How to grow and protect your company’s cash
Business savings explained
Cashflow is at the core of any business — but what happens to your idle cash? Too often, it just sits in a current account, missing out on potential growth. Instead, it could be earning interest in a business savings account.
This guide walks you through everything you need to know about business savings accounts, including the benefits, types, and how to choose the right one. We'll also go over managing your savings efficiently and avoiding common pitfalls.
Contents
What Is a business savings account?
A business savings account is a type of account that pays interest on the amount of money your business deposits into it. Different types include instant access accounts, fixed-term savings, and notice accounts. Each type of account has its benefits and drawbacks, making them suitable for different situations. We'll discuss each in more detail in the 'Types of business savings accounts' section later on.
Earn daily-paid interest with Revolut Business Savings
Check out our instant access savings accounts, with rates from 2.15% AER (variable).
AER stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year. Available on Grow, Scale, and Enterprise plans. Business Savings T&Cs apply
Business accounts vs Business savings accounts
The main difference between a standard business account and a business savings account is that savings accounts typically generate interest on the balance over time, while a standard business account is used for day-to-day transactions and financial management.
You wouldn't pay your regular bills from a savings account, for example. Some business accounts may provide interest on your balance, but this is often at a lower rate than accounts built for saving.
If you want to get better rates on your business savings, it’s best to find an account built for that purpose, like Revolut Business savings accounts.
Benefits of business savings
Gaining interest on your money can help your business prepare for unexpected expenses or whatever's next — such as market expansion or investment in new tools. Check out our guide to help you figure out how much your business should save depending on your industry and future plans.
Planning for the future
A well-planned savings strategy can help make your business' spare cash work for you. You'll earn substantial interest over time as your savings balance grows, compounding over time. For small and medium enterprises (SMEs), this could make a difference in being able to reinvest in your business.
You might use your business savings to:
- open a new office
- hire more staff
- fund research and development
- acquire a competitor
Safeguarding your money
A business savings account helps safeguard against unforeseen disruptions — like an economic downturn, unexpected expenses, or industry fluctuations. If you have savings readily accessible, you can prepare for challenges and respond flexibly, without interrupting daily operations.
Build and access emergency funds
Emergency funds are important for any business. They help you maintain operations during tough times. A dedicated business savings account allows you to create a financial buffer, which can offer peace of mind for things out of your control.
This is vital in industries susceptible to cashflow challenges, such as retail and hospitality — if you know that your sales will slow down in quieter months like January, then an emergency fund can help keep your operations running during that time.
If you’re saving to build up an emergency fund for your business, it’s important to consider the different types of savings accounts to ensure you can get access to your money, fast. If you’re saving in a fixed-term account, for example, you wouldn’t be able to withdraw your money until the end of the fixed-term agreement, so an instant access or notice account might be more suitable.
Types of business savings accounts
Instant access business savings
Instant access accounts provide the flexibility of withdrawing funds whenever you need to. They often have lower interest rates compared to fixed-term accounts, but the flexibility they offer provides peace of mind for businesses operating in a fast-changing environment. These are ideal for businesses that need more frequent access to their funds, while still wanting to earn interest on spare cash when they can.Fixed-term business savings
Fixed-term accounts offer less flexibility on accessing your funds once you've deposited them. You agree to leave your money in the account for a specified period (ranging from a few months to several years) in exchange for a higher interest rate. There can be penalties for early withdrawals, so these accounts are suitable for businesses with surplus cash they won’t need immediate access to.Notice accounts
With notice accounts, businesses need to give the bank a specific notice period before withdrawing funds. They often provide better interest rates than instant access accounts yet maintain some degree of flexibility. These are great for businesses wanting to take advantage of higher rates without committing to fixed terms.
How to choose the best business savings account
Here’s what you should think about when choosing a savings account for your business:
Interest rates and fees
Interest rates play a crucial role in determining how much your business can earn on its savings. When comparing accounts, look for competitive rates while also considering any fees associated with the account. Some accounts may have high fees, which could negate any interest earned.
Comparing business savings poviders
Not all banks offer the same services or rates. Research and compare various banks and financial institutions, considering their reputation, customer service, online accessibility, and whether they fulfil your specific needs. Online reviews can also provide useful insight into the customer experience. Read our recent comparison of instant access UK business savings accounts to help you get started.
