Sole traders don’t legally need a separate business bank account. Unlike limited companies, which must keep business and personal finances separate, a sole trader can use a personal account for everything. So why do most sole traders open one anyway?

Because it makes everything easier. A separate account means clean bank feeds for your MTD-compatible software, no mixing of personal and business transactions, professional-looking invoices and payments, and far less time spent on bookkeeping. From April 2026, if your qualifying income is over £50,000 (check HMRC’s MTD eligibility guidance to confirm), you’ll need MTD-compatible software — and most of it works best with a dedicated business bank feed.

The good news: the best sole trader accounts in 2026 are free, with no monthly fee and no charges for standard digital payments. The market has changed dramatically in the last few years — digital banks now match or beat the high street on features, and several have built-in MTD filing that saves you buying separate software.

Here’s the full comparison, with fees, features, MTD compatibility, and current sign-up offers. Fees change frequently — always check the provider’s site before applying.

Affiliate disclosure: Some links below may earn us a commission at no cost to you. This doesn’t affect our recommendations — we recommend the accounts we think are best for sole traders, not the ones that pay the most.

The quick comparison table

Provider Monthly fee Free period Built-in MTD? Accounting integration Best for
Starling £0 Permanent Yes (Income Tax free; VAT £7/m until Apr 2027, then £14/m) FreeAgent, Xero, QuickBooks Best overall — free, great app, built-in MTD
Monzo Business Lite £0 Permanent Yes (Income Tax via Sage) Xero, FreeAgent, Sage (Pro plan) Built-in MTD on the free tier
Tide £0 (free tier) Permanent Income Tax free; VAT on paid Accounting plans Xero, QBO, FreeAgent, Sage Invoicing and savings pots
Mettle £0 Permanent Via FreeAgent (included free) FreeAgent, Xero, QBO Free FreeAgent — best if you want accounting included
ANNA Money £0 (Basic) Permanent Income Tax free; VAT £4.50/filing Xero, QBO, Sage, FreeAgent Invoicing and tax tools
HSBC £0 Permanent Via Sage (12 mths free) Xero direct feed Branch access, no ongoing fee
Barclays £8.50 (12 mths free) 12 months Via Sage/Xero/QBO Sage (12 mths free) Branch network, 12 months Sage free
Lloyds £10 (12 mths free) 12 months Yes (Income Tax, free) Xero, QBO, Sage Built-in MTD with high-street branch access
NatWest Pay-per-transaction 24 months (start-up) Via FreeAgent (included) FreeAgent, Xero, QBO 2 years free + free FreeAgent
Santander £9.99 (12 mths free) 12 months Via Xero/QBO/Sage Xero (6 mths free) 6 months Xero + £200 gift card
Metro Bank £0 if £6k+ balance Conditional Via Xero Xero direct feed Cash handling, branch access
Virgin Money M £0 Permanent Via Xero/Sage Xero (6 mths free) 0.25% uncapped cashback on card spend
TSB £5 (30 mths free) 30 months Via software Xero, QBO, Sage, FreeAgent Longest high-street free period
Coconut £3.60-£12 30-day trial Yes (Income Tax) Built-in accounting Banking + accounting in one app
Countingup £3-£18 (3 mths free) 3 months VAT only Built-in accounting Budget option with built-in bookkeeping

The best free accounts for sole traders

1. Starling — best overall

Starling’s Sole Trader account is the standout choice for most sole traders. It’s permanently free with no monthly fee and no charges for UK Faster Payments, direct debits, standing orders, or debit card spending. The app is award-winning, with instant notifications, receipt capture, and Spaces (pots for setting aside tax money).

MTD: Built-in MTD for Income Tax is included free. MTD for VAT is available with the Accounting Plus add-on at £7/month until April 2027, then £14/month. This means if your qualifying income is over £50,000 from April 2026, you can file your quarterly updates directly from the Starling app without buying separate software — a real cost saving.

Integrations: Connects to FreeAgent, Xero and QuickBooks via bank feed if you prefer external accounting software.

Downsides: No overdraft for sole traders. Cash deposits at the Post Office cost 0.7% (minimum £3). No branch access.

Best for: Sole traders who want a free, reliable account with built-in MTD and an excellent app.

2. Monzo Business Lite — built-in MTD on the free tier

Monzo Business Lite is free with no monthly fee. UK card payments and Faster Payments are free. Cash deposits cost £1 at the Post Office or PayPoint (limit £3,000/month for sole traders).

MTD: Built-in MTD for Income Tax (powered by Sage) is included on all plans, including the free Lite tier. This is a significant advantage — you get MTD filing without paying for separate software.

Integrations: Xero, FreeAgent and Sage feeds require the Pro plan (£9/month) or Team plan (from £25/month). The Pro plan includes 6-8 months of Xero free.

Downsides: Cash deposit fees. Overdraft available (up to £3,000, 39% EAR) for eligible sole traders but expensive. Accounting integrations require the paid plan.

Best for: Sole traders who want built-in MTD on a free account and don’t need external accounting software integration.

3. Tide — free tier with invoicing

Tide’s free tier has no monthly fee and includes 5 free UK bank transfers per month (then 20p each). Card spending in GBP is free. The free plan includes invoicing and savings pots (up to 3.75% AER).

MTD: Tide’s free MTD tools cover Income Tax on all plans. VAT filing requires a paid Tide Accounting plan (from £13.99/month for sole traders). For full accounting, you can also connect external software (Xero, QuickBooks, FreeAgent, Sage).

Integrations: Feeds to Xero, QuickBooks, FreeAgent, Sage, KashFlow, Clear Books.

Downsides: 20p per transfer after the first 5 each month. Cash deposits: £2.50 up to £500, then 0.99% at Post Office; 3% at PayPoint. No overdraft.

Best for: Sole traders with low transaction volumes who want invoicing included.

4. Mettle — free FreeAgent included

Mettle is NatWest’s app-only business account. It’s permanently free with no monthly fee and no charges for UK Faster Payments, BACS, or direct debits. ATM withdrawals cost £1.

MTD: FreeAgent is included free for the life of the account — and FreeAgent is MTD-ready for both Income Tax and VAT. This is effectively free accounting software bundled with your bank account.

Integrations: FreeAgent (included), Xero, QuickBooks.

Downsides: Only available to sole traders or limited companies with 2 or fewer owners. One app user only. No branch access. Cheque deposits via app up to £1,000 only.

Best for: Sole traders who want free accounting software (FreeAgent) bundled with their bank account — the cheapest all-in-one option.

5. ANNA Money — invoicing and tax tools

ANNA Money’s Basic plan is free with no monthly fee. The first £1,000 of incoming transfers per month is free, then 0.95%. Outgoing transfers are unlimited and free.

MTD: Built-in MTD for Income Tax (ITSA) is free. VAT filing is available via ANNA’s XLS VAT Filing tool at £4.50 +VAT per filing — useful if you need occasional VAT filing without a full accounting subscription.

Integrations: Xero, QuickBooks, Sage, FreeAgent, Clear Books.

Downsides: 0.95% fee on incoming transfers above £1,000/month on the Basic plan. Cash deposits from 1%. Paid plans (£12.90-£59.90/month) for higher transaction volumes.

Best for: Sole traders who want built-in MTD and invoicing, and whose incoming payments are under £1,000/month.

High-street bank accounts for sole traders

If you want branch access, cash deposit facilities, or an established relationship with a high-street bank, these are the best options:

HSBC — free ongoing, no monthly fee

HSBC Small Business Banking has no monthly fee, permanently. Standard digital transactions and debit card payments are free. Cash deposits at the Post Office cost 1.5% (free from 14 December 2026). SEPA payments 24p, CHAPS £17. HSBC also offers “My Business Finances” powered by Sage for MTD filing — free for 12 months, then a subscription applies.

Best for: Sole traders who want a high-street bank with no ongoing monthly fee and branch access.

Barclays — 12 months free with Sage

Barclays Business Current Account charges £8.50/month after the first 12 months free. Barclays includes 12 months of Sage accounting software free, then 50% off after that. Simple electronic payments, direct debits, standing orders, and debit card payments are free. Check the Barclays website for current sign-up offers — promotional bonuses are sometimes available for switchers.

Best for: Sole traders who want a high-street bank with Sage included and don’t mind paying £8.50/month after year one.

Lloyds — built-in MTD with branch access

Lloyds Business Current Account charges £10/month after 12 months free (increased from £8.50 in July 2026). The first 100 outgoing electronic payments per month are free, then 20p each. Notably, Lloyds includes a free built-in MTD for Income Tax tool — so you get high-street banking and MTD filing in one app. Lloyds also currently offers up to £400 in rewards (a £200 boost plus a £200 Amazon gift card) and 6 months of Xero free for new customers — check the Lloyds website for current availability.

Best for: Sole traders who want branch access and built-in MTD without paying for separate software.

NatWest — 2 years free for start-ups

NatWest’s Start-up account offers up to 24 months of free everyday banking for businesses in their first year with turnover under £1m. FreeAgent is included free for the life of the account. After the free period, fees are per-transaction (35p per automated payment).

Best for: New sole traders who want the longest free period and free FreeAgent.

Santander — 6 months Xero + £200 gift card

Santander Business Current Account Classic charges £9.99/month after 12 months free. The sign-up offer includes 6 months of Xero free and a £200 gift card (Beyond Banking offer, T&Cs apply).

Best for: Sole traders who plan to use Xero and want a sign-up incentive.

