Free business bank account

Written and fact-checked by Oroni Chowdhury · Published: November 2026 · Last reviewed: November 2026 · Applies to the 2026/27 tax year

Nearly every business account advert promises “free” banking. Then a month with a few cash deposits and extra payments arrives, and a small charge appears anyway. Over a year, the gap between two “free” accounts can run into hundreds of pounds.

This guide looks at the free business bank account question from a tax return point of view. It explains what “free” really covers, compares current fees, works out the yearly cost for four example businesses, and shows how your account choice affects expenses, records and Making Tax Digital.

What Is a Free Business Bank Account?

A free business bank account is one that charges no monthly or annual fee for the basic account. Providers still make money from other services, so the word “free” covers three quite different deals.

What is usually included, and what isn’t

• Usually included: a UK sort code and account number, a debit card, app and online banking, and some or all UK transfers.
• Often charged: paying in cash, CHAPS and international payments, extra cards, and invoicing or accounting add-ons.
• Sometimes missing: overdrafts, branch access, cheque paying-in and multiple users.

Do You Need a Business Account for Your Tax Return?

• Limited companies: the company is a separate legal person, so its money must be kept separate from the director’s personal money. A dedicated business account in the company’s name is the practical way to do that, one of the duties GOV.UK lists for running a limited company.
• Sole traders: the law does not require a separate account, but many banks’ terms forbid business use of a personal account. Our self-employed tax return guide explains the records you need either way.

Why one account makes Self Assessment easier

When every business payment goes through a single account, your bank statement becomes a ready-made record of income and costs. Expenses are less likely to be missed, personal items are less likely to slip in, and you have clear evidence if HMRC ever asks questions. A free business bank account gives you that separation at no monthly cost.

Hidden Costs That Make “Free” Accounts Cost Money

Before comparing providers, list how you actually use your account each month. These are the charges that turn a £0 headline into a real bill.

Free Business Bank Account Fees Compared (November 2026 Snapshot)

The table shows standard £0 plans from five UK providers. It is a factual snapshot, not a recommendation, and Tax Return Accountants receives nothing from any provider. Fees change often, so check the provider’s own page before you open an account.

Snapshot compiled on 7 November 2026. Check each provider’s own fee information before opening: Starling, Zempler, Tide, Monzo, HSBC. Only free plans are shown; most providers also sell paid plans.

Tide protection explained: Tide is not a bank. Tide current accounts provided by ClearBank are covered by the FSCS up to £120,000. Older Tide e-money accounts with sort code 23-69-72, provided by PrePay Technologies, are safeguarded instead and are not FSCS-protected. Your sort code tells you which you have.

When a paid plan is worth it

A free business bank account suits most small businesses, but a paid plan can make sense if you need several team cards, unlimited transfers on a capped account, VAT return filing or multi-currency accounts. Add up what the extras would save in fees and time, and compare that with the monthly price. If the paid features would save less than they cost, stay on the free plan.

What a Free Business Bank Account Really Costs: Four Examples

Using the fees above, here is the yearly cost for four illustrative businesses. They assume UK transfers and Post Office or PayPoint cash deposits only, with no international payments, overdraft or paid extras.

Illustrative calculations based on the fees above, rounded to the nearest pound, and not a forecast of your costs.

HSBC figures use its tariff until 13 December 2026; under the new Post Office rate the market trader would pay about £360 and the limited company about £180. Tide’s £1,000 deposit is charged at 0.99%. The pattern is clear, though, whichever free business bank account you look at: for anyone who handles cash, the cash deposit charge matters far more than the monthly fee.

How a Free Business Bank Account Affects Your Tax Return

Choosing a free business bank account isn’t only a banking decision. It shapes how easily you can prepare an accurate Self Assessment or company tax return.

Bank charges are allowable expenses

GOV.UK’s guidance on legal and financial costs confirms that sole traders can claim fees charged by their bank, overdraft or credit card provider, plus interest on business loans. Loan and overdraft repayments themselves are not allowable. If an account is used for both personal and business purposes, only the business proportion of the charges can be claimed. On the self-employment pages, these costs go with your other financial costs. Our allowable expenses guide lists the rest.

The trouble with mixing personal and business

• Business costs paid from a personal account are easily forgotten, so you pay more tax than you need to.
• Personal spending can slip into the accounts, which overstates expenses.
• If HMRC opens an enquiry, unpicking a mixed account takes time and may cost you fees.

These are among the problems covered in our guide to tax return mistakes for the self-employed.

