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Guide to setting up a Business Bank Account


Guide to setting up a Business Bank Account

Do I need a business bank account?

If you want to operate as a limited company then you will need to have a separate business bank account. This is because company money needs to be distinguishable from the personal finances of the directors and shareholders, as a limited company is considered a completely separate entity. Any money that comes through the business has to be accounted for and easily traced if necessary.

What should I be looking for in a bank?

Applying for a business bank account is a straightforward process, but finding the right bank and the most appropriate account for you can be more complicated. It is important to work out what features you will make most use of, the kinds of transactions that you are likely to be processing and whether you are likely to expand your business in the future. You will need to compare interest rates, facilities and the level of service that you want from your bank.

Where do I start?

It may be tempting to use the bank that you use for your personal banking for your business account because it is the most convenient option. However, not every bank provides equally good services to their business customers as they do to their personal account holders, and there are ways to save yourself money and avoid spending more than you need to on services you won’t use.

How should I use my business bank account?

The kinds of transactions you will be handling through your business bank account will usually include:

  • Receiving payments from clients for completed work
  • Paying out your salary
  • Withdrawing any dividends you or your shareholders take
  • Paying PAYE tax and National Insurance for all employees
  • Paying your annual corporation tax bills
  • Reimbursing personal expenses
  • Paying for business expenses
  • VAT payments on a quarterly basis, for companies that are registered

Which bank should I choose?

Most of the high street banks offer business bank accounts, but there aren’t any specialist providers of accounts designed specifically for contractors, so you will need to compare those available to find one that suits you. Below are some aspects to take into account when you are considering your options:

  • Charges and fees - many banks offer cheap introductory rates, but you need to check that they are still competitive once the offer expires, especially if you are required to commit for a length of time. Some banks offer free business banking, which may suit new businesses until they need to upgrade and take advantage of additional features.
  • Ask for advice – recommendations from those who have tried and tested an account can be helpful in making a decision. It can be difficult to ask clients or colleagues about their banking arrangements, but your accountant can usually help if required.
  • Online banking – most banks offer customers an online service, which allows them to make payments, check their balance and search for transactions whenever they want. However, some banks charge extra for this option so check whether you will have to pay fees for the service.
  • Interest – will you earn interest on in-credit balances? It’s always worth knowing so that you can move your money around and make it work harder for you if need be.

How do bank charges work for business accounts?

Some banks don’t charge fees for everyday banking, but most do impose charges for business activity such as processing debit card payments, withdrawing cash and paying in cheques. Most of these functions are free on personal accounts and so these costs can be easy to overlook. It is recommended that you calculate what you could be spending on your banking so that you can work it into your budget.

How do I set up a business bank account?

Money laundering regulations in this country mean that there are minimum requirements for proving your identity and financial history when you open a bank account, therefore you will be subject to some checks when you apply to open your business bank account. You will need all your company registration documents, such as your certificate of incorporation, copies of your memorandum and articles as well as details of any shareholders you have. The bank will also require proof of identity such as your passport in order to open the account.

How long does opening a business bank account take?

The mandatory checks banks have to carry out such as confirming your identity and that of any other directors means that the application process can take a while. Sometimes an account can be open in as little as a week, but often they can take up to a month or longer to open.

If you need any help opening your bank account, from choosing one which meets your needs to providing any of the financial details they ask you for, then your accountant will be able to help you with whatever you need.

How can Nixon Williams help you setup a business bank account?

All businesses need a bank account, so to assist you with this task we have a facility with Cater Allen Bank (part of the Santander Group), to open bank accounts for our clients. By working with us, Cater Allen can normally open a business bank account within 10 working days (subject to status). The account offers:

  • Easy access by telephone, post and online.
  • In-branch deposit taking available at Royal Bank of Scotland branches.
  • Free banking for up to 30 transactions per month.
  • Regular monthly statements by post and online.
  • View balances, pending credits and payments online.
  • Set up and manage Standing Orders, Direct Debits, transfers and payments online.
  • Full cheque book and banking facilities for Sterling accounts.
  • Telephone banking – available from 7am to 11pm, 365 days
  • No minimum balance

Due to this special relationship, our clients are not required to maintain a minimum balance and no charges are payable provided you do not exceed 30 transactions per month.

You are of course free to open a business bank account with any bank of your choosing, however if you do not opt for Cater Allen, we cannot assist you with the opening of the account.

To open your business bank account, please complete the form below:

For more information on starting out as a contractor you may find these pages useful: