By: Money Navigator Research Team
Last Reviewed: 07/01/2026
FACT CHECKED
Quick Summary
In the UK, whether you “need” a business bank account depends mainly on your legal structure.
If you run a limited company, GOV.UK states the company’s banking must be separate from your personal banking, and says the simplest way to keep finances separate is to open a business bank account.
If you are a sole trader, HMRC expects you to keep proper records of business income and expenses (including evidence such as bank statements), but a separate “business account” is not generally a legal requirement.
If you use a “business account” from a payment/e-money firm, it can function like a bank account day-to-day, but the protection model differs: the FCA says funds held by payment and e-money firms are not directly protected by the FSCS and must instead be safeguarded (with rule changes effective 7 May 2026).
This article is informational only and not financial advice.
What counts as a “business bank account” in the UK?
A “business bank account” usually means a current account designed for business use, with onboarding that verifies the business and the people who control it, and features that support trading (cards, transfers, sometimes cash handling, user permissions, integrations).
However, some products marketed as business accounts are provided by payment institutions / e-money institutions rather than UK-authorised banks. They may still look and feel like bank accounts, but how customer funds are protected differs (more on that below).
When you usually need a business bank account (by business type)
Limited company: banking must be separate
GOV.UK is explicit that there must be a clear division between company finances and those of owners/directors, and states: “your company’s banking must be separate from your personal banking”, adding that opening a business bank account is the simplest way to do it.
In practical terms, that means many limited companies treat a dedicated business account in the company name as part of “basic set-up”, because it supports keeping a clear audit trail of company money.
Sole trader: not generally required, but records still matter
For sole traders, the key compliance requirement is record keeping for Self Assessment: you must keep records of business income and expenses, and GOV.UK lists examples of proof, including bank statements and invoices.
So “need” is usually less about law and more about whether your banking arrangements let you keep clean records and meet any provider terms (for example, some personal current accounts restrict business use).
Partnerships: rules vary by structure
A general partnership is not the same as a limited company. GOV.UK focuses on registering the partnership with HMRC and keeping records, and notes there are different rules for LLPs and limited partnerships.
In practice, banks commonly ask for documentation and identity checks for all relevant partners/signatories when opening partnership accounts, which can make a dedicated account the “default” approach for many partnerships even when not strictly mandated by statute.
LLPs: separate legal personality (often treated like “must-have”)
LLPs have a separate legal personality (similar to a company) and have annual filing requirements at Companies House.
Because of that separation and the way banks onboard LLPs, LLPs are commonly expected to operate through an account held in the LLP’s name (especially where clients, contracts, and accounting records need a clear entity boundary).
The most common “practical must-haves” (even when a sole trader isn’t legally required)
Even if you’re a sole trader, you may find a business account becomes effectively required because of one or more of these constraints:
Your bank’s terms: GOV.UK explicitly says to check with your bank which type of account you can use for business transactions.
Payments and admin workflows: some providers, platforms, or clients ask for bank details that match a business name, or require clearer separation for reconciliation.
Multiple users and permissions: if more than one person needs to access funds, role-based access is often part of business banking products rather than personal ones.
Accounting and audit trail: separating business income/expenses can reduce ambiguity when producing records (especially if HMRC queries records during a compliance check).
If you’re deciding between personal and business banking in day-to-day use (fees, features, limitations), see:
summary table (scenario > outcome > practical impact)
| Scenario | Do you “need” a business bank account? | Practical impact if you don’t |
|---|---|---|
| You run a UK limited company | Typically yes: GOV.UK says company banking must be separate from personal banking | Harder to evidence separation of company vs personal money; admin friction with accounting records |
| You are a sole trader with straightforward trading | Not generally a legal requirement; records must be kept for Self Assessment | You still need clear records; mixing transactions can make evidence gathering harder |
| You operate as an LLP | Often expected because the LLP is a separate legal person | Identity/ownership checks can involve multiple members; clarity of entity boundary matters |
| Your personal bank terms restrict business use | You may effectively need a business account | Continued business use may breach terms (risk of restrictions or forced changes by the bank) |
| You choose a payment/e-money “business account” | Possible, but protection model differs | FCA notes no direct FSCS protection; safeguarding applies and may involve delays if a firm fails |
Bank vs e-money “business accounts”: why protections can differ
If your provider is a UK-authorised bank, deposits may be eligible for FSCS protection up to the current limit (the FSCS confirms the deposit protection limit rose to £120,000 from 1 December 2025).
If your provider is a payment institution or e-money institution, the FCA says funds held by payment and e-money firms are not directly protected by the FSCS; firms must safeguard customer funds instead, and the FCA has set out safeguarding rule changes that come into effect 7 May 2026.
