Top-Rated Best Business Savings Accounts for Superior Growth in 2024
If you’re in search of the best business savings accounts, you already know the value they can add to your company’s bottom line. This no-nonsense guide evaluates accounts that offer superior interest rates and suitable access for businesses of all sizes. Dive into our expert comparison to navigate the complexities of business banking and secure an account that isn’t just first-rate but the right fit for your business strategy.
As a business owner, you want to make sure that your money is always working for you. With interest rates at a historic low since 2008, there wasn’t much to be gained from a savings account, be it personal or business. However, over the last year or so, particularly since the end of 2022 and into 2024, interest rates have been rising rapidly. Currently, in the UK in February 2024, interest rates stand at 5.25 per cent, a massive increase from the low of 0.1 per cent just a couple of years ago.
As a business owner, I aim to ensure the best outcome for the money we have in the business, making sure it’s working in the bank rather than being eroded by inflation. Inflation has recently reached an all-time high, prompting the increase in interest rates to combat it. Now is the time to start exploring savings accounts.
If you have money sitting idle in an account, here’s my guide to the best business savings accounts to maximize your returns. I’ve compiled comparisons and insights into the best accounts currently available. If you have accounts with idle money or client funds, now is the time to consider a business saver or client money account setup. This could be an effective strategy to offset loans or financing costs, aiming for a zero-sum financial situation.
Let’s dive in and address all your questions about the best business savings accounts.
Key Takeaways
Businesses have multiple options for savings accounts in 2024, including high-interest fixed-term, notice, and easy access accounts, with protection covered by the Financial Services Compensation Scheme up to £85,000.
Selecting the right business savings account depends on the business’s specific needs, assessing factors such as interest rates, fund access, fees, customer service, and aligning with financial goals.
Interest on business savings is paid gross and must be declared on tax returns, with sole traders and limited companies facing different tax liabilities, while FSCS coverage is dependent on the legal structure of the entity.
Top Business Savings Accounts for 2024
In 2024, several business savings accounts have gained attention for their high interest rates and varied account types. Some of these accounts include:
Allica Bank 12 Month Fixed-Term Business Savings Account Issue 17: Offers a competitive 5.10% AER for businesses able to lock away at least £20,000 for 12 months.
United Trust Bank Business Savings Accounts: Provides seven fixed-term savings accounts with rates between 3.75% and 5.25% AER.
United Trust Bank Business 180 Day Notice Base Rate Tracker: Offers a competitive 5.25% AER (variable) and requires 180 days’ notice for withdrawals.
However, if you’re seeking an easy access account, Virgin Money Business Savings Accounts offer interest rates from 1.35% up to 4.55% AER. When it comes to account types, businesses have a plethora of options, including easy access accounts, notice accounts, and fixed-rate accounts, each offering different levels of access and interest rates. The key is to choose the one that aligns best with your business needs and financial goals.
It’s important to note that the Financial Services Compensation Scheme (FSCS) provides a safety net for most business savings accounts, with protection up to £85,000 per financial institution.This means that even in the unlikely event that the bank or building society fails, your business savings are still secure.
Thus, whether operating a small start-up or a large corporation, opting for a business savings account can be an astute financial move.
Advantages of Business Savings Accounts
Business savings accounts offer numerous advantages, including having your business savings accounts protected. Higher interest rates provide increased earnings from surplus cash, sometimes through tiered rates that benefit higher balances. This means that the more money you save, the higher the interest you earn, maximizing your return on investment.
Moreover, these accounts offer financial security by:
Creating a buffer to cover unforeseen expenses
Maintaining at least three months’ worth of operating expenses in your business savings account
Enhancing financial planning by allowing companies to set aside funds for tax obligations and investments
Influencing cash flow through the frequency of interest payments
Lastly, businesses can:
Shop around for business accounts with top interest rates and deals due to the ability to hold savings with different providers
Provide a safe space to store surplus cash
Offer a means to grow it
Choosing the Right Business Savings Account
Choosing an appropriate business savings account is key to maximising your returns. It involves comparing:
Interest rates
Access to funds
Potential fees
The level of customer service provided
It’s equally significant to confirm that the selected account matches your business’s specific requirements and financial objectives.
There are three main types of business savings accounts:
Easy access accounts: These accounts offer flexibility in depositing and withdrawing funds. They are ideal for businesses that need regular access to their savings.
Fixed-rate accounts: These accounts offer a fixed interest rate for a set period. They are suitable for businesses that can afford to lock their funds away for a specific period.
Notice accounts: These accounts require a notice period before funds can be withdrawn. They are suitable for businesses that can plan their cash flow.
When choosing the right type of business savings account, consider factors such as deposit and withdrawal flexibility, potential returns, opening restrictions for specific business types, and minimum balance requirements. These factors will help determine the account that best suits your business’s needs and cash flow requirements.
Easy Access Business Savings Accounts
Easy access business savings accounts offer:
Unrestricted deposit and withdrawal access, catering to businesses that desire immediate liquidity for unforeseen expenses
Variable rates, with some banks offering introductory bonus rates or consistently competitive interest rates, like Tide’s 4.33% AER and Cynergy Bank’s 4.00% AER
A straightforward fee structure with no charges for withdrawals or account holding
Complementary services that could enhance the banking relationship
Furthermore, businesses can manage their easy access savings through various channels, including secure online banking platforms, mobile apps, and telephone banking.
Notice Business Savings Accounts
Notice business savings accounts have the following features:
Require an advance notification for fund withdrawals, typically ranging between 7 and 180 days
Offer variable interest rates that are often higher than those of easy access accounts, with some offering up to 5.25% AER
Interest is calculated and paid daily
Requires waiting for a set period for a higher interest rate
Some banks might allow earlier access at the cost of reduced interest if the notice period is not met
For instance, Lloyds Bank provides notice accounts with options of either 32 days or 95 days’ notice, aiming to offer competitive rates that fluctuate with the market.
Fixed Rate Business Savings Accounts
Designed for businesses that can set aside funds for a predetermined period, fixed-rate business savings accounts offer a set interest rate within that term. These accounts offer a higher rate of interest compared to instant access accounts, providing predictability over the account term. However, businesses must commit to locking in their money for the full term of the account, which is commonly between 6 months and 24 months, with limited or no access to funds before maturity.
Withdrawing funds before the end of the fixed term generally results in penalties, which are often calculated based on the interest that would have been earned if the funds had remained until the term concluded.
Regular Business Savings Accounts
Regular business savings accounts are designed for businesses capable of making consistent monthly deposits, ultimately aimed at enhancing financial growth. These accounts may offer bonus interest rates for maintaining deposits over a set period, contributing to a more favourable return on funds.
To open and retain a regular business savings account, a minimum monthly deposit is generally required, as well as meeting a minimum opening balance, which varies by institution. Regular business savings accounts feature withdrawal restrictions and are designed not for day-to-day transactions, but for holding surplus cash with the goal of long-term savings.
Client Deposit Accounts
Client deposit accounts are essential for accounting firms and solicitors to manage client funds effectively. These accounts ensure that client money is kept separate from business funds, offering scalability to firms by enabling a consolidated workflow for all client transactions, simplifying the payment process. Firms also benefit from better pricing for payment fees by using a singular client account, as opposed to individual client negotiations. Firms using client deposit accounts must publish written procedures as outlined in the Professional Statement on Client Money Handling, ensuring transparency and adherence to the Client Money Protection Scheme.
An alternative to a single client account is establishing client holding accounts, with the business client as the account holder, to reduce liability and regulatory concerns.
Business ISAs (Individual Savings Accounts)
Though the idea of Business ISAs may seem attractive, it should be clarified that business ISAs as a distinct product do not exist. Instead, businesses use various types of business savings accounts which are designed for saving money longer-term rather than for day-to-day transactions.
Benefits such as earning tax-free interest, typically associated with Business ISAs, actually relate to individual ISAs and not to business savings accounts.
Eligibility Criteria for Business Savings Accounts
A range of business structures including limited companies, partnerships, and sole traders are eligible for business savings accounts, with specific options for entities like housing associations, clubs, societies, and parish councils. When opening a business savings account, proof of identity and address for all company officials and trustees, and additional verification for key officials of clubs, societies, or charities are mandatory. To be eligible, the business must be UK-based and registered, with potential restrictions for different sectors and exclusions for certain business types.
Business savings accounts, as opposed to a business current account, typically necessitate an initial deposit not exceeding £25,000, with varying requirements to maintain a minimum balance from £1 to over £25,000.
