What's the best bank account for UK freelancers?
(Updated September 2022)
There’s never been a better time to take a look at your freelance business banking.
The UK in particular is spoilt for choice when it comes to accounts that work the same we do: efficiently, online, often from our phones, leaving one hand free for a cuppa.
When I first got a business bank account, I had to do it in a high street branch, taking in all manner of paperwork, sitting down with a banker who loved to disappear and photo copy things. No more! In some instances you can open a bank account from your phone whilst making a coffee.
For years I was paying banking fees monthly, plus transaction fees, extra fees for over seas payments. I mean, I know my particular bank had a massive stallion to feed, but still. No more! These days some challenger banks have tiny birds as mascots and they’re far less greedy.
A frequent discussion in the Being Freelance Community is which bank freelancers should pick. So, here’s our round up with our various BFF’s views (Being Freelance Friends - you really should join us).
First up - couple of points which are useful to know.
What is FSCS protection?
Something you’ll spot when choosing a bank in the UK. Some accounts are FSCS protected (Financial Services Compensation Scheme). That means if that bank fails, you’re covered up to £85,000.
Do sole traders need a business banking account?
No! In the UK, a sole trader can use a normal current account for their banking. However, it’s a very good idea to keep your ‘business’ and your ‘personal’ banking accounts separate. For the sake of this post, we are just looking at business bank accounts.
What is a challenger bank?
Challenger banks are smaller retail banks set up to lure customers away from the big, established national high street names. Some are totally independent, some are now being created by the old banks to make themselves look hip and down with the kids.
The big point of difference with challenger banks is they focus on their technology offering, are nimble enough to set up accounts super-fast, are geared to link with your accounting software, and help you track invoices, expenses and budgets.
Even better, because they don’t have as many overheads as a high street bank, they can operate for less. Which means lower fees for freelancers.
Bear in mind, however, that not all challenger banks have banking licences or FSCS protection. So while your money’s protected, it may not be as safe as it would be locked away in a traditional bank. If you have a big amount building up (here’s hoping!), it’s worth keeping in mind.
What’s the best BUSINESS bank account for UK freelancers?
Let’s take a look at what’s on offer. (Updated February 2021)
Starling
Starling is a fully licensed online bank, meaning your money’s covered up to £85k by the FSCS.
Its business account has no monthly or transaction fees, offers 24/7 customer support, and integrates with Xero, Quickbooks and FreeAgent. Because Starling’s a licensed bank, it also provides overdrafts and loans.
The only real snag comes if you’re a freelancer who needs to deposit a lot of cash (which isn’t many of us, but could happen) as they charge a 0.3% fee with a minimum £3 charge.
Even the no-fee account has great money management tools. But if you need more, you can add on a Business Toolkit for £7/month. The toolkit enables you to create, send and match invoices, run HMRC tax calculations and tax reports, record VAT and submit VAT returns. So if you don’t have accounting software that might be worth considering.
Starling also offers accounts in Euros (sole traders & Ltd companies) and US Dollars (Ltd companies only) for an extra fee - brilliant if you’re working a lot in those currencies.
Make the most of Starling’s ‘Saving Spaces’ - these are sub pots within your account which make it really easy to set money aside for things like tax or overheads so you know how much money you really have to play with.
What the Being Freelance Community thinks
There are many Starling super-fans in the community. Helen Forster says: “Starling is very easy to set up, has no fees, and their support team is always extremely helpful.” Emma James agrees: “It’s Starling all the way for me. Easy to set up, easy to integrate with accounting software, and their business toolkit really elevates it.”
Zoe East is also team Starling: “I’m Starling 100%! Everything is so easy to access and set up on the app and the 24/7 chat function is so handy for any queries. It links to FreeAgent, has no ridiculous payment limits, gives you instant payment notifications, and to top it off they sent me some socks for being on their beta panel!”
Tide
Tide has swept up 400,000+ customers since it launched in 2015. One of the main reasons it has caught freelancers’ imaginations is because you can set up a business account and have a sort code and account number to start invoicing within minutes of making an application.
While there are no monthly fees, there is a small 20p charge for every transfer in and out of your account. Which could soon add up if you do a lot.
It’s easy to schedule payments and integrates with the main accounting software packages, including Quickbooks, Xero and Sage.
If you want free transfers, plus extra services like phone support and a 24/7 legal helpline, you can switch to a ‘Plus’ account for £9.99 a month.
Tide’s app is packed with useful functions. You can send, pay and track invoices, and upload receipts that automatically match with transactions, making the job of tracking expenses super easy.
