Guide to Setting Up a Business Bank Account

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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 is 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.

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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 everyday 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 a 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 01442 275789 or email:

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