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.
Your company must have a dedicated account
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 for your company, here are 5 things you should consider:
1. Personal vs Business bank
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. Separate savings account
3. How long do ‘free banking’ terms last?
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. When comparing accounts, find out if there is a minimum balance required in order to qualify for ‘free’ banking.
4. The right account for your type of business
If you’re a professional contractor, you’re unlikely to be concerned about the cost of cheque and cash transactions. However, monthly account fees, and the cost of electronic transactions are crucial.
5. Do you want personal service, or online only?
Would you prefer an account which offers face-to-face contact with a dedicated business banking team? If this is important to you, a high street name is more likely to suit. If this isn’t of interest, you may save money by opting for an online-only account, or signing up to one of the challenger banks.
Tide Business Account – no more ‘high street’ fees!
The Tide Business Account is very popular with our visitors, as you can set up an account in minutes (literally), which means you can supply your client/agency with sort-code and account details rapidly if needs be. There are no fees whatsoever, and you can get 12 months’ free transfers if you’re a Contract Eye visitor! Simply click below for more information.
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-registered company, you will need to take along various bits of paperwork, such as:
- Certificate of incorporation – with your company name and number.
- Passport and/or Drivers licence to prove your own identity.
- Recent utility 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 (a few minutes using one of the ‘new wave’ of banks – such as Tide), 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.
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