The headline "free banking" offer is rarely the cheapest account once a year of fees lands. Two accounts that look identical on the front page can be £200 apart by the time you've paid for transactions, cash handling and the odd CHAPS payment. If you're a sole trader, run a limited company, or sell online, this guide breaks down what a UK business bank account actually costs — and the levers that bring the bill down.
All the figures below are typical market ranges to help you sense-check quotes. They are illustrative, not pulled from any single named bank, and pricing changes often, so always confirm the current tariff before you open an account.
Why business banking isn't free (and why personal accounts won't do)
Personal current accounts are mostly free because banks make money lending your balance and cross-selling. Business accounts carry more compliance cost, more risk checks, and far more transaction volume, so most charge for the privilege. Using a personal account for a limited company is also a non-starter — the company is a separate legal person and HMRC and your accountant expect a clean, dedicated trail. Even sole traders, who legally can use a personal account, usually find a business account makes bank reconciliation and bookkeeping far simpler.
The main fee types, explained
Almost every business tariff is built from the same building blocks. Knowing them lets you compare like for like. The table below summarises the typical UK market ranges — illustrative figures to sense-check a quote against, not the tariff of any single bank:
| Fee type | Typical UK range | Who it hits hardest |
|---|---|---|
| Monthly account fee | £0 to ~£12 per month | Everyone after any free period ends |
| Per-transaction (electronic) | 20p to 40p per item | High-volume ecommerce sellers |
| Cash deposit handling | 0.5% to 0.8% of value | Cash-heavy trades (cafés, retail) |
| Cheque handling | 20p to 50p per cheque | Businesses still paid by cheque |
| CHAPS (same-day) | £15 to £30 per transfer | Large or urgent supplier payments |
| International / FX margin | 2% to 4% spread + £10 to £25 flat | Sellers receiving overseas payouts |
| Arranged overdraft | ~10% to 15% EAR + ~1% to 2% fee | Anyone using it as working capital |
Monthly account fees
A flat standing charge for having the account open. Typical range: £0 to around £12 a month for a standard small-business account, and more for accounts bundled with extras. App-only challengers often sit at the low end or offer a free tier; high-street banks more commonly charge a monthly fee after any introductory period.
Per-transaction charges
This is where costs quietly stack up. Many high-street accounts charge per payment in and out — typically 20p to 40p per electronic transaction, sometimes with a small bundle of free items included. A high-volume ecommerce seller processing hundreds of payments a month can pay more here than in monthly fees.
Cash and cheque handling
Paying in or withdrawing cash usually costs a percentage of the value — commonly 0.5% to 0.8% of cash deposited, sometimes with a minimum charge — plus a flat fee per cheque (often 20p to 50p). If your business is largely cashless this barely matters; if you bank takings daily it can dominate the bill.
Faster Payments, CHAPS and BACS
Standard Faster Payments are often free or a few pence, but same-day CHAPS transfers typically cost £15 to £30 each — worth knowing if you ever pay a large supplier or property deposit at speed. BACS payments are usually cheap or free.
International payments and FX
Sending or receiving money in another currency attracts both a fixed fee and a margin on the exchange rate. The margin is the part people miss: a 2% to 4% spread above the mid-market rate is common at traditional banks, on top of a flat fee that might be £10 to £25 per international payment. For ecommerce sellers receiving overseas marketplace payouts, FX margin can be the single biggest hidden cost.
Card payments and acquiring
If you take customer card payments, the merchant-acquiring fee is separate from your bank account but part of total cost — commonly 1.5% to 2.5% plus a few pence per transaction for online sales. Issued business debit and credit cards may also carry non-sterling transaction fees abroad.
Overdraft and borrowing costs
Arranged overdrafts carry an interest rate (often a representative 10% to 15% EAR or higher for small businesses) plus sometimes an arrangement fee of around 1% to 2% of the limit. Unarranged overdraft fees are steeper still. Treat the overdraft as emergency liquidity, not working capital.
Free banking introductory periods — and why they end
Most "free business banking" offers run for a fixed window — commonly 12 to 30 months — and then roll onto the bank's standard tariff. The offer is a customer-acquisition cost: switching business accounts is a hassle, so the bank bets you'll stay once the free period ends. Diarise the end date the day you open the account. When it lands, re-run the comparison below rather than drifting onto full-price fees by inertia.
App-only vs high-street: the real trade-offs
App-only challengers usually win on monthly fees and headline transaction costs, and they tend to have the slickest tools for invoicing, categorisation and feeds into your accounting software. The trade-offs are real, though:
- Cash handling — depositing physical cash is often awkward or expensive with app-only banks, and a deal-breaker for cash-heavy trades.
