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Do I need a PayPal business account for my small business?

4-minute read

Person using PayPal app on phone and using laptop

PayPal has long been around as a simple and safe way to take payments online as it offers automatic protection for both buyers and sellers.

Now with greater competition out there and PayPal increasing fees for business purchases between the UK and Europe from November, you might be wondering whether PayPal is right for your business.

Read on to find out more about PayPal business accounts, the difference between using a personal and business account, and fees you need to be aware of.

What is a PayPal business account?

A PayPal business account can be used for processing payments online and in person, and you can link it up with your business bank account to easily transfer your money.

With a PayPal business account, you can:

  • accept a wide range of payment types online – customers don’t need a PayPal account to pay you
  • take payments on the go with a card reader and your smartphone
  • use a QR code to take payment via the PayPal app
  • create and send invoices
  • integrate PayPal checkout into your website
  • have multiple logins for up to 200 employees

Do I need a PayPal business account?

You don’t have to have a PayPal business account, but it has more features than a personal account and allows you to trade under your business name.

For example, it’s useful if you have an online shop and want to integrate PayPal into your checkout so customers can pay without leaving your website.

Can I use a PayPal personal account for business?

There’s no reason why you can’t use a personal account for business, but there are some drawbacks:

  • a customer can see your full name – this can appear less professional and doesn’t protect your privacy
  • there’s a fee for accepting credit or debit cards online
  • the features and merchant services are very limited
  • it’s confusing for tax purposes to mix personal and business transactions

While you might start out by using your personal PayPal account if you’re just making occasional sales, it’s a good idea to switch it to a business account as you grow. This means you can operate under your business name, accept more payment types, and benefit from additional features like online invoicing.

Free invoice template: download for your business today.

PayPal business account fees

While it’s free to open a PayPal business account, you’ll have to pay transaction fees every time a customer pays you for goods or services.

If you sell internationally, fees can add up quickly. And from November this year, this includes payments between businesses in the UK and those in the European Economic Area as PayPal is introducing new fees that’ll increase to 1.29 per cent.

There are no monthly fees or fees for closing your PayPal account though.

Rates for domestic transactions

These are the current PayPal business account fees you’ll be charged on transactions as a resident of the UK. The fixed fee depends on the currency you’re being paid in, but we’ve included the fixed fee for UK pound sterling for quick reference.

Payment type

Rate

Fixed fee for £GBP payments

Alternative payment method

1.20% + fixed fee

£0.30

Card funded payment from a user without PayPal account

1.20% + fixed fee

£0.30

QR code transactions (£10.01 and above)

1.50% + fixed fee

£0.10

QR code transactions (£10 and below)

2.00% + fixed fee

£0.05

All other commercial transactions

2.90% + fixed fee

£0.30

If you’re a registered charity and verified by PayPal, you may be eligible for discounted processing fees.

To see a full list of PayPal fees visit their website.

How to set up a PayPal business account

To get started, follow this step-by-step guide for opening a PayPal business account in the UK:

  1. Visit PayPal.com and click Sign up
  2. Select the ‘Business Account’ option and click Continue
  3. Enter your business email address and click Continue
  4. Enter a password, accept the privacy policy and user agreement, and click Create Account
  5. Use the drop-down menus to add information about your business (category, sub-category, business URL, country, credit card statement name). Click Continue
  6. Complete the form with information about you (date of birth, nationality and home address). Click Submit
  7. Check your inbox for an email from PayPal asking you to verify it’s you
  8. Once verified, your account will be ready to use

Find out more about setting up a commerce platform with PayPal.

Do you use PayPal for your business? Let us know in the comments.

Looking for self-employed insurance?

With Simply Business you can build a single self employed insurance policy combining the covers that are relevant to you. Whether it’s public liability insurance, professional indemnity or whatever else you need, we’ll run you a quick quote online, and let you decide if we’re a good fit.

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Written by

Catriona Smith

Catriona Smith is a content and marketing professional with 12 years’ experience across the financial services, higher education, and insurance sectors. She’s also a trained NCTJ Gold Standard journalist. As a Senior Copywriter at Simply Business, Catriona has in-depth knowledge of small business concerns and specialises in tax, marketing, and business operations. Catriona lives in the seaside city of Brighton where she’s also a freelance yoga teacher.

This content is for general, informational purposes only and is not intended to provide legal, tax, accounting, or financial advice. Please obtain expert advice from industry-specific professionals who may better understand your business’s needs. Read our full disclaimer

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