Why the branch no longer decides where your money sits
Ask a UK sole trader what put them off their old bank and you will usually hear the same three things. A monthly account charge that appeared once the introductory period ended. A branch that closed, leaving a two-hour round trip for a paying-in book. And an application that sat in review for eleven days while invoices went unpaid.
The numbers explain the shift. Starling alone reports more than 500,000 business customers, and Monzo counts over 400,000 small businesses on its books. Neither has a branch network worth mentioning, and both put the whole relationship inside an app. For a plumber in Salford or a translator in Cardiff, that is not a gimmick. It is the difference between reconciling the week on a Sunday evening and doing it at a kitchen table with a shoebox of receipts.
The catch is that "online business bank account" covers four quite different products. Some are fully licensed banks with compensation cover. Others are payment institutions that safeguard your money at a partner bank. A few are software platforms with a card attached. They look identical on a comparison page and behave very differently when a payment goes wrong.
What actually matters when you compare providers
Four questions sort most of the market out. Is my balance covered if the firm fails? What happens when a client pays in cash? Who charges me for a transfer, and how often? And can my accountant get the data without a spreadsheet by email?
| Provider | Monthly cost | Strongest for | Cash and cheques | Protection | Worth checking |
|---|
| Starling Business | No monthly fee on the standard account | Everyday UK trading, built-in accounting tools | Cash at Post Office, 0.7% fee with a £3 minimum; cheques in-app | FSCS, up to £85,000 on eligible deposits | Foreign card use and ATM charges |
| Monzo Business | Lite at no monthly fee; Pro at £5 a month | Invoicing, tax pots, single-director companies | £1 to pay in cash at PayPoint or Post Office | FSCS, up to £85,000 | Whether the paid tier earns its £5 |
| Tide | Entry plan no monthly fee; paid tiers from about £12.49 plus VAT to £69.99 plus VAT | New starters wanting expense cards and low entry cost | 3% on cash at PayPoint; ATM £1 | Not a bank; funds safeguarded at a licensed bank, so no FSCS cover | 20p per bank transfer on the entry plan |
| Wise Business | No monthly fee on the basic plan; a one-off £50 to unlock receiving, direct debits and invoicing | Selling to clients in euros or dollars | Not supported | Safeguarded, not FSCS protected | No overdraft; FX margin on conversions |
| High street banks | Introductory period, then an annual account fee in the region of £100–£120 on many business tariffs | Cash-heavy trades, lending, someone to shout at | Branch and business counter | FSCS, up to £85,000 | Length of the fee-free window and exit terms |
Two caveats are worth stating plainly. Published prices move, so treat the table as a starting point and confirm on the provider's own page before you apply. And FSCS cover protects eligible deposits if the firm fails; it does not rescue you from a bad debt or a fraudulent payment.
If you take a lot of cash, the deposit fee is the line that decides it. Three per cent on £4,000 of weekly takings is £120 a month, which dwarfs any saving on a monthly account fee. A market trader in Leeds learned that the hard way and moved her takings to a provider charging a flat Post Office rate.
Three owners, three different answers
The sole trader who wants nothing to do with bookkeeping
Priya designs packaging for small food brands from a spare room in Manchester. Her clients pay by bank transfer, usually late, and she has no employees. She opened a Monzo Business Lite account because the tax pot stops her spending money that belongs to HMRC, and the invoice tool means she is not chasing payment with a Word document. Her accountant pulls the transactions straight into Xero. She looked at Starling too and would have chosen it if she wanted the accounting built into the same app rather than linked.
The limited company that needs two directors on the account
A two-director joinery firm in Birmingham needs dual approval on payments and a record of who authorised what. Starling's multi-director access handles that without a phone call, and the Current Account Switch Service moved the direct debits and standing orders across in one go. The firm kept a high street account open for the first three months, which turned out to be sensible: one long-standing supplier had the old details saved and kept paying in there until they updated their records.
The seller who invoices in euros
An online retailer in Bristol buying stock from Portugal and selling to customers in Germany needs local account details in more than one currency. Wise Business gives her euro and dollar details and converts at the mid-market rate with the margin shown upfront. The one-off £50 unlocks the receiving and invoicing features, and the trade-off is no overdraft and no way to bank notes. She runs a Starling account alongside it for sterling takings, which is a common pairing rather than an unusual one.
Opening an account and moving without breaking Direct Debits
Applications are digital and usually decided within minutes for straightforward sole traders and single-director companies. Have your photo ID, your Unique Taxpayer Reference or Companies House number, and a rough figure for expected turnover to hand. Limited companies with complex ownership structures, or anyone with a poor credit history, should expect a manual review and a few days of waiting.
Once approved, ask for the switch rather than doing it yourself. Under the Current Account Switch Guarantee, the incoming bank moves your outgoing payments, payees, standing orders and Direct Debits, and redirects payments sent to the old account for a set period. It takes about seven working days, and it costs nothing. The guarantee also covers charges and lost interest if the switch goes wrong.
A short sequence that avoids most problems:
- Keep the old account open for at least a month after the switch date.
- Tell your three biggest suppliers and your payroll provider the new details in writing.
- Download the last twelve months of statements before you lose access.
- Test a small payment in and out of the new account before payday.
- Reconnect your accounting software and re-authorise the bank feed.
The costs that do not appear in the headline
Monthly fees are the visible part. The rest hides in transaction charges: 20p here for a transfer, a percentage there for cash, and a foreign exchange margin that can quietly cost more than a year of account fees. A retailer in Nottingham found her old provider was adding roughly three per cent on supplier payments in euros; switching to a multi-currency account cut that to a disclosed fee she could actually see.
Check how the account handles Making Tax Digital and VAT returns. Most mainstream providers now connect to Xero, QuickBooks, Sage or FreeAgent, but "connects" can mean a nightly export or a full reconciliation feed, and those are not equivalent.
Finally, read the exit terms. A business that grows into needing an overdraft, a business loan or a merchant facility often finds its app-based provider cannot help, and moving mid-year has its own cost in admin time.
If you are unsure, open a second account rather than closing your first. Run it for a full VAT quarter, watch what the charges actually come to, and decide with bank statements instead of a marketing page. That is a cheaper test than most businesses run, and a good deal shorter than the eleven days Priya spent waiting on her old bank.
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