62% of new England sole traders use challenger banks as primary account

The business banking landscape for sole traders in England has undergone a near-complete transformation in three years. Yolist registration data, which captures business account type at the point of adding a listing, shows that 62% of new sole traders registering in 2025 listed a challenger bank as their primary business account — up from 44% in 2023 and 21% in 2021.

The three dominant challengers (Starling, Monzo Business, Tide) each offer free-to-open accounts with features that traditional banks have only recently begun to match: instant notifications, automated tax pots, integrated invoicing, and accountant access for nominated advisers.

Traditional banks retain dominance in two segments: limited companies (where relationship management and credit facilities drive preference) and trades with high cash-handling requirements. NatWest, Barclays, and HSBC collectively account for 71% of limited company accounts in the same sample, compared to 38% of sole trader accounts.

For accountants — who deal with both segments daily — the bifurcation creates workflow implications. Cloud accounting software compatibility (Xero, QuickBooks) is near-universal among challenger banks; patchy for legacy business banking. The Making Tax Digital transition is expected to further accelerate challenger adoption: Starling's native MTD-ITSA integration (launched November 2025) offers a seamless sole trader workflow that no high-street bank has yet replicated.

The competitive pressure is showing: NatWest Business Banking reduced its sole trader account fee from £5/month to free in January 2026, directly in response to challenger growth.