Business savings accounts

Find out more about business saving accounts and how they could work for you.

A business savings account allows you to earn interest on your savings, usually making your surplus funds work a lot harder for you than if they were sat in a business current account.  

However, a business savings account is not a one-size-fits-all solution – many banks, building societies and online providers offer them, each with a range of differing features.  

As a starting point, consider if you can commit to locking your money away for longer periods of time in order to earn interest on your cash. If so, a fixed rate account may pique your interest. 

Alternatively, if cash flow and flexible access to your money is the safer option for your business right now, instant access accounts could be more up your street. 

If a business savings account is right for you, read the terms of the policy carefully, keeping a close eye on: 

• If the frequency of withdrawals is restricted 
• If there’s a rate of interest, and how and when it’s paid 
• Will tax be deducted from any interest earned? 
• Any bonuses or incentives available, and the terms or requirements you need to fulfil to achieve them 
• Is a constant set balance needed to keep the account open? 
• If the first £85,000 you save is protected under the Financial Services Compensation Scheme (FSCS). Read more about how the scheme protects your cash 

Before you commit to any account, fully understand what options are available to you, and which business savings account offer the cosiest fit for your business needs.  

When should you get a business savings account? 

There's no definitive time when you should open a business savings account.  

Once your business is making a significant amount more than it’s spending, you may find that syphoning off a lump sum into a business savings account as part of your strategy for either managing or growing your business, could make those funds work a lot harder for you.  

Leaving enough funds in your current account to manage general expenditure is important, but your excess funds are likely to be earning you very little if left to sit in a current account.  

Instant access business savings accounts 

This type of accounts allows you to withdraw and deposit funds as often as is needed, with no prior notice required.  

The minimum balance to open an instant access account is usually comparatively low, but always read the small print of the policy carefully.  

The trade-off for these benefits is that instant access savings account usually have lower rates of interest.  

They are designed for businesses that need to get their hands on their savings on a regular basis, for example to buy equipment, or to manage emergency outgoings. 

Notice variety account  

A notice variety account requires advanced notice of a withdrawal to be given to the provider, typically between 30 to 90 days, but some may stretch to a lengthy 120 days.  

Often, the benefit of this account is a higher interest rate but carefully compare all your options to double check this is the case for your business. 

Instant access and advanced notice accounts usually both have a variable interest rate; meaning providers can change the rates on both of these account types at any time. 

Sometimes you can withdraw money at other times, but be cautious that you may be charged, or penalised for doing so.

A business savings bond  

With a business savings bond, you can lock away a lump sum of funds in a fixed high interest account for a set period of time (usually one to three years).  

Withdrawals are usually not allowed during this time frame.  

It’s important to be aware of the date that the bond expires, so that you can decide what you would like to do with this pot of savings next, and avoid them automatically being moved to an account with a lower interest rate.  

Different providers offer bonds with different rates over different time frames, so exploring all the options available to find the right set up for your business needs is time well spent.  

Which is the right business savings account for you?  

You need to first decide what your needs are.  

Questions that you need to ask yourself before committing to a business savings account are: 

• Are there any opening restrictions, such as minimum annual turnover? 
• What’s the initial sum that you wish to deposit in the account? Different accounts have different initial deposit requirements. 
• Do you know what you plan on using this money for – emergency spend; paying your tax bill; long-term growth? 
• Are there penalties for withdrawing funds? 
• How do you like to manage your finances – online, in person, over the phone? 

How do you know a good rate when you see one? 

The higher the rate, the more interest you will make on your savings.  

However, picking the account that’s right for you is not as simple as just looking for the highest rate. 

Higher rate accounts often come with multiple restrictions on how much access you can have to your funds, a higher minimum balance to open the account with, and opening criteria based on the size and type of business. 

Comparison tables enable you to compare the different features of each available account, and choose the right set up for you. 

What do you need to open a business savings account?  

To open a business savings account you usually need to be a UK resident, over 18 years old (this includes all individuals with access to the account) and have a business current account (this doesn’t need to be with the same provider).  

Once you have chosen the account that’s right for your needs, you need to fill out an online application or speak directly to the provider. You will then need to pay an initial lump sum of money into the account to open it. 

By Kate White