Tax considerations for business savings
In the UK, the interest you earn on business savings accounts is taxed as income, as part of your corporation tax. As a registered business, you'll need to include this interest income in your company’s taxable income calculation.
For sole traders, the set-up is a bit different — you’ll need to consider your personal allowance as well as your other income. You can work out how much tax to pay as part of your annual self-assessment tax return. Find out more about the personal allowance on the UK Government website.
Make sure you keep accurate records — this will help when it comes to preparing your tax documents and staying compliant with laws and regulations.
Best practices for business savings
Here are some strategies you could consider as a starting point for managing your business savings:
- Setting savings goals: identify short and long-term savings goals tailored to your business' needs. That might be preparing for expansion, securing operating funds, or creating a buffer for unforeseen expenses. Clear goals will guide your savings strategy and help maintain focus.
- Automating deposits: if your cashflow allows, consider setting up automatic transfers to your business savings account on a regular basis. Automation ensures consistent saving and reduces the temptation to overspend, helping you reach your savings goals more effectively.
- Reviewing and adjusting your strategy: regularly reassess your business savings strategy and financial goals. As your business evolves, your savings needs may change, and so should the accounts you use. Compare interest rates, account terms, and your broader financial objectives periodically to make sure you're doing what's best for your business.
Common business savings mistakes
Navigating business savings can be a challenge, and some missteps can really set you back. Here’s what you should steer clear of:
- Keeping all your cash in one account: while it may be simpler to maintain all your funds in one place, it can hinder your ability to maximise interest earnings. Diversifying your accounts based on liquidity needs, interest rates, and saving goals can lead to a stronger financial strategy.
- Ignoring interest rates: choosing an account with low or no interest can cost your business over time. Always keep an eye on the interest rates your current accounts offer, and consider moving your funds to a more lucrative option if necessary.
- Not reviewing terms regularly: banking terms and interest rates can change frequently. Regularly reviewing the terms of your current accounts ensures you remain informed of any potential changes that could affect your savings strategy or profitability.
Wrapping up business savings
Understanding business savings is an important part of helping your business grow and succeed with the resources available to you. A dedicated business savings account isn't just a place to store cash — it serves as a crucial tool for managing liquidity, earning interest, and preparing for future challenges. By exploring the various types of accounts available, assessing the best savings options, and following a well-structured strategy, you can effectively safeguard your company's assets and optimise growth. Avoid common mistakes, and ensure you review your strategy regularly to adapt to changing business and economic landscapes.
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Business Savings FAQ
If you've got spare cash for your business, then you should look into business savings. It's better to leave your money somewhere it'll generate interest for your business, rather than leaving it in a business current account.
If you're not using business savings, you could be losing money to inflation, as prices increase over time and its value decreases.
Yes, you'll need to include any earnings from your business savings interest as income for tax purposes.
Sole traders will need to consider their personal allowance as well as their other income. You can work out how much tax to pay as part of your annual self-assessment tax return.
You'll need to consider which type of savings account is right for your business, and rates change regularly, so it's important to review every couple of months.
Read our guide to instant access business savings accounts to see some of the rates available.
Yes, building a healthy savings balance can help you manage your businesses cashflow more effectively when used correctly.
- Choose the right savings account for your needs
- Don't lock up more than you can afford in a fixed-term savings account
Learn more ways to improve your cashflow with our guide.
Summary box
- Enterprise — {TopRateGross} Gross,¹ 3.51% AER²
- Scale — {ScaleRateGross} Gross,¹ 2.75% AER²
- Grow — {GrowRateGross} Gross,¹ 2.25% AER²
Interest is calculated and paid daily to the Deposit Account. You’ll earn interest on any amount you withdraw from your Account until the calendar day prior to your withdrawal instruction.
This is based on a 365-day year. In a leap year, the Deposit Account Provider will add an extra day of interest on 29 February and include it in the next interest payment they make to your Account following that date.