Thinking of going from sole trader to Limited company? Remarkably, Tide say they will help you do it, even paying your company registration fee while setting up your business bank account. They also offer ‘virtual office’ addresses.
In the past people might tell you that Tide wasn’t a ‘real bank’ and so your money might not be protected. However that’s no longer the case. Tide accounts are provided by ClearBank and are FSCS guaranteed.
Oh! And if you’re an IPSE member - check out their offers before you sign up. Last we checked (Oct ‘22) you could get £75 cashback when opening an account via them.
What the Being Freelance Community thinks
Chris Evans is one BFF who’s turned to Tide: “Tide was simple to set up and their app is simple too. I like things to be kept simple on that side of things; it links up with my FreeAgent simply and it just works. No fuss, no mess.”
Monzo
Monzo’s business accounts are also popular with freelancers. Like Starling, they’re a fully regulated bank – so governed by all the same rules as high street banks – and offer quick set-up from your mobile.
Monzo’s entry level ‘Lite’ account is fee-free, but doesn’t integrate with any accounting software, so could feel limited for lots of freelancers.
Monzo’s ‘Pro’ account, for £5/month, gives you extra features, such as integration with Xero, FreeAgent and Quickbooks, and simple invoicing. In fact, they also give you a six-month free subscription to Xero and customer offers, such as discounts from popular brands.
A reminder - integrations with accounting software are free with Starling and Tide so it doesn’t feel like something you should be paying for.
Monzo Pro also has the ‘Tax Pot’ function. So you can choose a % of every time you’re paid to be set aside for tax. That's very similar to Starling’s free Saving Space. But it’s cool that it’s specifically a % for tax.
What the Being Freelance Community thinks
BFF Andy Hirst is mad for Monzo: “Monzo all the way! They offer a great app, which is probably one of the most important things to me, and the service has been spot on.” Grace Abell’s on board too: “I use Monzo, mostly because their business banking is free. The app is really good too.”
Mettle
Mettle is an online business account, operated by NatWest - it’s like NatWest trying to be cool and to be fair they’ve pulled it off.
Free to open, no monthly fees, and quick to set-up from the app. But its biggest selling point is that customers receive FreeAgent for free. (NatWest own FreeAgent). Don’t worry if you use different software, it also integrates with packages like Xero and Quickbooks.
Even though it comes with free FreeAgent, you can also create and send invoices within the app - you receive an alert when they’re paid, and payments are automatically matched to the outstanding invoice. Expenses are simplified too.
Mettle also have their own variation on a Saving Space. They call it a Money Pot - same idea, allowing you to easily set aside money to save for things like tax or new equipment. All features are 100% free, there’s no paid option.
Worth noting - currently you can’t make or receive international transfers. You can use your Mettle card with overseas companies, it’s overseas bank transfers that aren’t possible.
Also Mettle is not part of the FSCS scheme. Your money is ‘safe guarded’ (same as Revolut, more details of which below) but it’s not the same swift protection.
What the Being Freelance Community thinks
BFF Bekah Chapman’s a fan: “I opened a Mettle account to get FreeAgent accounting for free. There’s no monthly charges with Mettle which is great and it syncs to FreeAgent so all my business ‘ins and outs’ populate automatically.”
Course for freelancers
Sorting your business finances is a great step. What about everything else? Check out the Being Freelance course…
Chase
Chase don’t offer a dedicated business account, but their no-frills current account offers 1% cashback on everyday purchases on your card for a year so we’ve forgiven them.
Once you’ve got your main account you can open extra accounts in seconds, all for free, handy to separate money out for tax or upcoming expenses.
Their account is free with no monthly fees and you can even use it abroad without paying a penny. If you’re looking for a basic account to get started then this might be the one for you.
Chase is FSCS protected. It’s actually a ‘cool’ brand from J.P.Morgan - a well established banking name.
What the Being Freelance Community thinks
BFF Matt Meir has a personal account with Chase, “Been using them for nearly 12-months, pretty decent. App-based. Card details are given in the app as soon as you sign up and get accepted, so you don’t need to wait to make digital purchases.”
Revolut
Revolut has been lurking in the shadows for a few years. But with over 500,000 business users they’re stepping it up. They offer a free account but watch out for the fees for accepting online payments - 1% + 20p from UK consumer cards.
If you need more functionality there’s a £7/month option for freelancers and a further tier at £25/month. Revolut’s paid options seem ideal if you deal with international clients. Plus with the fixed exchange rates and free international payments you might save enough to balance out the monthly fee.
Revolut can be integrated with Xero, QuickBooks and Free Agent to keep things simple and straightforward for you.