Tax Implications for Business Savings Accounts
Understanding the tax implications related to business savings accounts is important. Interest earned on these accounts is paid gross and must be declared as part of the annual tax return. Sole traders use personal tax allowances and may be subject to Class 2 & 4 National Insurance and Income Tax on the interest earned from business savings accounts.
On the other hand, limited companies must pay Corporation Tax on interest earned from business savings accounts, which falls under taxable profits, and the rates vary according to total profit amounts.
FSCS Protection for Business Savings Accounts
In terms of financial security, the Financial Services Compensation Scheme (FSCS) generally covers business savings accounts in the UK, offering a safety net of up to £85,000 per financial institution. The FSCS protection is applied per legal entity: separate businesses as distinct legal entities each enjoy £85,000 protection, but branches or multiple accounts of the same entity are combined for a single claim.
Eligibility for FSCS protection does not depend on the size of the business; it is based on the legal structure: incorporated entities like limited companies each have their claim while sole traders have combined protection for business and personal deposits. Reimbursement from the FSCS for business savings can take up to three months in cases like those involving temporary high balances or for complex legal structures such as trusts.
How to Open and Manage a Business Savings Account
The process of opening a business savings account is quite simple. An application can be submitted online, through direct contact with the institution, or with certain providers, in-person at a branch. The application process typically involves providing documentation to verify personal identification and primary bank account information. This verification may be completed electronically via credit agency searches, which do not impact the applicant’s credit score or visibility to lenders.
Once approved, a new business savings account is funded by linking an existing bank account and transferring funds electronically. Businesses often prefer online account management due to the ease of handling transactions and financial planning without physical banking constraints. Notice business savings accounts usually provide online management, which is convenient for advance withdrawal planning.
What is the best business savings account?
Choosing the best business savings account depends on your business’s specific needs and goals. However, several accounts stand out in the market. Here are some options to consider:
Aldermore Business Savings Accounts: Offers rates up to 4.60% AER and is considered the best overall business savings account.
Tide Instant Access Saver: Provides easy access with a rate of 4.33% AER.
United Trust Bank Business Savings Accounts: Offers the best notice accounts with rates up to 5.25% AER.
Recognise Business Savings Accounts: Ideal for fixed-term savings with rates up to 4.50% AER.
Cynergy Bank Business Saver: Considered the best option from a digital bank, offering a rate of 4.00% AER.
If you’re looking for the highest interest, the following business savings accounts offer competitive rates:
United Trust Bank Business Savings Accounts: rates up to 5.25% AER
Cambridge & Counties Bank Business Savings Accounts: rates up to 4.80% AER
iFAST Corporate Fixed Term Deposits: rates up to 5.00% AER
Barclays Business Savings Accounts (for large businesses): rates up to 1.96% AER
Unity Trust Bank Business Savings Accounts (for charities): rates up to 5.10% AER
Wise Business Interest (for dealing with multiple currencies): 4.70% AER on GBP, 5.10% AER on USD, and 3.65% AER on EUR.
Can a Ltd company have a savings account?
Indeed, a Limited company is allowed to have a savings account. It is legal for a limited company to use a savings account, but the account management and transactions should be handled correctly to avoid legal and tax issues. However, directors should be cautious about using personal savings accounts for company funds to get better interest rates, as this could potentially lead to complications regarding the distinction between personal and company finances.
Limited companies can open a savings account, and it is a common practice for such entities to earn interest on their surplus cash. However, a Ltd company must use a business savings account rather than a personal savings account to adhere to legal and financial regulations.
Can a business account have a savings account?
Certainly, a business can maintain a savings account distinct from its current account. This account is intended for saving money longer-term while earning interest. Business savings accounts are not meant for daily transactions, which are handled through business current accounts. If a business has surplus cash that isn’t needed immediately, it’s beneficial to transfer it into a savings account to earn interest.
Limited companies must use dedicated business savings accounts and cannot open savings accounts designed for individuals due to legal requirements to keep business and personal finances separate. Sole traders, on the other hand, can move money between their business and personal accounts, allowing them to apply for personal savings accounts to earn interest on business savings.
Is there a business bank account that pays interest?
Indeed, various business bank accounts offer interest. Business savings accounts, for instance, are designed to allow businesses to earn interest on funds that are not immediately needed for expenses. These accounts provide the opportunity to grow a business’s wealth and also serve as a safety net for unexpected large business expenses. Interest-bearing business checking accounts are also available but tend to have lower interest rates compared to business savings accounts. There may be certain requirements or fees associated with earning interest on a business bank account, such as maintaining a minimum balance or paying monthly service fees.
