How much does a business bank account cost?

The five things you pay for

1. The monthly account fee

Several digital banks charge nothing, permanently: Starling, Monzo Business Lite, Mettle, Tide Free, ANNA Pay As You Go, Allica and the Co-operative Bank. High-street banks typically charge around £6.50 to £12.50 a month after an introductory free period — 12 months at most, 25 months at Virgin Money.

This is the number everyone compares and it is frequently the smallest one on the list.

2. Transaction charges

Most digital accounts include unlimited free electronic payments. Some do not. Tide’s free plan includes only five free transfers a month, then charges around 20p each — for a business making fifty payments a month that is £108 a year on an account advertised as free. Lloyds includes around 100 free outgoing payments, then charges per item.

3. Cash handling

The single biggest variable for anyone taking notes and coins. Three models, wildly different results:

• Flat fee per deposit — Monzo charges £1 regardless of amount.
• Percentage with a minimum — Starling charges 0.7% with a £3 minimum per deposit.
• Per £100 — the high street charges roughly £0.85 to £1.50.

At two deposits totalling £1,200 a month, the annual cash cost ranges from about £24 to about £216 depending on provider. See best for cash deposits.

4. The extras

International payments, CHAPS, cheques, unpaid item fees (£4 to £7), unarranged overdraft charges. Individually small, and easy to ignore until one applies.

5. The interest you do not earn

This is the cost nobody counts. An account charging nothing but paying nothing is not free if you hold a balance.

Monzo pays 1.30% on its free tier and up to 3.25% on Pro. Allica pays 2.83% on a free account. Starling pays nothing on business balances. On a £25,000 reserve that is a £325 to £705 annual difference — larger than most monthly fee comparisons.

Worked example: a consultant

£5,000 average balance, 25 payments in and out a month, no cash, no cheques. Fees at a free digital account: £0. Interest at Monzo Lite: £65. Net: minus £65 — the account pays you. The same business at a high-street bank in year two pays roughly £102 in fees and earns about £50, a net £52 cost. A £117 annual swing on a business that barely uses the account.

Worked example: a café

£2,500 a week in cash, £10,000 average balance. At 0.7% percentage cash charging, roughly £910 a year in cash fees alone. At £1.20 per £100 on the high street, roughly £1,560 plus £102 in fees. At the Co-operative Bank’s 1.5%, roughly £1,950.

Here the practical questions take over — Post Office capacity, security, night safes — but the numbers show why cash businesses need to model this rather than pick on brand.

Is a paid account ever worth it?

Sometimes, and the reason is usually interest rather than features. Monzo Team costs £300 a year and lifts your rate from 1.30% to 3.25%. That pays for itself above roughly £15,400 of balance.

The opposite is also true. Tide Max costs £839.88 a year and pays 3.25%. At £25,000 that is a net loss against Tide’s own free plan — the highest advertised rate on their chart is the worst outcome for most businesses.

How to cut what you pay

• Consolidate cash deposits. Where a minimum charge applies per deposit, fewer larger deposits cost less.
• Use a machine, not a counter, if your bank prices them differently. Lloyds charges nearly double at the counter.
• Move your reserve to an account that pays. You do not have to bank everywhere you save.
• Model year two, not year one. Introductory free periods always end.