If you’re setting up a limited company, opening a business bank account will be at the top of your to-do list.
Your company must have its own dedicated bank account, as it is a distinct legal entity.
Even if this wasn’t the case, a separate bank account still makes sense, because it’ll be easier to stay on top of your business finances. And that means you’ll be less stressed come tax time.
But how do you pick the right business bank account? What are the must-have features and the pitfalls to avoid?
Scroll down to learn more about two popular free business accounts for contractors – from Tide and Zempler Bank.
Do you need a business bank account as a contractor?
If you run a limited company, the answer is yes. A company is a separate legal entity, so it must have its own bank account. Mixing personal and company money in one account isn’t allowed and will only cause problems.
When you contract through a limited company, clients are dealing with your company, not you as an individual. This separation protects your personal assets — if the company is sued, only the company’s funds are at risk.
Because of this, the money you invoice belongs to your company and has to stay in its own account. You can then pay yourself via salary or dividends, but company and personal funds must remain distinct.
It also makes practical sense. A dedicated account keeps your finances organised and saves hassle at tax time. Even sole traders — who aren’t legally required to have a separate account — often benefit from opening one.
Choosing a business bank account as an IT contractor: what to consider
It’s tempting to take the easy route and open a business account with the same bank you have your personal account with. Business, personal… as long as it’s a bank account, it’s all the same, right?
Well, not really.
While all high street banks offer business banking, the quality, features, and fees can differ significantly.
It’s also worth noting that, in most high-street banks, personal and business banking are separate divisions.
While you may be perfectly satisfied with your bank’s service for your personal account, their business banking service might offer a completely different experience.
So where do you start?
Here are five things to consider.
1. What fees do they charge?
While personal current accounts are usually free, business bank accounts rarely are. Many new banks advertise ‘free’ banking, but this often only applies up to a certain number of transactions — go over the limit and charges apply.
Most banks also offer an introductory free period, after which regular charges kick in.
Banking fees are allowable expenses, so they’ll reduce your tax bill. But nobody likes handing a slice of profits to the bank simply for holding their money, so it pays to compare carefully.
Accounts are typically priced in one of three ways:
A flat monthly fee.
Per-transaction charges.
A mix of both, sometimes with a free quota before charges apply.
As a contractor, most of your activity will be online transfers. So an account with free or low-cost online payments is often the best value, even if other services like cheque or cash deposits cost more. If you only run a few transactions a month, you may even stay within a free quota.
Don’t dismiss monthly fee accounts either. Some waive the charge if you keep a minimum balance, so with a steady ‘float’ your banking could cost nothing.
2. How good is their online service?
Business banking apps vary widely in quality. So, as you’ll probably be doing most of your banking online, it pays to choose carefully. You don’t want to get stuck with a clunky, glitchy app that crashes every time you try to check if you’ve been paid.
Start by looking up banking apps on the App Store or Google Play Store. Which ones have the best reviews? Keep in mind that some banks have separate apps for personal and business banking, so make sure you look up the right one.
It’s also a good idea to check if the app easily connects to other tools, such as accounting software. This will save you from having to upload transactions manually and your accountant from having to go through every single transaction to check if it’s correct.
3. How hard is it to open an account?
Nine times out of ten, you can start a business bank account application online. But what happens next depends on the bank.
In many cases, the process is entirely online, while other banks may require you to complete it by visiting a branch or speaking with someone over the phone.
The documentation you’ll need to present also varies. While all banks require proof of ID, address, right to live in the UK, and company details, some may have additional requirements.
The more involved the account opening process is, the longer it’ll take for you to get up and running, and the longer it’ll take for you to start accepting payments from your clients.
4. What else do you need aside from day-to-day business banking?
While any business bank account worth the name will let you check your accounts 24/7 from an app, pay and get paid online, export statements, and set up direct debits, the standout accounts also have other perks.
Perks can include:
Preferential exchange rates for foreign transactions.
Free or discounted access to accounting software.
Cashback on business-related purchases.
Interest, albeit this is becoming increasingly rare on business current accounts.
5. What’s the support like?
How would you prefer to speak with your bank? Are you happy with using in-app chat, or would you rather be able to make a phone call?
Support isn’t just about tracing payments or spotting suspicious activity. A business account that gives you access to business training or legal advice could be hugely valuable.
Tide Business Account – £50 cashback
Tide isn’t a traditional bank, but over 350,000 contractors and freelancers already use it for their everyday business banking needs.
Opening an account takes minutes, with no credit checks, and you’ll get your sort code and account number straight away.
Key features
No monthly fees on the standard account.
Fast, app-based setup and account management.
20p per transfer, £1 per ATM withdrawal, 3% PayPoint / £1 Post Office deposit fee.
Seamless integration with FreeAgent, Xero and QuickBooks.
Instant Saver pays up to 4% AER (variable) – correct as of September 2025.
Contract Eye opened a Tide account in 2024 – the process was quick, the app is excellent, and the FreeAgent link makes bookkeeping simple.
Exclusive offer: Contract Eye visitors qualify for £50 cashback when they open and fund a new account. Click here to get started.
Zempler Bank – free business banking, no annual fee
We have a special offer via Zempler Bank for contractors.
Zempler integrates seamlessly with FreeAgent, Xero and other major software. It is FSCS protected (up to £85,000) and offers UK-based customer service.
