Best Bank Accounts for Freelancers

2 weeks ago
70

So you went freelance and you’re invoicing clients! Congratulations!

 

But managing your money as a sole trader freelancing means considering more than just how much you’re earning. As well as record keeping for tax returns, you’ll need to think about banking.

Do you need a separate bank account if you’re a freelance sole trader?

No. Not legally speaking. But some personal bank accounts do not allow you to use the bank for business purposes (including as a sole trader). Check the terms on your own account.

In addition, you ARE required to keep financial records relating to your spending in a business context. So it’s much easier to have a separate bank account for handling your sole trader earnings and spendings. 

It makes it much, much simpler to have a separate bank account.

Do I need a business bank account for freelancing?

A separate personal current account could very well do the job if you find one that doesn’t restrict that type of usage. But many do.

As such, a bank specifically designed for freelancers or small businesses is often a sensible way to go.

 

And in 2020, there’s really no need to head for the High Street. There are loads disruptive online only business banks today that allow you set up in a matter of minutes hassle free.

We’ve taken a look at the key features of a number of them.

Compare Freelancer Bank Accounts

There’s a summary of key facts about some of the biggest names in sole trader banking here, with more details about pricing and features below.

 

BankMonthly FeesTransaction Fees (UK Transactions)International Payments?Available to Sole Traders?
TideNone20pAvailableYes
Starling BankNoneNoneAvailable - with feesThere is a sole trader offering but at the time of writing, applications are "temporarily closed." We'll check back and update.
RevolutNone (some paid options are available but there's a fee free account too)None for first 5 transactions. 20p per transactions thereafterAvailableYes
Monzo£5NoneAvailableYes

Tide – Pros and Cons for Freelancers

Ok, so in the interests of disclosure, my micro business banks with Tide. And the main reason we set up with tide was the speed at which we could be up and running with a sort code and an account number to begin invoicing. 
 
It was ludicrously quick. But since then competitor banks like some of the above have turned up to disrupt, not only the High Street Banks, but other online only business and freelancer accounts too.
 
Nonetheless, I’ve been happy with tide. And I love the app and user interface within it. But here’s a run down of the pros, cons and features.
 

Pros

  • Set up is almost instant. You can have a sort code and account number in minutes.
  • No charges to replace a card
  • No monthly fee
  • Low transaction fees
  • Integrates with all the biggest accounting software packages

Cons

  • There's a charge to deposit cash. Not an issue for many but if you handle a lot of cash it will be a problem
  • International payments are not available to everyone yet
  • You can't deposit cheques (but, does anyone still use them?)
  • Tide is remarkably easy to setup. And its low barrier to entry is probably what makes it so appealing as a bank account for freelancers who want to get invoicing quickly.

Which Accounting Software Does Tide Integrate with?

Ok, so it’s an absolute pain in the backside to try and run a business with a bank account that doesn’t integrate with your accounting software. And if you deal with a lot of transactions, it’s next to impossible.

At the time of writing, Tide integrates with:

  • Xero
  • Freeagent
  • Sage
  • Kashflow
  • QuickBooks

That’s all the biggest providers, I think.

 

 

Starling – Pros and Cons for Freelancers

Although my primary business is with Tide, I am part of another business that uses Starling.

In a nutshell, it was harder to setup and I prefer the Tide app. But Starling is fee free in all regards and its integration with Xero

Pros

  • Set up is quick - in some cases within half hour (but not all cases)
  • Easy to use mobile app
  • No monthly fee
  • Low transaction fees

Cons

  • If you lose your card abroad, you'll incur a fee
  • No integration with Sage yet
  • 0.3% fee to deposit cash with a minimum charge of £3

So lots of the marketing material suggests quick setup with Starling too. Some say they were set up within an hour. It wasn’t my personal experience. For another project I’m involved in, a company with 4 directors, it took us the best part of a week and we all had to go through a process of uploading verification videos and so on.

Nonetheless, that’s significantly quicker than a lot of High Street banks. And one of the things that makes Starling amongst the best bank accounts for freelancers is the completely fee free nature of banking with them. No monthly fees, no transaction fees. But like many of these High Street disruptors, you will incur a fee to deposit cash. In the case of Starling, this is 0.3% (and a minimum charge of £3 applies).

I think it’s fair to say these accounts aren’t really made for businesses or freelancers who deal a lot in cash.

Which account software does Starling integrate with?

At the time of writing, Starling integrates with:

  • Xero
  • QuickBooks
  • FreeAgent

The one notable absence there is Sage. So if you’re already using Sage for your accounting and you don’t want to move, that might be a bone of contention.

 

 

Revolut – Pros and Cons for Freelancers

I’ve never personally banked with Revolut. But having read up on the reviews, what people love and are not so hot on, here’s what looks like the biggest pros and cons for freelancers using Revolut for Business.

Pros

  • Quick setup
  • A basic account has no monthly fees
  • Accounts available with zero monthly fee
  • Option for paid accounts with free local and international transactions
  • Integrates with all the biggest accounting software packages

Cons

  • You cannot deposit cash with Revolut. Not an issue for most but an issue for some
  • On the free account, international transfers will incur fees
  • All ATM cash withdrawals incur fees

Which accounts software does Revolut integrate with?

At the time of writing, Revolut integrates with:

  • Xero
  • Sage
  • FreeAgent
  • Freshbooks
  • Kashflow
  • ClearBooks
  • ZohoBooks

That’s an impressive list with a promise of more to come.

Monzo – Pros and Cons for Freelancers

Monzo is a popular choice as a bank account for freelancers amongst many of them I know. Here are some of the pros and cons:

 

Pros

  • Quick setup from your mobile
  • Deposit cheques by post with no fee
  • Zero monthly fee account available
  • Low £5 monthly fee account gives lots of extra features and fee free spending
  • Lots of added features like integrated invoicing and digital receipts

Cons

  • The Lite account (zero monthly fees) doesn't allow integration with any accounting software so is very limited
  • Doesn't integrate with Sage, which will be limiting for some businesses

Which accounting software does Monzo integrate with?

Its list of integrations isn’t as long as that of Revolut and Sage is a notable absentee from the list. But at the time of writing, Monzo integrates with:

  • Xero
  • FreeAgent
  • QuickBooks

Freelance Sole Trader Bank Account Perks

Before you open a bank account, it’s also worth checking out the perks! With many banks offering similar fees and overall costs to freelancers, it’ll be things like accounting integrations and other sweeteners that swing it.

A lot of business and sole trader bank accounts come with perks. Monzo, for example, offers 6 months of free Xero. Others offer notable discounts on other software or even offline services.

Check out the perks, read up on all the features, make sure it fits with your current book keeping and accounting setup and, if you’re still not sure, check with your accountant.

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