Is there a business bank account that pays interest?
For further clarity, business savings accounts are purposely designed to allow businesses to:
Earn interest on funds, serving as a substitute for current accounts which generally provide little or no interest.
Be offered by online banks, which can provide higher rates due to lower overhead costs compared to traditional brick-and-mortar banks.
Have tiered interest rates, where the rate increases as the account balance grows, providing an incentive to save more.
While it’s true that some interest-bearing business checking accounts exist, they generally offer lower interest rates compared to business savings accounts.
High-interest business savings account
Businesses seeking to maximise their returns find high-interest business savings accounts to be an appealing option. Tide Instant Saver Account, for instance, offers one of the highest easy access rates at 4.33% AER, calculated daily and paid monthly, with a starting balance of just £1 and no fees for withdrawals, deposits, or holding an account.
Another notable account is the Cynergy Bank Business Saver which provides one of the highest easy access rates at 4.00% AER, with interest paid monthly at a gross rate of 3.93% per annum, and accounts can be opened with as little as £1 with no fees.
high-interest savings account
In a wider context, a high-yield savings account is a savings account variant that provides substantially higher interest rates than traditional savings accounts, often up to 10 to 12 times the national average. High-interest rates on these accounts are often found at online banks due to competition.
As of 2020, there is no longer a federal regulation limiting withdrawals or transfers from savings accounts to six per month, providing more flexibility for account holders. When opening a high-yield savings account, it is important to consider factors such as:
The initial deposit requirement
Interest rates
Minimum balance requirements
Any potential fees.
NatWest savings account
When considering business savings accounts, NatWest is an option worth considering. They offer a variety of business savings accounts including:
Instant access savings account: features an interest rate between 1.46% and 1.92% AER (variable) and allows immediate withdrawals without notice.
Notice savings account: requires a notice period before making a withdrawal and offers competitive interest rates.
Fixed-term savings account: offers a fixed interest rate for a specific period, providing a guaranteed return on your investment.
The 35-day notice account provides a higher interest rate of 3.20% Gross p.a (variable) with the requirement of 35 days notice to withdraw. NatWest’s 95-day notice savings account offers their best business savings rate at 4.17% Gross p.a (variable) with a 95-day notice period required for withdrawals.
For client funds, NatWest provides a Client Deposit Manager with instant access to funds and quarterly interest payments, and a Client Account Manager for regulated companies with a minimum balance of £300k.
Best business bank
The best business bank for you depends on your business requirements. Several banks stand out for their exceptional business services, including:
Virgin Money
Metro Bank
NatWest bank
Barclays bank
HSBC
These banks offer a variety of flexible and high-interest business savings accounts, as well as a range of other business banking services.
Shawbrook Bank, Starling, Tide, and Revolut offer digital banking solutions, which may be more suitable for businesses seeking online banking convenience.
Summary
In conclusion, business savings accounts offer a valuable way for businesses to grow their surplus cash while offering financial protection for unforeseen circumstances. The best business savings account for your business depends on your unique needs and financial goals. Whether you’re seeking easy access, notice, or fixed-rate accounts, the options are plentiful, and each comes with its own set of advantages. It’s essential to understand the eligibility criteria, tax implications, and protection offered by these accounts. With proper management, a business savings account can significantly contribute to your business’s financial health and growth.
Frequently Asked Questions
Can a Ltd company have a savings account?
Yes, a Ltd company can have a savings account as it is a legal requirement to keep business and personal finances separate. Different documentation may be required based on the bank chosen.
Can a business account have a savings account?
Yes, a business can have a savings account specifically designed for business use, allowing the company to earn competitive interest rates on cash deposits.
Is there a business bank account that pays interest?
Yes, business savings accounts typically offer higher interest rates compared to business current accounts, making them a better option for earning interest on your business funds.
Are business savings accounts worth it?
Yes, business savings accounts are worth it as they provide a secure place to store extra funds and earn interest, serving as a financial safety net for unexpected expenses.
What is the best business savings account?
The best business savings account for you will depend on your specific business needs and financial goals. Consider options like Aldermore Business Savings Accounts, Tide Instant Access Saver, and United Trust Bank Business Savings Accounts to find the right fit for your business.
