A Knight Banneret must not be confused with a Baronet – the latter title did not come into use until the 17th Century and was (and is) in effect an hereditary knighthood.
In the Middle Ages a Banneret was a senior knight, either by experience or wealth, but more likely the latter. He was marked by entitlement to a rectangular banner, as opposed to the pennons carried by lesser knights – technically “knights bachelor”. The qualifying income seems to have been £200 a year, although many were much richer. Kings who wanted to promote a knight with an inadequate income to the rank of Banneret would often give them a money grant to make up the difference.
A Banneret would have a larger retinue than an ordinary knight, and the retinue might well include lesser knights in its composition. He was also paid double the war wages of an ordinary knight.
In the 14th Century, it was common for Knights Banneret to receive an individual summons to Parliament. Where they did, it is hard to distinguish them from a parliamentary baron, who normally received an identical summons. (The first barony by letters patent was not created until 1387.)
The distinction seems to be that a Knight Banneret’s individual summons was not usually passed to his heir. If it was, in effect, a parliamentary baronage was created. Nigel Saul (1) gives the examples of Sir Roger Beauchamp (summoned between 1363-1379), Sir Richard Stafford (1371-1379) and Sir Guy Brienne (1350-1389). These men’s heirs were not summoned. It is tempting to think of them as Life Peers, but this is anachronistic.
In the fifteenth century the distinction between gentry on the one hand and peerage on the other became much clearer. This is at least in part because all new peerages were now created by letters patent. An effect of this was to limit the inheritance of peerages to heirs male, except in the case of the earlier creations, because letters patent almost invariably excluded female inheritance.
(1) Knights and Esquires: The Gloucestershire Gentry in the Fourteenth Century, Nigel Saul. Page 8.