graph below represents the data, which uses the exact same data set as the graph above, but only looks at bank accounts that have been added to our Joy Pilot software within the last two years.

New business bank accounts opened by our clients in the past 2 years.

Now you get to see a slightly different trend in the preferred business bank that our clients are now tending to use.

(1)    Even though HSBC could be viewed as the incumbent bank for contractors, it is Starling that is the most preferred bank now by a significant margin. In fact, for every HSBC Bank account opened within the last two years by our clients, three bank accounts were opened with Starling.

(2)    And now you can also see the rise of the new challenger banks with Tide, Wise, Revolut, and Monzo all being on a similar pegging, and where Starling and Tide featured in our first graph, Of the top six banks preferred by our clients, now five of them are of the new challenger bank type.

(3)    Within the “Other” category we see a mixture of other challenger banks, along with the usual traditional banks that are most likely still used by clients where they have an existing personal relationship.

Other Banking information

Opening a business bank account these days is usually very fast, and if you are the sole business owner the process is extremely straightforward. There are still a few things though that we think it’s good to keep abreast of.

Not all challenger banks are actual “banks”. One thing we would say is that while it doesn’t have to be a deal breaker, only banks that are authorised by the Prudential Regulation Authority offer deposit protection. In the event the bank fails, then up to £85,000 is protected by the FSCS. Business accounts through banks not authorised in this way do not have this same deposit guarantee which is run by the financial services compensation scheme (FSCS).

Online banking service quality also varies across banks. Some banks, such as the new challenger banks have a slick online experience through both online banking and via a phone app. Several traditional banks have tried to emulate this (such as “Bo” which survived for 6 months after being pushed “live” by RBS) but it has not been an easy road.

Business finances is another area that you may want to look at if you need to take on some debt for a new project or looking to fund a new asset purchase for example. One name that pops up a few times for our clients is Capital On Tap.

Our Business Banking Summary

The data presented here has come directly from our Joy Pilot software and represents the bank accounts that are used by our clients who operate both as limited company contractors (the majority) and sole traders.

It’s easy to see a distinct shift and the popularity of banks, and while our first graph showed that traditional high street banks were used by most of our clients, it’s easy to see that the new online challenger banks have become much more popular in recent times.

This will be because of things such as (a) availability of a banking app (b) a simple onboarding process, (c) low monthly fees, (d) free card payments and ATM withdrawals both in the UK and abroad (e) and an element of “cool” that the traditional banks cannot create. And although all banks offer online business banking, the user experience is often variable across different banks.

The nice thing about the new challenger banks, along with the introduction of open banking, is that the business bank account owner has better control over their account data, and it’s much easier to change bank accounts if the service, or features being offered, do not meet expectations. In fact, there is even a current account switch service you can use for free.

So, what is the currently the most popular UK business current account for our contractors? Its Starling (a fully regulated UK bank).

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