Reduce your tax bill as a sole trader
Sole traders are regarded as Individuals for tax purposes, therefore the money in the business bank account belongs to them rather than the business. Any interest earned on this money is subject to tax of 20% at the source. However, there is a way to reduce your tax bill as a sole trader.
Instead, you can open a mini cash ISA and invest up to £15,240 per annum (2015/ 2016 tax year). The interest earned grows tax free. Many sole traders use this kind of account to save for their annual tax bill in January and if applicable their July payment on account. Remember that if you have a partner they also receive the same annual mini cash ISA allowance that could also be funded by the business.
Unfortunately this is not allowed for limited companies because the money belongs to the business.