As they’re an e-money institution (EMI) Revolut safeguards your money in a way that’s different to FSCS protection. In a nutshell, it means they follow a set of laws to keep your money safe and if they fail then you’ll still get your money back. If you want to read all the detail then they’ve got a handy blog.
What the Being Freelance Community thinks
BFF Eman Ismail does a lot of work with people in other countries has been won over “Revolut is amaaaazing. I love it. Highly recommend. It does cost £25 a month but it’s worth being able to accept different currencies without the extra fees!”
Monese
Monese aren’t accepting any new business customers right now (Sept ‘22). But with the ability to open an account in a few steps and create invoices from your account all for £9.95/month it’s worth keeping an eye out for when they re-open applications.
Monese make a big thing out of international payments. They also have saving ‘pots’ which is great for tax planning. But, given that it’s a paid service, it’s surprising that it doesn’t seem to integrate with accounting software. Not that great for dealing with your freelance money with ease, or ‘ese’.
What about UK high street banks for freelancers?
Many people bank on the high street purely out of habit. They do have advantages though including access to business loans and overdrafts, which could be important if you want to fund growth in the future or have issues with cashflow.
Now on to the drawbacks. Most traditional banks charge freelancers monthly fees(from £5 to £7.50) for holding an account, plus some have transaction fees (20p-35p) and yet further fees still for overseas transactions. It’s worth figuring out how much that can add up. It can also take weeks to get your account up and running, which can be frustrating when you’re used to doing things quickly online and you’ve got client work to be cracking on with.
Even so, there are lots of business owners in the Being Freelance community who still seem happy managing their money with the big guys.
What the Being Freelance Community thinks
Daniel Hiscoke rates Barclays for “…syncing with Quickbooks, providing spending and payment alerts on its app, and offering simple international payments.”
Others, including Andrea Boughton, rate NatWest highly primarily because it offers free use of FreeAgent, which can save you a chunk of money on accounting software.
However, the majority of BFFs have grown tired of paying out monthly fees, felt short of support, want decent apps and have switched to digital-focused challenger accounts.
What’s the most ethical bank for freelancers?
Before we go, let’s talk ethical banking. There’s an ‘ethical’ boom happening across the board, including food, drink, energy and finance, as consumers increasingly choose products and services that are ethically produced and don’t harm the environment or society.
Consequently, many freelancers want a bank that doesn’t sacrifice its principles generating profits.
Co-op Bank
For freelancers who prioritise businesses that embrace ethical practices, Co-op Bank is the one option that actually makes a point of doing the right thing.
It offers a variety of business accounts to pick through. With those that most suit freelancers you get free banking for 30 months. Let’s face it, that’s 2.5 years to figure out if you like them. It then increases to £7 or £10 a month, but sometimes if your balance is always over £1000 it’s kinda free? Clear about being ethical - not so clear on everything else.
Worth noting, if you’re a member of the Federation of Small Businesses (FSB), you can get free (well, limits apply) business banking with the FSB Business Current Account.
BUT… this is the ethical option, so whilst it may not be ‘cool’, quick and app based, your patience pays off in the long term; you’re valuing something more than just your time.
While some in the Being Freelance community feel Co-op’s digital platform has some catching up to do and others are underwhelmed with its accounting integrations, many stick with it because of its social conscience. Co-op Bank says it’s committed to making sure your money is being used for good and refuses to represent businesses who don’t meet their ethical standards. They also actively campaign for social and economic change.
You know what we need? A challenger bank to take that same ethical stance!
So, what’s the BEST bank for freelancers?
Overwhelmingly it’s Starling that gets mentioned the most. But of course, in any community there will be a knock on effect of positive recommendations where one eventually becomes most popular.
But as you can see, there are a lot of benefits with various banks. The ‘free FreeAgent’ accounting software that comes with Mettle is also getting noticed a lot in freelance circles. Once it has international payments it could start getting Starling in a flap. Some freelancers have a Mettle and a Starling account.
Meanwhile, for those doing a lot of overseas work, Revolut has a clear specialism in international transactions that freelancers can benefit from.
The best thing to do is research and pick the one that suits your business best. Know how many transactions you’re likely to make in/out each month. Know if you’ll be making/receiving lots of overseas transactions. Check the perks, cram up on the features, and make sure it fits with everything you need it to do. And remember, if you’re not happy it is easier to move banks than you think.
Now here’s to watching that balance go in the right direction as your freelance business thrives.
There’s more advice on managing your freelance finances as part of the ‘How to get started being freelance’ course. It’s online training to help new freelancers get started the right way.
This post was written by Ian Winterton, Becky Coote and Steve Folland.
All information given is taken from the bank websites, correct as of September 2022.