- Lending and overdrafts — high-street banks generally offer broader credit facilities and relationship lending.
- Branch access and human support — if you value walking into a branch or a named manager, the high street still leads.
- FCA protection — check whether deposits sit under FSCS protection or in a safeguarded e-money structure; the protections differ.
There's no universal winner. A cashless online seller and a high-street café will reach opposite conclusions from the same fee table.
Compare on total cost of ownership, not headline price
The only number that matters is what you'll actually pay over a year, given your volumes. To work it out, estimate your monthly counts of payments in, payments out, cash deposits, cheques, CHAPS and international transfers, then price each against the tariff. A "£0 monthly fee" account with 30p per transaction can easily cost more than a "£8 a month" account with free transactions once you cross a few hundred payments. The exercise mirrors how you'd track business expenses accurately — you measure the real activity, not the brochure.
Worked example: a year of fees for a small ecommerce seller
Take an online seller doing 250 transactions a month — roughly 200 sales settlements and payouts in, plus 50 supplier and expense payments out. They bank no cash, write no cheques, make one CHAPS payment a quarter, and receive an overseas marketplace payout once a month worth about £2,000.
On an account that has rolled off its free period, with a flat monthly fee and per-transaction pricing, a typical illustrative year might look like this:
- Monthly account fee: £8 × 12 = £96
- Transaction charges: 250 × 12 = 3,000 transactions at 25p = £750
- CHAPS payments: 4 × £20 = £80
- International FX: 12 payouts of £2,000, with a ~3% margin = £60 each = £720
- Total illustrative annual cost: ≈ £1,646
That's before any merchant-acquiring fees on card sales. The eye-opener is usually the transaction line and the FX line — together about £1,470 of the £1,646. Move to an account with bundled free transactions and a tighter FX margin, and the same business might pay closer to £400 to £600 a year. The monthly fee, the bit most people fixate on, is the smallest line. For more on choosing an account suited to online selling, see our guide to the best business bank account for UK ecommerce.
Practical ways to cut your fees
- Match the account to your volume. Low transaction count? Pay-as-you-go pricing wins. High volume? A bundled monthly fee usually beats it.
- Cut FX margin. Use a multi-currency or specialist FX provider for overseas payouts and conversions instead of converting through a high-street bank at a 3%+ spread.
- Avoid CHAPS when you can. Faster Payments now cover most large transfers; reserve CHAPS for genuine deadlines.
- Go cashless where practical. Cash-handling percentages add up fast.
- Don't live in the overdraft. Arrangement fees and interest dwarf account charges; finance working capital properly instead.
- Separate spending from the current account. A dedicated business credit card for expenses can centralise purchases, ease reconciliation and sometimes earn cashback that offsets fees.
- Review annually — especially when an introductory free period ends.
Keeping records straight whatever account you choose
Whichever bank you pick, a clean account makes everything downstream easier — VAT returns, year-end accounts and, from 6 April 2026, Making Tax Digital for Income Tax for sole traders and landlords with qualifying income over £50,000. Keeping business and personal money rigorously separate is the single biggest favour you can do your future self and your accountant. A tidy bank feed also makes reconciling marketplace payouts far less painful.
Frequently asked questions
Do sole traders legally need a separate business bank account?
No. A sole trader is not a separate legal entity, so you can run your business through a personal account. In practice a dedicated business account makes bookkeeping, VAT and Self Assessment far cleaner, and many personal-account terms forbid business use. A limited company, by contrast, must use its own account because the company is a separate legal person.
What's the most overlooked business bank account fee?
The foreign-exchange margin. The flat international payment fee is visible, but the 2% to 4% spread added to the exchange rate is buried in the rate itself, so many sellers never notice they're paying it. For anyone receiving overseas payouts regularly, FX margin is often the single largest cost in the account.
Why do free business banking offers end?
Free periods, usually 12 to 30 months, are a customer-acquisition cost. Switching accounts is enough hassle that banks expect most customers to stay once the offer rolls onto the standard tariff. Note the end date when you open the account and re-compare on total cost of ownership before you drift onto full-price fees.
How should I compare business bank accounts?
On total cost of ownership for your actual volumes, not the headline monthly fee. Estimate your monthly counts of payments in and out, cash deposits, cheques, CHAPS and international transfers, then price each against the tariff over a full year. A zero-monthly-fee account can easily cost more than a paid one once per-transaction charges are included.
