By Nathaniel Dalby on Small Business UK - Advice and Ideas for UK Small Businesses and SMEs
If you’re just starting up your small business, the idea of actually saving money might seem so pie-in-the-sky that it’s not even worth considering. However, saving the spare cash your business generates (no matter how small) can have huge benefits in the long term.
That’s why we’ve collected the best small business savings accounts currently available in the UK. We’ll also cover why you need a business savings account and how you choose the best one for your business.
Continue reading or use the links below to jump to a specific section:
- What are business savings accounts?
- Why do I need a business savings account?
- Can I use a personal savings account for my business?
- The best business savings accounts
- Which account is best for my business?
- Paying tax on a business savings account
What are business savings accounts?
A business savings account is similar to a personal savings account, but used specifically for business. Using these accounts, a business can save any cash spare reserves and accrue interest on them, with different rate types available.
How business savings account work varies on the account and bank, with some requiring an initial deposit or minimum monthly payments. And while some accounts work in the traditional way (where you can apply via phone or in-branch), many are now online or app-only.
We’ll let you know here everything you need to know at a quick glance, so you can judge whether an account works for your business or not.
Why do I need a business savings account?
There’s a number of reasons why you might choose a business savings account, even if the benefits are minimal. The main reason is simple safekeeping; a business savings account gives you a place to store your spare cash in a way that keeps it safe and accessible.
As previously mentioned, you’ll also get the added benefit of earning interest, allowing you to make some more money for your business without having to do anything. This could give you some emergency funds in the event of any unexpected expenses.
Can I use a personal savings account for my business?
Generally, you won’t be able to use a personal savings account for business purposes. That’s because it can make tax reporting complicated and could even raise a problem with HM Revenue & Customs (HMRC).
If your business is running as a limited liability company (Ltd) using a personal account could affect your protection and damage the legal distinction between you and your business.
When running a business of any size, keeping track of your finances and expenses is something you’ll want to keep as simple as possible, and separating your personal and business savings is the best way to do that.
The best business savings accounts
Business savings accounts generally come in one of three categories:
- Easy access
- Fixed rate
- Notice account
We’ve collected the best accounts in each category and an explanation for each one, so you can make a choice based on your business and personal situation.
Easy access
Easy access accounts are just what the name describes: they allow you to access your money at any time. These accounts generally offer a variable interest rate.
| Provider | Account name | Interest rate (AER) | Minimum deposit | Account access |
|---|---|---|---|---|
| Tide | Instant Saver Account | 4.33% | £1 | Online |
| Cynergy Bank | Business Saver | 4.00% | £1 | Online |
| Allica Bank | Easy Access Business Savings Account | 4.01% | £20,000 | Online |
| Virgin Money | Business Access Savings Account | 3.80% | £1 | Online |
| Shawbrook | Easy Access Business Account | 4.01% | £1,000 | Online |
Fixed rate
Fixed rate accounts offer a fixed interest rate, so they won’t fluctuate like a variable rate account, and you’ll always know what your returns are. Keep in mind that fixed rate accounts will usually have a much higher minimum deposit than easy access.
| Provider | Account name | Interest rate | Minimum deposit | Account access |
|---|---|---|---|---|
| Close Brothers | 1 Year Fixed Term Deposit | 5.15% | £100,000 | Online / Post / Phone |
| Virgin Money | 18 Month Business Term Deposit | 4.25% | £5,000 | Online |
| Aldermore | Fixed Rate Business Savings Account (1 year) | 4.51% | £1,000 | Online |
| Cambridge & Counties Bank | Fixed Rate Business Savings Account (1 year) | 4.60% | £10,000 | Online / Post / Phone |
| United Trust Bank | Business 2 Year Bond | 4.75% | £5,000 | Email / Online / Post / Phone |
Notice account
Notice accounts are a mixture of the two others, generally offering variable rates but requiring you to hand in a notice before accessing your money. The higher the notice is, the better the rate will be.
| Provider | Account name | Interest rate | Minimum deposit | Account access |
|---|---|---|---|---|
| United Trust Bank | Business 180 Day Notice Base Rate Tracker | 5.25% | £5,000 | Email / Online / Post |
| Nationwide | Liquidity Manager Notice Account – 95 days | 4.25% | n/a | Online / Phone |
| Lloyds | 95 Day Notice Account | 4.00% | £10,000 | Online / Phone / Email |
| Allica Bank | 180-day Notice Savings Account | 5.01% | £20,000 | Online |
| Virgin Money | Business Online 120 Day Notice Account | 4.85% | £1 | Online |
Which account is best for my business?
This will vary depending on a number of factors, and it’s best that you take stock of how your business operates before committing to an account. If you’re interested in saving, make sure you set saving goals and think about how often you’re planning on accessing your money.
Interest rates should also factor into your decision, with a fixed rate ideal if you’re looking to leave your money to grow, and an easy access account better if you’re planning on accessing your money in the near future.
Paying tax on a business savings account
Paying tax is a part of any business, big or small, and it’s important to understand your obligations.
The rate a small business savings account offers gross earnings, which means you’ll have to declare any interest you’ve accrued when it’s time to submit your tax returns.
This will vary depending on whether you’re a sole trader or a limited company. Sole traders pay tax on any money earned above the standard tax-free personal allowance, while limited companies pay corporation tax on profits, including interest on business savings.
Read more
Small firms £7.5bn poorer due to low savings rates – Figures from Allica Bank found that small firms are £7.5bn worse off, partly because they’re offered lower savings rates than large firms
What are the best business bank accounts in the UK? – Make the right decision about your small business bank account, whether you’re just starting out or you’re more established
Best business bank accounts for sole traders – We’ve rounded up some of the best business bank accounts created with sole traders in mind
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Nathaniel Dalby, Khareem Sudlow