Metro Bank — free if you keep £6,000 balance

Metro Bank’s Business Account is free if you maintain a daily balance of £6,000 or more. Below that, it’s £8/month plus 30p per transaction. Includes free Invoice It invoicing and Xero direct bank feed.

Best for: Sole traders who keep a healthy balance and want branch access with extended opening hours.

TSB — 30 months free

TSB Business Plus offers 30 months free, then £5/month (waived if your average balance is over £10,000). Currently restricted to existing TSB customers in some cases — check eligibility before applying.

Best for: Existing TSB customers who want the longest high-street free period.

Virgin Money M Account — free with cashback

Virgin Money M Account for Business is permanently free with 0.25% uncapped cashback on debit card spending. Includes 6 months of Xero free. Day-to-day digital transactions, direct debits, and standing orders are free.

Best for: Sole traders who want cashback on card spending and a permanently free account.

All-in-one banking + accounting apps

If you want your bank account and accounting software in one app, these combine both:

Coconut — banking + MTD accounting

Coconut offers a business current account with built-in accounting and MTD for Income Tax filing. Plans start at £3.60/month (Side Hustle) or £12/month (Professional), with a 30-day free trial. Includes invoicing, tax estimates, and automatic expense categorisation.

Best for: Sole traders who want one app for banking, bookkeeping, and MTD filing.

Countingup — budget option

Countingup starts at £3/month after a 3-month free trial. It combines a business current account with bookkeeping, invoicing, and tax estimates. Has built-in MTD for VAT but not Income Tax. 30p per UK bank transfer in or out.

Best for: Sole traders on a tight budget who want banking and basic bookkeeping in one app.

How to choose: decision guide

If you want free and simple → Starling

Free, great app, built-in MTD for Income Tax, no transaction fees for digital payments. The default choice for most sole traders.

If you want free accounting software included → Mettle

Free account with FreeAgent included (which would normally cost £15-£25/month). Best all-in-one value.

If you want built-in MTD on a free account → Monzo Business Lite or Starling

Both offer MTD for Income Tax filing on their free tiers. Monzo uses Sage; Starling uses its own tool.

If you take cash regularly → Metro Bank or a high-street bank

Digital banks charge 0.7-3% for cash deposits. If cash is a significant part of your income, a high-street bank with branch access will be cheaper overall.

If you want a sign-up bonus → check Lloyds and Santander

Lloyds currently offers up to £400 in rewards (£200 boost + £200 Amazon gift card) and Santander offers a £200 gift card plus 6 months of Xero free. These are time-limited offers — check the banks’ websites for current availability before applying.

If you want one app for everything → Coconut or ANNA

Banking, bookkeeping, invoicing, and MTD filing in a single app. You pay a small monthly fee but avoid buying separate accounting software.

Do you actually need a business bank account?

Legally, no. HMRC doesn’t require sole traders to have a separate business account. You can use a personal account for business transactions — see our personal card for business expenses guide for how HMRC views mixed finances.

But practically, a separate account makes life easier:

  • Clean bank feeds for MTD-compatible software
  • No time spent separating personal and business transactions
  • Professional appearance to clients (payments to “Your Name” vs “Your Business Name”)
  • Easier to track allowable expenses
  • Most MTD software requires a business bank feed

If you’re just starting out with low turnover, a personal account is fine. Once you’re regularly invoicing clients or need MTD software, open a business account — the free options above cost nothing.

What you need to open a sole trader business account

Most providers require:

  • Proof of ID — passport or driving licence
  • Proof of address — utility bill, council tax bill, or bank statement (usually within 3 months)
  • UK residency — you must be a UK resident
  • Age 18+ (16+ for Monzo)
  • HMRC registration — some banks ask for your UTR number; others don’t require it until you’re trading

For digital banks (Starling, Monzo, Tide, Mettle, ANNA), the application is done entirely in-app and usually takes 10-15 minutes. Most accounts are opened same-day or within 2-3 days. High-street banks may require a branch visit or take 1-2 weeks.

If you’ve lost your UTR number, see our lost UTR guide. If you haven’t registered as self-employed yet, see our first-year self-employed checklist.

The bottom line

The best sole trader business account in 2026 is the one that’s free, has built-in MTD, and integrates with how you work. For most sole traders, that’s Starling — free, excellent app, built-in MTD for Income Tax, and no transaction fees. If you want free accounting software bundled in, Mettle (with FreeAgent) is the best value. If you want branch access and cash facilities, HSBC is free ongoing or Lloyds includes built-in MTD.

Don’t overthink it — you can switch accounts later if your needs change. The important thing is to separate your business finances from your personal ones before MTD starts and your bookkeeping gets more complex.

Just started out? See our starting out as self-employed guide for the full picture on registration, tax, records and deadlines.

Back to Self Assessment Help: Accountants & Filing Services · Back to Guide