How Can New Companies Open a Business Bank Account in the UK?
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Starting a business abroad can be a difficult journey due to legal and financial requirements, but opening a business bank account can streamline the process and make managing finances easier. Opening a business account for non UK residents can be more complicated, but it is essential for processing finances, collecting payments, and building trust with your clientele. Let’s explore why your business needs a bank and how to open one.
Why does your business need a bank account?
A business bank account brings about credibility and keeps you legally compliant. In the UK, it is legally required for certain business structures such as a limited liability company (LLC), limited liability partnership (LLP), or a corporation, to open a business account.
Additional reasons to have a business bank account can be as follows;
1. Simplifies tax preparations
2. Makes your business professional
3. Builds trust with your customers and vendors
4. Expansion in operations
5. Identity protection
6. Receive credit card payments
From a bank’s perspective, who is a non-UK Resident?
A non-UK resident is anybody who resides outside the UK permanently.
Why might it be difficult to open a business bank account as a non-UK Resident?
Despite the difficult process of opening a business bank account in the UK for foreign nationals, it is not any different for UK residents also who have to provide more supporting documents and meet specific criteria e.g. prove their tax residency.
Professional trajectory is the more advised way to go as regulations and requirements checkpoints need to be observed. The requirements could be proof of identification, proof of address, financial statements, company’s financial projections, etc.
Banks and financial institutions in the UK are regulated by the Financial Conduct Authority (FCA). FCA ensures that institutions comply with regulations to protect consumers, as well as the stability of the financial system. They also keep track of these rules and impose sanctions for any violations of these laws.
Money Laundering Regulations, imposed in the UK, stipulate the main guidelines of Anti-Money Laundering legislation (AML) which will make the banks and other financial institutions very vigorous in their AML programs and strategies to ensure that they are used to detect and prevent illegal funds from accessing the economy.
All banks need to closely monitor customer loans and prevent the laundering of money by criminals, just like everybody else. The majority of banks are pursuing AML compliance through KYC screening which can be referred to as "know your client". Such identification includes the examination of identity documents to authenticate the identity of clients and the observation of account activity to detect any suspicious activity. This, in turn, will curtail the cases of money laundering and financing of terrorism, within the financial system.
With these stringent regulations in place, it makes it quite hard for foreigners to open business accounts since many countries do not have these agencies and databases in place to cross-check people's identities and financial activities.
As such, non-UK residents must go through strict scrutiny and documentation procedures if they want to open a business account in the United Kingdom. Banks need to be certain beyond doubt of your identity and that you intend to use the bank account for legitimate business purposes.
Residents of which countries are likely to be more successful when applying for a UK business bank account?
Residents from countries with the most developed infrastructure are likely to be more successful when applying for a UK business bank account. This is because they have agencies that do identity checks and have verification processes that align with the UK banking standards.
These are countries like the United States, Canada, New Zealand, Australia, European countries, Pakistan, and India.
What else do banks look at when considering an application for a business bank account from a non-UK resident?
When opening a business bank account in the UK, the bank does checks and verifications to ensure the applicant meets the criteria for compliance, diligence checks, and risk assessment.
Diligence Checks
Banks conduct screening for Politically Exposed Persons (PEPs), individuals on sanction lists, and countries on watchlists. The screening process helps identify and manage potential financial crime and compliance risks associated with these individuals.
This is to enhance transparency and prevent money laundering. Documentation, transparency, and showing the legality of funds and the legitimacy of business operations are primary components of showing the feasibility of a startup.
Type of Business
There are some businesses a bank may consider as a higher risk such as gambling or cryptocurrency, firearm business, and adult entertainment. Banks often refuse to open business bank accounts to these businesses due to the increased risk of money laundering and fraudulent activities.
IT, finance, and tech companies, especially those with innovative business models, such as telecommunication firms selling data or minutes are also under the list of 'undesirable industries'. This is because their revenue streams and financial flows might be complex or unconventional, making it difficult for banks to assess and monitor them effectively.
Company set up
UK company incorporation is a step to consider when you want to open a business bank account as a non-UK resident. You can either set up the business using a physical address i.e. by renting a physical space in the UK and using the address for the company or by using a virtual address. Proof of address is one of the requirements needed when submitting your documents to open a business bank account. This verifies the legitimacy of the business and ensures compliance with regulations.
Evidence of trading
You may need to provide proof that your business is trading by sharing evidence like invoices issued to customers, payment receipts for the payments you have made for your business expenses, contracts with suppliers, etc. You can choose to apply for a business account once your business is established and trading.
Additionally, building a website for your business can be helpful to earn trust and increase your business reputation.
You can also set up eCommerce accounts on platforms like eBay and Amazon to showcase your products and services, which can be another evidence showing that your business is trading.
These types of setup can demonstrate that your business model works and attracts high market demand increasing the chance of your business bank account approval.
What should I consider when choosing a bank for my business?
