The latest IT Contractor News from Contract Eye

A recent survey into the business banking habits of small businesses shows that the major banks are making billions each year from transaction and standing charges alone.

The poll, commissioned by a new B2B financial services company, CashFlows, suggests that monthly banking fees are costing UK businesses over £2.3 billion per year.

A mere 21.9% of businesses pay no charges for having a business account, and almost 24% pay anything between £1 and £25 per month for the privilege.

Limited company contractors are less likely to incur significant monthly charges compared to other types of business, as they tend to have a small amount of monthly transactions, however many standard business accounts will apply a monthly standing charge, regardless of the number of transactions made.

How to get a free business bank account

Most major banks target new businesses with 'free business banking' deals - often for 12 to 24 months, with free transactions up to a certain level, and a range of other 'extras' (most of which are completely useless for contractors). You can also find accounts which remain free on an ongoing basis provided that you are a low transaction client.

Above all, you should establish what your ongoing banking costs will be once any promotional period expires, as you could end up paying hundreds each year for the luxury of processing a few monthly Bacs payments from your agency each month.

Although offers change all the time, at the time of writing, Lloyds are offering 18 months' free banking, Barclays offer up to 2 years' free banking, and Cater Allen (part of Santander) offer free ongoing banking, but you will need to apply via an intermediary such as your accountant.

There are other considerations to make when comparing banks, although cost and customer service are likely to be of most interest to contractors. You can read more in our tips for choosing a contractor bank account.