Company bank account and contractor banking

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You will undertake various tasks when you start your own company for the first time. Besides finding work for your first contracting role through a recruitment agency or directly with a client, you will also need to open a contractor bank account for your UK limited company. All company contractors need a bank account for their business, and a limited company is a separate entity from an individual; therefore, it will require a bank account.

Once you or your accountant have formed your new company and it is officially registered, you can apply for an account for your new business. Your company will then become a business customer going forward. Therefore, who offers the best business bank account for contractors and what else is there to consider here?

We have a first-timer’s guide to contracting in the UK. This guide gives a complete overview of what to consider for your contracting business as you start up for the first time. We would also recommend that as a limited company contractor you choose a good accountant from the outset. Please also have a read of contractor tips.

Initial thoughts

As mentioned, your limited company is a separate legal entity in its own right. You cannot use your personal bank account to do business banking.

Please note that you are not a separate legal entity from your business when you operate as a sole trader. Therefore, you do not need a different business bank account. However, you may choose to have a separate business account for your trade. A separate account will likely be the case if many transactions are going through the business.

When you work through an umbrella company as one of their PAYE employees, you are a regular employee. Therefore, you do not need a business bank account.

Open a company bank account for the first time

General advice

When you open an account for the first time as a limited company contractor, your company needs to be incorporated. Once it is, and you have the company documents, you can apply for a new business account.

You can choose the bank that you currently bank with on a personal basis to set up your contractor bank account. The process will likely be much quicker and more straightforward if you do, compared to opening a business account with a bank that you have not banked with before.

Nowadays, you can also apply online when you open an account. This process will save time and be easier than trying to make and attend an appointment at the bank.

Most banks will, at the outset, offer a free company bank account for business banking for the first twelve months. Some now even offer twenty-four months of free business banking. Once your free period is up, there is usually a charge each month of around £6.

As time passes, you will expect that your business banking will help you grow your business. You will ideally need an account that operates effectively and does not have hidden fees.

When you open a company bank account

When you open the company bank account, you will typically need to supply:

  • The name and address of all company directors.
  • Any previous names and addresses (if you have been at your current address for less than 3 years).
  • Your date of birth.
  • Your nationality and residency status.
  • The details of your personal current account (the sort code and account number).
  • Your limited company details, which will include the company registration number and registered office address (please note, you will need to have set up your company before you apply for a bank account).
  • Photo ID such as passport, driving licence, etc.
  • Proof of the applicant’s (director) home address.
  • Your company’s paperwork, such as your Certificate of Incorporation. They may also require an HMRC letter (HMRC write to you shortly after setting up your company) or a letter from your accountant. Please check with the bank to which you are applying for their ID requirements.

As part of your application, the bank will also do formal checks with Companies House to verify that the company is real. They will also check who the directors and shareholders are.

Are you looking to consider a change in your company bank account?

Interest rates are and have been low for several years now. Therefore, it may be wise for company contractors to check a website that can compare the latest deals site, such as:

Making a comparison will allow you to see which banks offer the best deals at the current time in terms of a free company bank account and what interest rates are currently on offer. When you have this information to hand, you may consider opening a business bank account with one of the banks with a better deal.

Another consideration is how ABC Bank plc deals with customer queries regarding waiting times and satisfactory resolution. Having a UK team rather than a call centre in a foreign country is also helpful. Furthermore, you could read their terms and conditions to see what to expect from your new banking service.

In addition, similar to personal accounts, some banks offer an account switch service for business accounts. You will need to open a business account with the new bank when switching. As part of your application, you can select an option to show that you are switching accounts. Once the process starts, the bank will transfer over existing payment commitments such as direct debits.

FreeAgent digital online software

Many contractors and small business owners opt to use a digital platform called FreeAgent. This option will help the company to maintain its bookkeeping records online. Nowadays, most banks are compatible with many of the digital platforms out there. The digital software will link to your contractor bank account and automatically import the bank transactions.

Most of the popular and well know online software packages cost about £30 a month if you run this yourself. In some cases, the monthly cost can be half of this price if your accountant runs this for you and they have a deal with the provider.

If you opt to use FreeAgent, the banks Natwest, RBS and Mettle will pay your company’s FreeAgent licence fees for the life of your company. Therefore, a financial saving here is at least £180 pa when you open an account with one of these banks.

If you are using a digital platform to keep your company’s accounting records, it will link to your company bank account. Therefore, you could also consider asking for a debit card for your new business account if the bank does not already provide this. If you use your business debit card to pay for more of the company’s business expenses, such payments will automatically feed through to your digital software. Using a business card will make recording these transactions slightly easier than paying for such business expenses through your own personal card or cash.

Starling Bank

Starling Bank is now a new top choice for UK small businesses and contractors for a company bank account. According to many, they are the best business bank account for contractors. They offer an excellent Starling bank business account, and this is one of the best ones out there for contractors and small businesses.

They do not yet offer a free FreeAgent licence, like the banks mentioned above. However, FreeAgent will integrate with Starling, just like most other banks.

Other issues

All banks in the UK must offer the Financial Services Compensation Scheme. If the financial institution concerned becomes insolvent, this scheme protects the first £85,000 of any savings an account holder owns.

In the UK, all financial institutions, including banks, are regulated by the Financial Conduct Authority. This regulation means the financial institution must adhere to certain standards of practice.

Final thoughts

The above gives a good overview of business banking. If you are starting up for the first time, it is much easier to open a company bank account and go with the bank that you bank with personally.

However, you could also use a site that compares deals to see where your bank stands.

If you go with one of the banks that offer FreeAgentfor free, there is a good saving to be made here. Indeed, this is also a popular choice.

Link to Contractor Advice UK group on


Published On: August 1st, 2022 / Categories: First timer guide, Other Guides, Starting Up Your Own Company /

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One Comment

  1. Free limited company January 11, 2022 at 7:35 pm - Reply

    Opening a company account with a bank also has other additional perks. For example, you can usually obtain free banking for at least a year as a new business. Also some banks even offer new clients special deals on accounting software to use in their businesses. Lastly, as regards this point, it may be easier for you to obtain a business overdraft or loan if you have a company bank account.

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