If you’re just starting your small business, the idea of saving money may seem so absurd that it’s not even worth considering. However, saving the excess money your business generates (no matter how small) can have huge long-term benefits.
That’s why we’ve compiled the best small business savings accounts currently available in the UK. We’ll also cover why you need a business savings account and how to 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 savings accounts for companies
- Which account is best for my business?
- Pay taxes on a business savings account
What are business savings accounts?
A business savings account is similar to a personal savings account, but is used specifically for businesses. By using these accounts, a business can hold additional cash reserves and accumulate interest on them, with different types of rates available.
How business savings accounts work varies by account and bank, and some require an initial deposit or minimum monthly payments. And while some accounts work the traditional way (where you can apply over the phone or in-branch), many are now online or app-only.
Here we’ll tell you 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 are several reasons why you might choose a business savings account, even if the benefits are minimal. The main reason is simple custody; A business savings account gives you a place to store your excess money in a way that keeps it safe and accessible.
As mentioned above, you’ll also get the added benefit of earning interest, allowing you to earn some more money for your business without having to do anything. This could give you some emergency funds in case of unexpected expenses.
Can I use a personal savings account for my business?
Generally, you will not be able to use a personal savings account for business purposes. This is because it can complicate your tax return and could even lead to a problem with HM Revenue & Customs (HMRC).
If your business operates 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 it.
The best savings accounts for companies
Business savings accounts generally fall into one of three categories:
We’ve compiled the best accounts in each category and an explanation for each, so you can choose based on your personal and business situation.
Easy access
Easy access accounts are just what their name describes: they allow you to access your money at any time. These accounts generally offer a variable interest rate.
Fixed interest 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 generally have a much higher minimum deposit than easy access accounts.
notice account
Notice accounts are a combination of the other two and generally offer variable rates but require you to give notice before accessing your money. The longer the notice, the better the rate.
Which account is best for my business?
This will vary depending on a number of factors, and it’s best to take stock of how your business operates before committing to an account. If you’re interested in saving, be sure to set savings goals and think about how often you plan to access your money.
Interest rates should also be a factor in your decision, with a fixed rate ideal if you want to let your money grow, and an easy-access account best if you plan to access your money in the near future.
Pay taxes on a business savings account
Paying taxes is part of any business, large or small, and it is important to understand your obligations.
The rate that a small business savings account offers to gross profits, meaning you’ll have to report any interest you’ve accrued when it comes time to file your tax returns.
This will vary depending on whether you are a sole trader or a limited company. Individual entrepreneurs pay taxes 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
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