Interest will begin accruing no later than the first business day following the day when your money arrives with the Deposit Account Provider. This can take up to 24 hours from the point of your instruction. This means that if you send money to Savings on Monday, but the Deposit Account Provider doesn’t receive the money until Tuesday, you’ll start accruing interest no later than Wednesday. It also means that if you send the money on a day the Deposit Account Provider is closed, it may not receive your money until the next day on which it is open.
Interest is calculated daily on the cleared balance in the account, using the interest rate applicable on that day, and is paid daily.
¹Gross is the rate of interest payable before any income tax is deducted.
²AER stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded on an annual basis.
Read more.Yes, the interest rate can change at any time. If the rate decreases, then we’ll let you know at least 30 days before the change is made.
If the rate increases, we’ll let you know within 30 days of the change being made.
A change to your rate could be instigated by the Deposit Taker, or as a result of a change in the proportion of any interest income being received by Flagstone and Revolut Business.
If the interest rate decreases, we'll inform you of the time frame within which we need to receive your instruction if you do not wish to continue with Savings at the new rate. If you don't provide us with such an instruction, we will consider that you have agreed to the change.
Enterprise — at the current interest rate: £1,000.00 would earn £35.10 interest after 12 months, for a final balance of £1,035.10. This is just an example and not based on your individual circumstances. It assumes that you don’t add or take out any money during the year.
Scale — at the current interest rate: £1,000.00 would earn £27.50 interest after 12 months, for a final balance of £1,027.50. This is just an example and not based on your individual circumstances. It assumes that you don’t add or take out any money during the year.
Grow — at the current interest rate: £1,000.00 would earn £22.50 interest after 12 months, for a final balance of £1,022.50. This is just an example and not based on your individual circumstances. It assumes that you don’t add or take out any money during the year.
You can manage your savings account through your Revolut Business app. Only those with the Business Owner role, or Savings View/Manage permission assigned to their role, will be able to apply for and manage your savings account.
If we receive your instruction to open a new Deposit Account before 12:00PM on a business day, we'll action your instruction that day.
If we receive your instruction to place additional funds into an existing Deposit Account before 12:00PM on a business day, we'll action your instruction that day.
There is deposit protection in place for £85,000 only. Any deposits over that amount are not protected. The maximum deposit value is dependent on plan (Enterprise is £2 million, Scale is £1 million, and Grow is £500,000).
If you provide an instruction to withdraw funds from a Deposit Account before 12:00PM on a business day, we will action your instruction that day.
On rare occasions, Deposit Account Providers fail to return payments to Flagstone on the correct day. In such an event, Flagstone escalates the issue rapidly with its relationship managers at the Deposit Account Provider and uses its best endeavours to ensure that the maximum delay is 24 hours.
You can make withdrawals to your Revolut Business account at any time. As long as we receive your withdrawal instruction before 12:00PM on a business day, we will execute your instruction that day.
The Deposit Account Provider will hold your money as a deposit. Just like other deposits, the money in your Revolut Business Savings account may be protected by the Financial Services Compensation Scheme (or FSCS as it is sometimes called).
This means that if the Deposit Account Provider provides FSCS coverage and if you meet the eligibility criteria yourself, then if the provider was to fail, you're guaranteed by the Scheme to receive back any eligible deposits you've made (through Savings or otherwise) up to £85,000.
Flagstone, as the trustee, would be responsible for administering your claim in conjunction with the rules of the scheme. The total value of deposits that the FSCS scheme covers and the timescales for payout may change from time to time.
An FSCS information sheet is available at any time in the Revolut Business app, and you can read more about FSCS protection on the FSCS’s website at fscs.org.uk.
Your deposit may become automatically repayable, less incurred costs or losses to the Deposit Account Provider, in certain circumstances including: material breach of the Terms, where the Deposit Account Provider is required to do so by law or regulation, if you become insolvent, or if any of Flagstone, Revolut, or the Deposit Account Provider reasonably considers there may be illegal or fraudulent activity.
None of Revolut, Flagstone, or the Deposit Account Provider will deduct tax from the interest you receive. Depending on your circumstances, you might need to pay tax on the interest you earn. You're responsible for paying any tax due to HM Revenue and Customs (HMRC). For more information, go to gov.uk/apply-tax-free-interest-on-savings.