Just to avoid any confusion, everything in this post is based on how things work in the UK and is for things available in the UK.
So far I have operated various business ventures off my personal bank account. Since I’ve been doing this as a sole trader, this is allowed. It does however make tax returns take more effort than necessary.
I recently had reason to interact with FreeAgent, which is some pretty cool accounting software that makes a lot of things simpler. Unfortunately to really use it to its potential, you need to link it to a bank account used solely for your business.
Conveniently, they offer a free account to anyone who has a Mettle account. I had seen Mettle before, and it is described as “the free mobile business account with no hidden fees or charges”, and is operated by NatWest, one of the big UK high street banks.
After a quick investigation, it seems one of the reasons it is free (which is the norm for personal accounts in the UK but not business accounts) is that it is not actually a bank account, but an “e-money account”. You get an account number as well as a debit card, but it is not subject to the Financial Services Compensation Scheme (a scheme in the UK in which the government guarantees bank balances up to a certain amount if a bank goes under).
That limitation seemed fine to me since I did not intend to keep a large balance, so I created an account. Sadly, I found out there are other limitations which basically rendered it useless to me.
Firstly, it does not come with an IBAN (international bank account number). This means I cannot receive payments from Apple. Secondly, the card is a prepaid card. Since it is tied to the e-money account they give you, it feels like a debit card to use, except some things just don’t accept payments using them. Crucially for me, Microsoft Azure and Google Ads.
In the end, I opened a business account with Royal Bank of Scotland. RBS and NatWest business accounts also get free FreeAgent accounts. The application was more involved (for Mettle, besides verifying your ID you just have to declare you aren’t in one of their list of prohibited business) but in the end was fine.