IT Contractor Mortgages and Pensions

If you are a limited company contractor, one of the first things you need to do is open a dedicated business bank account. We look at the steps you need to take complete the process.

Unlike sole trading, where your personal and business income are treated as one, as a limited company director your personal and business finances are kept completely separate.

As a limited company is a distinct legal entity, you must not use your personal bank account for any of your company's affairs.

Choosing a business account

When choosing a bank account, there are a number of things you should consider:

1) Your personal bankers may not necessarily provide the most competitive business account offerings (but there is also a convenience factor of using the same provider).

2) You could benefit from opening a separate business savings account for any VAT and corporation tax liabilities you build up.

3) Even if interest rates are not currently worth comparing, many banks offer 2 years free business banking, or at least very low transaction charges. Make sure you also find out what ongoing monthly charges apply once any free banking period expires.

Read more in our guide to choosing a contractor company bank account.

Opening your account

Having informed your chosen bank that you want to do business with them, you will typically need to meet up with a 'small business banker'.

Assuming you have a UK-registed company, you will need to take along various bits of paperwork, such as:

1) Certificate of incorporation - with your company name and number.

2) Passport and/or Drivers licence to prove your own identity.

3) Recent utilitiy bills and personal bank statements (if you don't already have a personal account there).

In theory, you'd expect to have a bank account opened within 7-10 days at most, although many contractors may have experienced less than impressive service from some high street names.

If you haven't received confirmation of your new account details in this time, chase up your contact in the business banking section.