Records you must keep

Sole traders must keep business records for at least five years after the 31 January Self Assessment deadline for the tax year. Limited companies generally keep records for six years from the end of the financial year. Download statements before you close any account, as access often ends with the account.

VAT-registered businesses

Most bank charges are exempt from VAT, so there is usually no VAT to reclaim on them. Even so, a free business bank account that lets you attach receipts to transactions, or export them to your software, makes VAT returns quicker and reduces the risk of missed input VAT on your other purchases.

MTD for Income Tax and Bank Feeds

Under Making Tax Digital for Income Tax, sole traders and landlords with qualifying income over £50,000 (total gross self-employment and property income before expenses, not profit) must keep digital records and send quarterly updates from 6 April 2026. The threshold falls to £30,000 from April 2027 and £20,000 from April 2028.

• Bank feeds: most MTD software can import transactions automatically from major UK banks. Check that your chosen free business bank account is supported.
• Built-in tools: some banks include basic bookkeeping or MTD features, but advanced features such as VAT filing may be a paid add-on.
• Free plus software: a free account paired with separate MTD software is often the most flexible option.

Not sure whether MTD applies to you? Use our free MTD check.

Sole Trader or Limited Company: Who Can Open Which Account?

Is Your Money Safe? FSCS vs E-Money

The Bank of England confirmed the £120,000 limit. It applies per depositor per authorised bank, so two brands under one licence share one limit.

A sole trader’s personal and business deposits at the same bank are added together under one £120,000 limit. An eligible limited company is a separate depositor, with its own limit apart from the director’s personal accounts, as the FSCS explains for small businesses. E-money safeguarding is not FSCS protection.

Should you keep a separate tax savings account?

Many sole traders open a second account, or a savings pot inside their free business bank account, purely for tax. Moving a set percentage of each payment into it means the 31 January bill and payments on account are covered.

Interest is treated differently by business type. For a sole trader, it is normally personal savings income on the Self Assessment return, where the personal savings allowance may cover some of it. For a limited company, it is part of the company’s taxable income for Corporation Tax.

Opening or Switching Without Losing Records

Opening an account usually needs photo ID, proof of address and, for a company, the Companies House details of directors and owners. This guide to opening a business bank account covers the steps in full.

• Many small businesses can use the Current Account Switch Service, which moves payments and Direct Debits for you. Check eligibility with the new bank.
• Download every statement from the old account before it closes.
• Tell your accountant and update the bank feed in your bookkeeping software, so that no transactions are missed or duplicated during the changeover. Keep the old account open until the final Direct Debits and card payments have cleared.

Mistakes to Avoid

These are the errors that most often turn a free business bank account into a costly one, or cause problems at tax return time.

Free Business Bank Account FAQs

Is a free business bank account really free?

Only the monthly fee is free. Most £0 accounts still charge for some services, such as cash deposits, extra transfers or international payments.

Which free business bank account is best for sole traders?

It depends on how you trade. Sole traders who rarely handle cash usually do best with unlimited free transfers; cash-heavy traders should compare deposit fees first. We don’t recommend a single provider.

Which free business accounts accept cash deposits?

All five in our snapshot accept cash through the Post Office, PayPoint or branches, but each charges a fee per deposit or a percentage.

Can a sole trader use a personal account?

The law allows it, but many banks’ terms don’t, and a separate account makes records and your tax return much easier.

Are bank charges tax-deductible?

Yes. Fees charged on your business account are an allowable expense for sole traders and a deductible cost for companies.

Do free accounts work with MTD software?

Many do through bank feeds, but check that your provider is supported before relying on it.

Are free business accounts FSCS protected?

Accounts with a UK-licensed bank are covered up to £120,000. E-money accounts are safeguarded instead.

Can I pay cash into a free business account?

Usually yes, at the Post Office, PayPoint or a branch, but a fee normally applies per deposit.

What happens when an introductory free period ends?

The standard tariff starts, so diary the end date and compare accounts before it arrives.

Can I have two business accounts?

Yes. Some owners keep one for day-to-day banking and another for tax savings, but all of them must be included in your records.

Do I need bank statements for my tax return?

You don’t send them to HMRC, but they are key records and you must keep them for the required period.

Final Verdict: Choosing a Free Business Bank Account in 2026/27

The right free business bank account is the one that stays cheap for the way you trade. Count your transfers and cash deposits, check the protection, and make sure statements and bank feeds work for your tax return and MTD. Then claim the bank charges you do pay as an expense.