Business Bank Accounts for Micro Businesses

Your money, set up the right way

Getting the right business bank account is about more than a sort code and a card. It is your hub for payments, record-keeping, and cash flow control. For micro businesses in the UK, the best accounts now blend low or no monthly fees with powerful digital tools, so you can open, manage, and reconcile your finances quickly and confidently. With options offering free banking for the first 12 months, app-first onboarding, and integrations with popular bookkeeping software, you can keep costs low while staying compliant. FSCS protection up to £120,000 per banking group provides an extra layer of reassurance for your business funds.

Who benefits most

This guide is for UK micro businesses, freelancers, sole traders, and early-stage limited companies that want straightforward banking with predictable costs. If you are starting out, scaling gently, or shifting from a personal account to a dedicated business account, the options below can help you choose a setup that supports your day-to-day operations and future growth.

What counts as a good micro business account

A strong micro business account balances affordability with practical features. Many leading UK providers now offer either free banking for an introductory period or permanently low-cost plans, with standard UK payments included. Look for accounts that integrate with Xero, QuickBooks, or FreeAgent, as well as in-app invoicing, receipt capture, and spending categorisation to simplify tax preparation. For peace of mind, confirm FSCS protection and whether the provider sits within a larger banking group, as limits apply per group. Consider eligibility too - some free accounts target sole traders and freelancers, while others require a limited company or LLP with UK-resident directors. Finally, check how you will use the account day to day, including card payments, ATM usage, and any need for cash deposits at the Post Office.

A good test: can you complete your week’s bookkeeping from your phone without chasing paper or exporting spreadsheets?

Getting set up - step by step

Digital onboarding is standard across most UK challenger banks, so you can usually apply in minutes. Be ready with basic details about your business, Companies House information if you are incorporated, proof of ID, and address documentation for all owners or directors. Expect verification checks for KYC and AML compliance. If you handle cash, ensure the provider supports Post Office or branch deposits and know the fees. If you invoice clients, explore accounts with built-in invoicing and payment links to speed up reconciliation. Once open, connect your account to your bookkeeping platform, set up categories for expenses, and switch on receipt capture. If you plan to grow, choose an account that lets you upgrade to paid tiers later for extras like multi-user access or integrated tax tools.

Why these accounts matter for growth

Keeping banking costs low means more cash for stock, marketing, and wages. Accounts with no monthly fee or long free periods reduce overheads at a time when every pound counts. Integrated tools streamline admin, helping you avoid late VAT returns and messy spreadsheets. Clear, app-first interfaces make it easier to track spending patterns and spot issues early. Strong customer support - whether in-app chat or UK phone lines - can resolve glitches quickly. FSCS protection up to £120,000 per banking group safeguards eligible deposits, while clear eligibility rules help set expectations from day one. In short, the right account lets you focus on customers, not bank charges.

Quick comparison at a glance

Standout line: Choose based on your fees today and the features you will actually use tomorrow.

Next steps you can take right now:

• List your must-have features and acceptable fees.
• Check eligibility and FSCS status for your preferred providers.
• Gather ID and business documents before applying.
• Connect your chosen account to your bookkeeping app on day one.

The upsides and trade-offs

Watchpoints before you apply

Read the fee tariff carefully. Free banking can mean standard UK transfers are included but cash deposits, CHAPS payments, or international transfers incur charges. If you sell at markets or take cash, check per-£100 cash deposit fees and any caps. Eligibility matters: some accounts require a UK-registered limited company or LLP and UK-resident directors. Sole traders should confirm they are supported and whether features differ from limited company accounts. FSCS protection has limits per banking group, so larger balances may need spreading across groups to stay within the cap. Finally, think about future needs - multi-user access, accounting integrations, and the ability to upgrade plan tiers without hassle.

Other routes to consider

1. High street multi-product bundles that combine banking with merchant services.
2. Specialist fintechs for international payments if you invoice overseas.
3. All-in-one platforms with bookkeeping built in for single-operator businesses.
4. Credit unions or community banks for local support and advice.
5. Payment service providers with business accounts if you mainly take card payments online.

Common questions, clear answers

Q: Do I need a business account if I am a sole trader? A: It is not a legal requirement, but separating business and personal finances makes bookkeeping and tax preparation clearer and more professional for clients.

Q: Is my money protected? A: Eligible deposits are protected by FSCS up to £120,000 per banking group. Check whether your provider shares a licence with other brands so you understand your total cover.

Q: How quickly can I open an account? A: Many providers offer digital onboarding, and approval can be same day if you have complete documentation. Complex structures or additional checks may take longer.

Q: What fees should I watch for after a free period? A: Monthly account fees, cash deposit charges, international transfer fees, and expedited payment types like CHAPS are common items to review before the free period ends.

Q: Can I switch later without disruption? A: Yes. The Current Account Switch Service for business accounts is supported by many banks. Confirm eligibility and timelines, and schedule the switch outside your busiest trading days.

How Switcha can help

Switcha will connect you with the best options for what you are looking for. We compare fees, features, eligibility, and support to highlight accounts that fit your size and stage. Our guidance is clear and impartial, so you can move forward with confidence and set up banking that works for your business.

Important information

This guide is for general information only and is not financial, legal, or tax advice. Always check eligibility, fees, and FSCS rules with the provider before applying. If you are unsure, consider regulated financial advice.