Business Savings Accounts Guide (2025)

Not sure whether you should open a business savings account?

Whether you’re putting money aside for tax, future investments, or just want a safety net, the right account can help your funds grow without risk. 

This guide explains how business savings accounts work, what features to look for, and how to choose the best fit for your company. It aims to help you make smarter financial decisions and put idle money to work.

>>Read our full article on What are the Best Business Savings Accounts in the UK?

What Is A Business Savings Account?

A business savings account is a place to stash your company’s spare cash and earn interest while you’re not using it. Consider it a financial buffer — whether you’re setting aside money for tax, future investments, or just building up a rainy-day fund.

While they work similarly, a business savings account is tied to your company, not you as an individual. That means:

• It’s legally separate from your personal money
• The interest earned is taxed under Corporation Tax, not Income Tax
• You’ll usually need a business bank account to open one

How Does A Business Savings Account Work?

A business savings account is simple: you move money in, leave it to grow, and take it out when needed. However, how it works depends on the type of account you choose.

Depositing & Accessing Funds

You deposit funds from your business current account, just like transferring between any two bank accounts. Some accounts let you withdraw instantly, while others might require notice, anywhere from 30 to 120 days.

There is no debit card, direct debit, or spending. These accounts are built to hold, not spend.

How Interest Works

Interest is usually shown as AER—the Annual Equivalent Rate. It tells you how much interest you’d earn over a year, factoring in compounding (if applicable).

Here’s what to watch for:

• Daily or monthly interest: Some accounts calculate interest daily and pay it monthly
• Fixed vs. variable: Fixed means your rate won’t change during the term, while variable can rise or fall.
• Gross rate: This is the interest before tax

Even a few percent can add up if you’ve got regular cash buffers.

Withdrawal Rules

Not all accounts offer instant access:

• Easy access accounts let you take money out whenever you like
• Notice accounts require advance notice (30, 60, or 90 days)
• Fixed-term accounts lock funds away for a set period — no early withdrawals allowed

⚠️ Make sure the terms match your cash flow needs — otherwise, you could be penalised or stuck waiting.

Business Savings Account Pros & Cons

Pros

• Earn interest on idle cash – Put surplus funds to work instead of letting them sit in a zero-interest current account.
• Helps separate savings from spending – Keeps tax money or emergency funds ringfenced and less tempting to dip into.
• Improves financial discipline – Encourages better budgeting and long-term planning.
• Safe place to store reserves – Most UK accounts are FSCS-protected up to £85,000 per provider.
• Flexible options available – Choose from easy access, notice, or fixed term depending on your cash flow needs.

Cons

• Access can be limited – Some accounts require notice or lock your funds for a set period.
• Interest is taxable – For limited companies, any interest earned is subject to Corporation Tax.
• May require a minimum deposit – Some providers ask for £1,000+ to open or maintain the account.
• Rates can vary and change – Variable interest rates aren’t guaranteed, and better deals may pop up after you’ve locked in.
• No day-to-day functionality – No debit cards or direct debits; this account isn’t built for transactions.

Types of Business Savings Accounts

Not all business savings accounts work the same. The best depends on how soon you’ll need the money and how much interest you want to earn. Here’s how the main types stack up:

Feature	Easy Access	Notice Account	Fixed Term	Business ISA
How It Works	Deposit and withdraw funds anytime.	Must give notice (e.g. 30–120 days) to access funds.	Lock funds away for a fixed term—no early access allowed.	Offers tax-free interest for eligible businesses (rare).
Typical AER	2.00% – 3.25%	3.00% – 4.00%	4.00% – 5.00%	Varies (limited availability)
Pros	– Full access to funds anytime – Great for flexibility	– Higher rates than easy access – Ideal for planning cash use	– Best rates on the market – Fixed returns for budgeting	– Interest is tax-free – Works well for qualifying charities or non-profits
Cons	– Lower rates compared to other types – Variable interest rates	– Must wait for access – Penalties if you withdraw early	– No access during term – Not suitable if you might need funds sooner	– Rarely available – Often capped and restricted
Best For	Businesses that need short-term access to funds	Firms with predictable outgoings and surplus cash for mid-term goals	Companies with stable cash flow and cash they won’t need for 6–18 months	Eligible businesses looking for tax efficiency

Business Savings Account vs Business Current Account

Already got a business current account? Great — but that doesn’t mean you don’t need a savings account too.

They serve different purposes, and using both together can make managing your business finances easier (and more profitable).

Feature	Business Current Account	Business Savings Account
Purpose	Day-to-day banking — paying bills, receiving payments	Storing surplus cash and earning interest
Access	Instant — with debit card, online banking, and direct debits	Limited — often no card or direct debit access
Interest	Typically none or very low	Pays interest — up to 5.00% AER (fixed term)
Functionality	Designed for transactions	Designed for saving and protecting funds
Fees	May charge monthly or per transaction	Usually free to hold, but minimum deposits may apply

Most businesses benefit from having both types of accounts:

• Use your current account for daily trading — paying staff, invoices, and suppliers.
  
• Use a savings account to set aside money for tax, future investment, or emergency use — and earn interest while it sits.

📌 If your current account consistently holds more cash than you need for monthly expenses, it’s time to open a savings account.

How Much Does A Business Savings Account Cost?

In most cases, business savings accounts are free to open and maintain. That’s one of the key reasons they’re a smart option for businesses looking to earn interest without taking on extra costs.

But there are a few exceptions and small-print details worth knowing.

