91Ï㽶»ÆÉ«ÊÓƵ

A business savings account works in a similar way to a personal savings account, except you use it for business purposes. You deposit money into the account and then earn interest on those funds.

You shouldn’t use a business savings account for everyday banking transactions – that’s what a business bank account is for. But you can use a business savings account to set aside money for emergencies or future growth. 

What types of business savings accounts can you get?

As with personal savings accounts, you can choose from a range of different business savings accounts. And you can open as many business savings accounts as you like to meet your different savings goals and priorities. 

Easy-access savings accounts

If you open an easy-access business savings account, you can pay in money as often as you like and withdraw your funds whenever you need to. This makes this type of account ideal for stashing away some cash for unexpected expenses.

Easy access accounts tend to pay variable interest rates, meaning the rate can go up or down at any time. You usually earn a lower rate of interest compared to other account types. 

Fixed-term savings accounts

A fixed-term savings account is a good option if you want to lock away a lump sum for a while. You can choose from terms of between one and five years, but you can’t usually withdraw your money during this time without paying a penalty. 

Because of this, you tend to earn a higher interest rate, and the longer the term, the higher the rate. You usually earn interest at a fixed rate, which means the rate won’t change.

However, before applying, check the opening deposit requirement – different providers ask for different amounts. Also, be aware you won’t usually be able to pay any more money into the account during the term. 

Notice savings accounts

A notice account sits between an easy-access and a fixed-term account. You can access your money in a more timely fashion, but you must give a certain amount of notice before making a withdrawal. This is typically 30, 60, 90 or 120 days. 

Notice accounts tend to pay higher rates of interest than easy access accounts – but not quite as much as a fixed-term account. This type of account can be useful if you’re putting money away to cover a bill that’s due on a set date, such as VAT.

Read more:

• How to use a business savings account

• How much should you have in your account?

• How to save as a business 

Can you use a personal savings account for your business?

This depends on the type of business you run. If you’re a limited company, you must keep your personal and business finances separate. This means you can’t use a personal savings account for your business expenses and must open a business savings account instead.

If you’re a sole trader, on the other hand, you might not see the need to open a separate business savings account and might be happy sticking with your personal account. 

However, if it becomes difficult to distinguish between your business and personal savings, it could be time to think about opening a business savings account. This can help with tax reporting.

Benefits of a business savings account

One of the key benefits of a business savings account is that it pays interest (unlike most business bank accounts). If you have cash in a business bank account that you don’t need for making immediate payments, it makes sense to move it into a savings account and watch your savings grow.

Building up a sizeable savings pot for your business means you have something to fall back on for unexpected bills, to ease cash flow during seasonal lulls in business activity, or to invest in new equipment or personnel. It can also prevent you from turning to loans or other sources of funding that can result in high levels of debt.

Limitations of a business savings account

Although there are many benefits, business savings accounts have a number of limitations, too. 

For example, if you’re opening a fixed-term savings account, you can’t typically access your money for the term of the account without paying a penalty. To avoid getting caught out, you need to be sure you can leave your funds untouched for the required time.

The same applies to notice accounts – you must provide the correct notice before making a withdrawal.

You should also watch out for:

• Variable interest rates: Some accounts pay rates that can go up or down at any time. This can impact your overall earnings. 

• Minimum balance requirements: Check whether you need to always keep a set amount in the account. If you don’t meet this requirement, your provider could cut the interest rate or close your account.

• Bonus rates: Some easy-access accounts pay a bonus rate that temporarily boosts the overall interest rate. This often lasts 12 months and then rate then drops. You may need to move your money to a more competitive account after this time.

Read more: Pros and cons of a business savings account

How to choose a business savings account

The best business savings account for you depends on your savings goals and needs. Think about the following points before opening one:

• Do you need to access your savings regularly? Or could you afford to lock a sum of money away for a set time?

• What’s the interest rate? Is it fixed or variable? Is it competitive?

• How much do you need to open the account? Can you meet this requirement, and do you need to maintain a minimum balance to keep the account open?

• How is the account managed? Can you manage it online or via an app, or would you prefer to have branch access? 

• Do you meet the eligibility criteria? Some providers may require your business to be a specific size or have a minimum annual turnover.