Business insights

As a business owner, the idea of having a business only savings account may not come naturally.

That’s right, savings accounts aren’t just for personal use. Businesses too can have savings accounts set aside to save money for all sorts of purposes. From onboarding new staff, to storing cash reserves for quiet periods, business savings are super important.

Read on as we examine the differences between personal savings and business savings accounts. Learn about the account options and make the ideal choice based on your circumstances.

 

Business vs personal savings account choices

As you’ll probably be aware, the main difference between personal savings and business savings accounts is that the former are to be used for personal finances while the latter are to be used for business purposes.

As such, you may use your personal savings account to save for a holiday or a new kitchen. However, your business account may be used for the receipt of customer payments and management of business bills.

You might not see the need for a separate business savings account, if you’re set up as a freelancer or sole trader. And you might find a single personal savings account works well for the management of income from a side hustle.

However, you should open a business savings account if:

  • Your business has been set up as a Limited Company (through Companies House). This will mean that your personal and business identities are separate, and you can’t use your personal savings account for business expenses.
  • Your business turnover has reached a point where it’s a real challenge to manage your professional and personal transactions within the same account.
  • You want to clearly define your income and outcome for tax purposes.

 

Keeping it personal

Relatively quick and easy to set up, a personal savings account will be the best choice for the management of everyday personal expenses, savings, and investments. In fact, you may simply use an existing account which you held prior to setting up the business.

Depending on your circumstances, it might be best to go with a basic or high interest savings account. Such accounts are also likely to come with tools for expense tracking and budgeting.

As mentioned, there may well come a time when you decide that a personal savings account isn’t sufficient for your professional needs. You might be keen to open a business savings account for access to features such as invoicing and business loan management. The continued mixing of your business and personal finances could also lead to tax complications.

Child and grandparent planting flowers

Being professional

As highlighted in our explanation of business savings, it’s easy to see the sense of opening a separate business savings account when you consider yourself and the business as separate entities. From the setting of increased transaction limits to the offer of business credit, a business savings account is bound to come with a range of features designed to meet your professional needs.

This will make a real difference when it comes to filing your taxes and complying with audits. Allowing for the access of multiple people, a business account will also enable easier access for shareholders and accountants.

We know life as a business owner can be hectic, but applying for a business savings account can be quick and painless. At Aldermore, you can apply online at whatever time or day works for you. We offer simple account management and no management fees or charges either, so you’re sure to ask yourself why you didn’t apply sooner.

With a business savings account, you can completely separate your professional and home life. A business savings account can relieve the stress on your personal credit and limit your liability. This means that any business investment is funded by the company and not your own personal income.

If your business gets into trouble, for any reason, creditors and legal professionals are only able to access the business account and they cannot touch any of your personal accounts, savings, investments, or assets.

It’s easy to think “well, that will never happen to me”, but you may be surprised. Our recent SME Index found that, over the next 12 months, businesses plan on investing in expanding their customer base (42%), reducing costs (34%), and improving their product or service (29%) as a priority. 39% of respondents said these company improvements would be funded from business savings, though over a fifth (21%) plan to use their personal savings.

Other reasons to open a separate business savings account include:

  • Giving customers and suppliers added financial confidence (as they make and receive payments from your business)
  • Greater financial security of personal assets (provided that you’ve registered as a limited company)
  • Optional syncing of accounting software for increased speed and reduced risk of accountancy errors
  • Protection of a business-specific credit score (giving you a better chance of securing the funds needed for growth).

While there are many benefits, you should be aware that opening a separate business savings account might make for an added expense. It’s fairly common for high street banks to charge business account holders upwards of £5 per month. However, Aldermore’s Fixed Rate and Easy Access savings accounts have no management fees or charges.

Of course, with two accounts you’ll also have twice the amount of admin. You’ll need to look after more cards, statements, and passwords. However, this extra organisation will seem well worth it when filing your tax return.

 

Smiling café owner

What are the benefits of opening a business savings account?

Generally, the main advantage of having a business savings account is having the ability to earn interest on leftover capital, which can be used to cover costs such as outstanding debt, taxes, unexpected costs, and business development.

There are additional benefits of choosing Aldermore for your savings*:

  • Easy account opening online at any time or day with as little as £1,000
  • Rated ‘excellent’ by our customers on Trustpilot
  • Award-winning. Recognised by Moneynet and Savings Champion in their 2023 awards, plus Moneycomms 2024 Business Provider of the Year
  • FSCS protected up to £85,000

Ready to learn more? Explore our business savings range.

Are business savings accounts hard to open?

One major issue that businesses feel with opening a business account is the assumed amount of time that it takes to open one.

Provided that you meet the criteria of your bank of choice, opening a business savings account should only really take about half an hour to do. Different banks will have different processes, but all of them will require a set of standard information to be produced prior to opening.

 

Making the right decision

With awareness of the key differences, benefits, and drawbacks you should be better able to decide whether to open a separate business account.

However, it’s worth thinking about your situation, considering any financial goals, lifestyle choices, and spending habits before making your final choice. Factors such as your business status, growth plans, and regulatory requirements might also make a difference.

 

*Terms and conditions apply.

Aldermore business savings accounts