• Minimum deposit requirements – Some providers require a minimum opening balance (e.g. £1,000+).
• Early withdrawal penalties – Fixed term and notice accounts may charge (or reduce your interest) if you access funds too soon.
• Linked account fees – You may need a business current account with the same provider, which could carry its own fees.
• Dormancy fees – Rare, but some banks may charge if the account is inactive for a long period.

📌 Always read the terms before you open — especially for fixed and notice accounts, where early access rules can catch you out.

Do You Pay Tax On Business Savings Interest?

Interest on business savings is taxable, counts as income and is subject to Corporation Tax for limited companies. Any interest earned on your business savings will be added to your company’s overall income and taxed accordingly.

However, the rules are different for sole traders and partnerships. The table below highlights some of the key differences.

Business Type	Tax Treatment	When & How to Report
Limited Companies	Interest is subject to Corporation Tax.	Report interest on your annual Corporation Tax return (CT600).
Sole Traders & Partnerships	Interest is taxed as part of personal income (Income Tax).	Report interest on your self-assessment tax return.

Keep track of all interest earned, whether you’re a sole trader, a partnership, or a limited company. Accurate reporting is crucial to ensure you’re taxed correctly.

How To Choose The Right Business Savings Account

Choosing the right business savings account is essential for growing your business funds. Here’s what to look out for:

• Interest Rate (Gross/AER): Look for an account with a competitive interest rate. A higher rate means your savings will grow faster. Compare gross and AER (Annual Equivalent Rate) to see which offers the best return.
• Access Terms: Think about how quickly you need to access your money. Instant access accounts let you withdraw anytime, while notice and term accounts may offer better rates but with restrictions. Choose based on your business’s cash flow needs.
• FSCS Protection & Provider Regulation: Check if the account provider is covered by the FSCS (Financial Services Compensation Scheme) for protection up to £85,000 if the bank fails. Ensure they’re also regulated by the FCA (Financial Conduct Authority) for peace of mind.
• Minimum Deposit or Balance: Some accounts require a minimum deposit or balance. Make sure the account matches your business’s financial situation.
• Online Banking & Mobile Access: Look for an account with online banking and mobile access. It makes managing your savings easier and lets you check balances, make transfers, or withdraw funds when needed.
• Fees, Limitations & Customer Support: Be aware of any fees, like withdrawal charges or account maintenance fees. Also, check the customer support level—good service can save time if issues arise.

How To Open A Business Savings Account In The UK

Opening a business savings account is usually quick and straightforward. Here’s what to expect, step by step.

Step-by-Step Process

1. Compare providers – Find one that matches your business needs (good rate, easy access, FSCS protection).
2. Apply online or in-branch – Most providers offer an online process, though some may need a phone call or a branch visit.
3. Submit documents – Upload or provide the required paperwork (see below).
4. Wait for approval – Once approved, you’ll receive your account details and can transfer funds.

If everything’s in order, some digital banks can open your account the same day. Traditional banks may take a few working days, especially if they need to verify documents manually.

Eligibility Criteria

You’ll usually need to be:

• A UK-registered business (sole trader, partnership or limited company)
• Over 18
• Based and operating in the UK

Some providers may restrict certain sectors or newly formed companies, so always check the small print.

Documents Required

Each provider’s list may vary slightly, but you’ll typically need:

• Business name and registration number (if a limited company)
• Personal ID (passport or driving licence)
• Proof of address (utility bill or bank statement)
• Proof of business address (for some accounts)

Sole traders may also need a copy of their UTR (Unique Taxpayer Reference).

Is My Money Safe In A Business Savings Account?

The Financial Services Compensation Scheme (FSCS) covers most UK business savings accounts. This protects up to £85,000 per business, per banking group. If the provider goes bust, FSCS can step in and return your money, usually within seven days.

But not all providers are covered, so don’t assume. Always check.

How to Check If a Provider’s Covered

• Look for confirmation on the provider’s website (it’ll usually say “authorised by the Financial Conduct Authority (FCA)”).
• You can double-check on the FCA Register. Just search the provider’s name or registration number.

If they’re not FCA-authorised and PRA-regulated, FSCS won’t apply.

What FSCS Doesn’t Cover

• Non-UK providers (some EU/overseas fintech may not be eligible
• Amounts over £85,000 – anything above this limit isn’t guaranteed
• Fraud or mismanagement by you – FSCS only protects against firm failure, not user error

Tips for Maximising Savings Account Benefits

A business savings account isn’t just a place to park spare cash—it can quietly boost your bottom line. Here’s how to get the most out of it:

1. Shop Around for the Best Rate

Don’t settle for the first account you see. Rates vary massively. Even a slight difference in interest can add up, especially if you hold a decent balance.

2. Use Notice or Fixed-Term Accounts for Extra Cash

If you don’t need instant access, consider a notice or fixed-term savings account. These usually offer higher interest than easy-access options, but you’ll need to plan ahead.

3. Split Large Balances for FSCS Protection

Have more than £85,000? Spread it across providers within different banking groups to stay fully protected under the FSCS.

4. Automate Transfers

Set up a regular transfer from your current account to your savings. It’s an easy way to build a buffer without thinking about it.

5. Review Your Account Regularly

Rates can drop. Providers might launch better deals. Check in every few months to see if your savings are still working hard, or it’s time to switch.

6. Keep an Eye on Fees

Some accounts charge for withdrawals, inactivity, or monthly maintenance. Always check the terms and factor that into your decision.

With a few tweaks, your savings account can do more than just sit there—it can quietly grow your business cash, without lifting a finger.

Business Savings Account FAQs