Could your business cash be working harder?

A business savings account can be a beneficial way of getting your business cash to work harder, as it allows you to earn interest on surplus funds that might otherwise be sitting idle and unused within daily cash flow. Many businesses will take advantage of these accounts to gradually grow their funds through compounding interest.

What is a business savings account?

A business savings account is a place where businesses can deposit their surplus money that is not functioning as part of their daily cash flow, allowing them to earn interest on these funds.

These accounts come in the same varieties as standard savings accounts: easy access, notice and fixed-term bonds. As a result, businesses can easily tailor the account they choose to the specific purpose of their funds, subject to how frequently they need to access them.

How could business cash earn interest?

Rather than leaving excess money to sit idle in a standard account, a business savings account provides a place where these surplus funds can generate interest and grow even while they’re not being used within the business’ standard cash flow. Many businesses take advantage of these accounts to maximise their earnings, adding interest on top of their standard intake to create extra financial growth wherever possible.

How much access might the business need?

Many businesses will opt for accounts with flexible access options, such as an easy access business savings account. The level of access needed depends on the specific purpose of the funds. However, one of the most common reasons for opening a business savings account is to build up 3-6 months’ worth of running expenses as a safety net against any unforeseen costs or to save towards specific upcoming bills. As a result, the ability to easily deposit and withdraw money with immediate effect is often desirable.

What eligibility and account rules should be checked?

Some important factors to consider are that business savings account owners must be UK tax residents in order to qualify for eligibility. Many providers enforce both minimum and maximum annual turnover limits to qualify for these accounts, as well as minimum opening deposits ranging from £1,000 to £10,000. A business must naturally be solvent to qualify and it’s helpful to consider what specific type of account you wish to use (easy access, notice or fixed rate) and the corresponding conditions.

Could your business cash be working harder?

To summarise:

• Business savings accounts are a place where a business can deposit surplus cash to earn interest, rather than sitting idle.
• These accounts come in easy access, notice and fixed rate varieties to suit the various potential purposes of your savings.
• Businesses generally prefer easy access accounts because they allow frequent deposits and withdrawals to keep their cash flow and interest earnings efficient. However, other types of account can prove beneficial once a lump sum can be set aside for longer periods.
• To qualify for a business account, owners must be UK tax residents, and many business account providers will set both minimum and maximum annual turnover limits to qualify for their product.

Frequently asked questions

Is it worth putting business cash into a savings account?

A savings account can allow you to earn interest on your business cash, essentially allowing it to grow further while it’s sitting idle. In this way, it can be well worth putting business cash into a savings account.

How much cash should a business keep in an easy access account?

It can be beneficial to keep anywhere between 3-6 months’ worth of operating expenses in an easy access account, as a safety net against both unexpected expenses and planned costs such as upcoming bills.

What should I compare when choosing a business savings account?

Checking the AER, frequency of interest payments, access rules and any potential account fees are all among the things it’s useful to compare when choosing a business savings account.

What’s the difference between easy access and fixed-term business savings?

Easy access accounts allow for immediate withdrawals and allow you to deposit funds as frequently as you want. Fixed-term savings, on the other hand, limit your access until the end of an agreed term but tend to offer more competitive and consistent interest rates.

Are business savings protected by the FSCS?

Yes, eligible business savings are protected by the FSCS up to a limit of £120,000 per eligible banking provider.

Do businesses pay tax on savings interest?

Businesses do pay tax on savings; however, the rates depend on the type of business. Limited companies are subject to corporation tax on all their savings. Sole traders and partnerships, meanwhile, benefit from both the Personal Allowance and PSA depending on their tax band and earnings.

How often should I review my business savings?

Most businesses will review their savings at least quarterly, to ensure they’re still stored in the most suitable account and are benefiting from competitive interest rates, as well as ensuring their cash flow remains fluid and any excess is being swept into savings to benefit from interest earnings.

Where can I check the latest rules and product terms?

You can review the latest rules and terms here.

Next steps

If you’re wondering could your business cash be working harder, the following pages provide further helpful information:

Explore business savings

View current interest rates

View all savings products

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