Choosing a bank with a track record of serving non-UK clients and providing an array of necessary facilities for clients of international origin can be of tremendous help when the process is simplified and a client-friendly approach is guaranteed.
You should also consider the fee charges offered by the banks. Some banks charge surprising hidden fees that can take a toll on your finances, so it is better to do your research before settling for a bank.
Customer services and facilities offered by banks, such as online and mobile banking can be important factors to consider when choosing a bank.
In the UK, there are two main types of banks: traditional banks (also known as high street banks) and online banks / virtual banks.
Is a UK High Street Bank better for my business as a non-UK resident?
High street banks refer to major retail banks that have a physical presence on the high streets of towns and cities in the UK. These banks offer a wide range of services from local business accounts, paying in cheques, meeting a banker personally, and withdrawing cash.
However, non-residents who have a bank affiliation in their own country may find it easier to open an account with a bank that has international branches.
Leading traditional banks that may offer services to non-UK residents include;
1. HSBC
2. NatWest
3. Barclays
4. Lloyds
5. Royal Bank of Scotland
How to open a business bank account with high street bank for non UK residents?
To open a business bank account with high street banks, you will need to:
Choose a bank that suits your business needs.
Check if you hit all the eligibility criteria
Make sure you have all the necessary documents such as;
Proof of ID for all company directors - national Identity Card, passport, or driving licence.
Proof of address- utility bill, bank statements, or tax statements.
Business address
Contact details
Company registration number
Estimated annual turnover
Submit an application form online or in-branch.
After your application has been approved, you will receive your account number, sort code, and debit card.
Physical banks are likely to insist that at least one director should be a UK resident, who will be present during the process of opening a bank account.
Other physical banks may require one or all company directors (according to the bank’s discretion) to travel to the UK to open an account, meet with a bank representative, and present relevant documents.
It is important to note that you can open a business bank account once your company is formed and trading. Once rejected you cannot get a 2nd chance.
Should I apply for a virtual bank account for my UK business?
The digital era provides the platform for opening business accounts online for non-UK residents without any necessity of going physically to the bank office.
Internet banks tend to provide a lower rate of fees and have better functions for financial management. With online banking, account holders can connect and check their accounts constantly with any location within the coverage of the Internet. Furthermore, virtual banks normally provide appealing and consumable interfaces. Their customer service is accessible round the clock- day and night to assist with any possible arising problems.
It is, therefore, possible to reduce the anxiety and hardships that foreigners face in the UK in opening and managing a bank account since one of their challenges might be that they do not possess a UK residential address.
Virtual banks that offer services to non-UK residents include:
1. Monzo
2. Revolut
3. Tide
4. Starling Bank
5. Tandem
6. Monese
How to open a business bank account online for non UK residents
Choose a bank that suits your business
Have all the necessary documents such as proof of identity, contact information.
Visit the bank’s website and start the application process.
Fill out all the forms and attach all the necessary requirements accurately.
Examine the application form before submitting.
Await approva
These banks provide UK account details, sort codes, IBANS, and virtual and physical bank cards. Whilst some of these banks may need no proof of address, it could make it relatively easier for non-UK citizens to access banking services.
It is important to note that identity verification is required by the majority of banks. In some situations they might call you to verify, or use biometric verifications.
Nonetheless, a considerable amount of research needs to be done and services offered by a bank should be compared and weighed before the final decision is arrived at. It is also very important that you find out in advance if there will be any restrictions that will limit and affect non-UK residents.
How many bank accounts should I open for my UK Business?
You can open 2 accounts from different banks for convenience. This way, you can have a wider range of banking options that cater to your business. Additionally, 2 accounts are convenient in case 1 account faces financial issues like frozen accounts or any other issues.
What documents do banks need to see when I apply for a UK business bank account as a non-UK resident?
It is important to do your research on the requirements and documents needed to open a business bank account as a non-UK resident. In addition to that, it should be also considered that all needed documents should be ready when opening a business bank account. Documents needed are;
1. Proof of identification (ID card, driver’s licence, or passport)
2. Proof of address (physical or virtual address)
3. Income information
4. Tax identification number
5. Business letters showing the existence of a registered entity
Banks can require additional documents as well depending on their requirements.
How long does it typically take for a Business Bank account to be opened for a non-UK resident?
The timeframe to open a business bank account can be around 1 to 3 weeks depending on the bank’s procedures.
To summarise, an entrepreneur who is a non-UK resident has an opportunity to open a business bank account in the UK once their company is formed and trading. Having an option between conventional bank or digital bank, a non-UK resident can use a business bank account which suits their requirements the best. The roadmap to achieving this goal may be met with hurdles, however, they can be tackled with the necessary information, and support on the journey.
Remember that what matters most to getting a good business bank account for you in the UK is knowing your requirements, conducting a thorough analysis, and making smart choices. Therefore, you will not only have the ability to survive but to achieve financial stability in your new country.
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