When you start out as a contractor, you will be required to open a business bank account. Your limited company will need to be separate to your personal account.
When getting started, the easiest option would be to use your personal banking provider. However, as convenient and simple as it may be, not every bank provides the same benefits for its business customers. There are ways to save yourself money and avoid spending more than you need on services that you won’t use. Remember to constantly consider your options and make sure to compare different banks with factors that matter most to you.
When operating as a limited company you will be required to have a separate business bank account. A business bank account is required so you can get paid, as a limited company it is completely separate from its directors and shareholders. Setting up a separate business account will allow finances to be clearly separated from your own personal finances.
Setting up a business account is quite simple. The main thing which you should take into consideration is that there are a number of choices which may affect your decision as to which bank you ultimately decide to go with.
Every bank will offer different deals to the next, this will only confuse you further and may affect your decision. You will need to consider different factors which each bank may be offering such as, interest rates, facilities and the level of service that you want from your bank.
There are several types of transactions which will be going through your business bank account. This may include:
- Receiving payments from end clients
- Paying out your salary
- Paying dividends to shareholders and to yourself
- Paying PAYE tax and National Insurance for all employees
- Paying your annual corporation tax bills
- Claiming for your personal expenses
- Paying for business expenses
- VAT payments on a quarterly basis
Most of the high street banks offer business bank accounts, however there aren’t any specialist providers specifically designed for contractors. With this in mind you will need to compare those available to find one that suits you, there are many things that you should take into consideration prior to making your decision:
- Charges and fees – many banks will offer great introductory rates which may seem too good to be true, but after these expire, fees can soon increase. It’s best to choose a bank who provide free business banking which suits new businesses until they need to upgrade or take advantage of any additional features.
- Try to reach out – who do other clients use? Ask for advice from those who have tried and tested an account can help in making a decision.
- Online banking – most banks offer customers an online service. Opting for online banking saves the hassle of writing and posting cheques, or using telephone banking. There are several advantages to online banking such as real time statements which can be beneficial for things such as quarterly VAT returns. As beneficial as online banking be you may need to be careful for any hidden fees when using online banking.
- Interest – it’s important to consider whether you will earn interest on in-credit balances. It’s worth knowing so that you can move your money around and make it work harder for you.
Dependant on which bank you choose you may need to consider any charges made by the bank. Some banks don’t charge fees for every day banking so you may not need to worry about any charges. However, many banks do charge for things like debit card use, issuing or paying cheques, transferring money and withdrawing cash.
With money laundering regulations in this country, there are minimum requirements for proving your identity and history when you open a bank account. With this in mind, you will be subject to some checks when you apply to open your business bank account. There will be several documents that you need to prepare 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.
Dependant on the checks carried out prior to confirm your identity and the identities of others involved with your limited company – it can take between one and four weeks to open a new business bank account.
All limited companies need a business bank account to operate. Here at Gorilla Accounting we can assist you with this as we have a partnership with Metro Bank and Cashplus.
-A Metro Bank business bank account has been designed for new and established businesses. Successful applicants can expect their account to be operational within 2-5 working days.
No minimum balance is required for the first year, and you can benefit from free cash withdrawals/deposits of up to £10,000 per month.
-A Cashplus business current account can be applied for instantly online, taking only minutes.
Verified applicants will receive their Account Number and Sort Code at the end of the application process. No credit check is required.
If you have any questions, please get in touch with a member of our New Business Team on 0330 024 0406 or email firstname.lastname@example.org.