Guide to setting up a business bank account

Why do I need a business bank account?

If you are operating as a limited company, then you have to set up a business bank account so you can get paid. A limited company is a separate legal entity from its directors and shareholders, and so the company’s money needs to be traceable throughout every stage of any financial transaction, and so it has to be clearly separated from your own personal finances and those of any other directors you might have.

How do I decide which bank?

Setting up a business bank account is pretty straightforward. The key thing to bear in mind though, is that there are a number of choices which may affect your decision as to which bank you choose. There are certainly no shortage of deals out there, which may only confuse you further! The aim of this guide is to help you decide what you need and what things to look out for, and at the end there are several links to some of the largest banks in the UK who offer business banking facilities, which will help with your research.

Where do I start?

For many people who set up a new limited company, their first thought is their own bank. This may be the most convenient and quickest option, as your bank knows you and can easily validate your identity. But if your company has other directors, who bank elsewhere, then this isn’t going to be so much of an advantage. On top of that, it’s also important to realise that you need to look for a good deal - and whilst your existing bank may be great for personal banking, it’s not necessarily going to be the best for business banking.

What will I use a business bank account for?

The types of activity going through your account will usually include:

  • Receiving money from clients for the work you do – either by cheque or BACS
  • Paying your own salary
  • Paying dividends to shareholders and to yourself
  • Paying monthly NI and PAYE taxes
  • Paying annual Corporation Tax
  • Claiming for your personal expenses
  • Direct debits for items like your mobile phone contract or internet connection
  • Quarterly VAT payments, if you are registered

Which bank to choose?

Most high street banks offer business banking, but there is no such thing as a special 'contractor’s bank account' despite what the marketing people might tell you! Some of the key things to consider when choosing a bank, other than the issue of comparative charges, are:

  • Charges and fees - many banks offer great introductory rates but after these expire fees can soon rack up, so it's best to choose a bank who provides free business banking.
  • Referrals and testimonials - who do other clients use, unlike personal banking where you can easily ask just about anybody what their bank is like it's sometimes not so easy for business banking, your accountant might be able to help here.
  • Telephone banking - at some point you're going to need to call your bank so what is their telephone banking service like? See the note above, referrals are handy here again.
  • Online banking -  making payments online saves the hassle of writing and posting cheques, or using telephone banking. Access to things like real time statements is also extremely useful, particularly when reconciling items for your quarterly VAT return! But be sure to check if there are any hidden fees for using online banking.
  • Interest - some business bank accounts pay interest on balances and some do not, so it’s always best to check.

How do business bank charges work?

If you choose a bank who doesn't charge fees you shouldn't have to worry about every day banking fees. However, many banks do charge for things like debit card use, transferring money, issuing or paying in cheques and withdrawing cash. This can come as a bit of a shock if you’ve only had personal account before, where everything was free.

What will I need to set up a business bank account?

All banks have to comply with stringent regulations around money laundering, which means that they have to carry out a series of checks before opening a new account. You will need to take all of the documents you received when your company was registered with you – for example, most banks like to see an original copy of your certificate of incorporation, as well as a copy of your memorandum and articles, and any share certificates that have been issued. They will probably also ask to see your passport, to confirm your identity.

How long does it take ?

Depending on the number of checks that the bank carries out to confirm your identity, and the identities of the secretary and any other directors, if relevant - it can take anything between one and four weeks to open a new business bank account (but we have heard of it taking three months before with some banks). 

At SJD Accountancy we recommend and have recommended our business banking partner Metro Bank. They have proven they are committed to customer services, have a good telephone and online banking platform and system and are one of the few if not the only bank to offer FREE business banking to all SJD clients plus the also offer competitive tiered rates of interest.

To find out more about Metro Bank and download an application form please visit: Exclusive Metro Bank Account 

If you have any questions about contracting or would like any further advice please call our new client services helpdesk on 0500 152500 / 01442 275789 or email: nikki.hanlon@sjdaccountancy.com.

SJD Accountancy

SJD Accountancy are the UK's largest specialist provider of fixed fee, Limited company accountancy services to contractors; we've been acting for contractors across the UK since 1992 and have more than 15,000 clients.

We are the only national specialist firm of contractor accountants with offices nationwide. SJD Accountancy has more qualified staff than any other firm in our market with qualifications from the following major tax and accountancy bodies - ATT, AAT, CTA, ACCA, CA, ACA and FCCA.

  • Unlimited face to face meetings. This is a unique service only SJD Accountancy offers - unlimited face to face meetings across the UK - tax is complicated and sometimes only a meeting will do.
  • UK's Largest contractor accountants with more qualified staff. No call centres, no outsourcing, no automated call handling. Simply telephone, email or meet your own dedicated accountant* face to face.
  • Money back service guarantee. All your telephone calls and emails will be answered the same day or we will make a full refund of that months fee.
  • Outstanding reputation. We have won more awards for customer service and accountancy excellence than any other firm in our market, including: Best Accountant for Contractors, Accountant of the Year and Best Professional Service Team to name just a few.
  • All inclusive low cost fixed fee accountancy package which includes completion of accounts*, payroll bureau, dividends and corporation tax computations, personal taxation, free bookkeeping software, your own dedicated accountant* and all company returns for a fixed fee of £120 plus VAT per month.

If you have any questions about contracting or would like any further advice please call our new client services helpdesk on 01442 275789 or email: janice@sjdaccountancy.com. Our new client services helpdesk is open Monday to Friday (8am to 6pm).

Appoint SJD Accountancy and never worry about your tax or accountancy affairs again.

Form your own Limited company with SJD - our same day online company formation service includes company bank account set up, VAT/PAYE registration and advice on optimum share structure. 

You may also find the following pages, guides and case studies useful:

*If you would like us to complete your company year end accounts we simply ask that you have been a client of SJD for one year or have made 12 monthly payments. All accountants are part or fully qualified.