For a deeper explainer of what this can mean in practice, see:
What you’ll typically need to open one (documents and timelines)
Document requests vary by provider and by business type, but most onboarding includes ID/address checks and evidence of the business structure. If you want a practical pack-list, see:
If you’re trying to plan admin time, see:
Common differences that affect “do I need one?”
| Factor | Using a personal account for business activity | Using a business account |
|---|---|---|
| Provider terms | Some personal accounts restrict business use; GOV.UK says check which account you can use | Designed for business use and business onboarding |
| Record clarity | Can work, but mixed personal spending can muddy the audit trail for Self Assessment evidence | Often cleaner separation of trading activity |
| Multiple users | Usually not designed for team permissions | Business products often support multiple users/roles |
| Entity separation | Limited company banking must be separate from personal banking | Supports separation of company money from personal money |
| Protection model | Depends on provider (bank vs e-money) | Depends on provider: bank deposits may be FSCS-eligible; e-money uses safeguarding |
Compare Business Bank Accounts
To compare providers and account types, start here: Business bank accounts. For cost and onboarding context, these guides are often useful alongside comparisons:
Provider reading (reviews/comparisons):
Frequently Asked Questions
GOV.UK states there must be a clear division between company finances and those of owners/directors, and gives the example that the company’s banking must be separate from personal banking. It also says the simplest way to keep finances separate is to open a business bank account.
That means the “need” for a business account is usually framed as a practical requirement to meet the separation standard, rather than a single line that says “you must open product X at bank Y”. Banks and accountants may describe it as “must-have” because it is the cleanest way to evidence separation of company money.
For sole traders, the core requirement is to keep records for Self Assessment: GOV.UK says you must keep records of business income and expenses, and gives examples of proof such as bank statements and sales invoices.
So a sole trader may be able to trade without a dedicated business account, but the practical question becomes whether the setup still allows clear, readable records and whether the bank account terms permit business transactions.
GOV.UK’s position is that the company’s banking must be separate from personal banking, because the company is a separate legal entity.
In real life, “temporary” arrangements can arise during set-up, but they can create messy accounting entries and blur the separation that the GOV.UK guidance expects to see.
Where funds move between personal and company accounts, those movements typically need careful recording as director-related transactions in the company records.
GOV.UK sets out that partnerships must register with HMRC and keep business records, and highlights that LLPs have different rules from general partnerships.
LLPs have separate legal personality and filing requirements, which often makes an account in the LLP’s name the expected route in practice. For general partnerships, “need” is frequently driven by banking onboarding (multiple partners to verify) and the desire for a clear partnership audit trail.
It can mean you’re not blocked by account terms, but “need” still depends on your legal structure and operational requirements. GOV.UK explicitly says to check with your bank which type of account you can use for business transactions.
Even where terms allow it, you still need to keep appropriate records (and evidence) for tax purposes. If personal spending and trading income share one account, producing clean evidence can take more work because the supporting proof is mixed.
Some do, some don’t, and requirements can depend on sector and risk policies. It’s common for organisations to prefer bank details that align with a business name, or to request additional verification when the payer/payee name doesn’t match expectations.
This isn’t usually about law; it’s about operational checks, fraud prevention, and reconciliation. If you’re seeing repeated requests for clarification, it can be a sign that a clearer “business identity” banking setup reduces admin friction – but the exact requirement is platform-by-platform.
Not necessarily. The FCA states funds held by payment and e-money firms are not directly protected by the FSCS; instead, firms must safeguard funds, and the FCA has introduced safeguarding rule changes taking effect on 7 May 2026.
By contrast, the FSCS says the deposit protection limit for eligible deposits at UK-authorised banks, building societies and credit unions rose to £120,000 from 1 December 2025. The practical difference is not about day-to-day app features; it’s about the protection model if a firm fails.
It depends on the provider and the product. Some applications involve checks on individuals connected to the business (especially where there’s limited trading history or where credit features exist), while other accounts are opened without the same type of credit assessment.
If you want the mechanics and common variations, see:
Many businesses do operate multiple accounts (for example, separating tax reserves, card settlement, or different trading channels), but what you can open depends on provider policies and the business’s ownership/control structure.
If you’re exploring that setup, see:
The key point is that multiple accounts don’t remove record-keeping duties; they just change how you organise the flow of funds.
Most providers will want enough information to verify:
- (1) the people involved and
- (2) the business structure
The specifics vary by legal form and by bank, but most applications ask for ID/address checks and evidence of the entity.
For a practical checklist by business type, see:
- Documents to open a business bank account
- If your application is slowed down by follow-up questions, why applications get delayed explains common triggers.
The real constraint behind “Do I need a business bank account?” is not branding – it’s traceability and separation.
For limited companies (and often LLPs), the banking setup becomes part of demonstrating that the entity’s money is not the same as a director’s or member’s money. GOV.UK’s framing (“company banking must be separate”) turns the business bank account into a practical compliance tool for keeping a clean boundary.
For sole traders, the “need” question is usually driven by bank terms, operational workflows, and record evidence: GOV.UK focuses on keeping business records and proof such as bank statements and invoices, which still has to work even if one account is used for mixed activity.
Sources & References
GOV.UK guidance on company and accounting records (separating company banking)
GOV.UK guidance on self-employed business records (what to keep)
FCA press release on payment safeguarding rule changes (and FSCS not directly applying)
FCA “proposed new rules” explainer on payments/e-money safeguarding and FSCS
FSCS deposit protection limit increase to £120,000 from 1 December 2025
Bank of England explainer on FSCS and the £120,000 limit change
UK government guidance: legal forms for business (LLPs as separate legal persons)