IF, launched as a stand-alone operation by the Halifax eighteen months ago, allows customers to offset their savings against borrowings while maintaining seperate accounts with the bank. The Inland Revenue has agreed with the bank that the savings element of its product can be applied to sole traders running small businesses as well as individuals.

Effective from 1 July 2002, IF says it will begin paying sole traders 4.01 per cent on £1 upwards, alongside the ability to offset their business savings against personal borrowing products for interest calculation purposes. By doing so, business owners could get an effective rate of up to 14.8 per cent on their business savings, claims the bank.

In contrast, NatWest pays just 0.60%, Barclays 0.70%, HSBC 0.75%, and Lloyds TSB 0.75% on more than £25,000 held in no notice or business reserve accounts, notes Intelligent Finance.

Jim Spowart, chief executive, Intelligent Finance, says: “Sole traders will now be able to get a competitive direct access savings account, but what’s more by offsetting their business savings against their personal borrowings, they will be able to get a whole lot extra out of their savings.”

The Cruickshank Report into competition in UK retail banking found that the big four high street banks were making excess profits at the expense of their small business customers. The Competition Commission has subsequently ruled that the clearers should pay base rate minus 2.5% interest on small business banking current accounts as a temporary corrective measure while new competition takes root.