There are numerous key things to consider – such as transaction and borrowing costs, what facilities the bank offers, and the type of relationship you want from a bank. Choosing the right business bank account is a vital task.
Limited company contractors have less probability of incurring significant monthly charges compared to other types of business, as they are inclined to have a small or moderate amount of monthly transactions, however, many standard business accounts will apply a monthly standing charge, regardless of the number of transactions are done.
Contractors will regularly use their business bank account to:
  • Receive money from clients for the work they do
  • Pay their own salary and dividends
  • Pay their corporation Tax and VAT
  • Pay for their company expenses
  • Set up direct debit payments for their mobile phone, insurance, accountancy fees, business related expenses, etc.
Choosing a business bank account – points to consider:
  1. Don’t essentially opt for opening a business account with your personal bank.
  2. Compare interest rates between business bank accounts. Assumed that most current accounts offer almost zero interest, focus on the rates offered on deposit accounts, where you may decide to place any tax liabilities for safe keeping (VAT, and Corporation Tax)
  3. Almost all the banks offer up to 2 years’ free banking to start-up businesses, however it is important to find out how much their charges and fees are after this introductory period, find the best banking deal, and avoid unnecessary charges. Importantly, you should find out what transaction charges apply to your account after any free period has expired.
  4. Online banking is a must these days – you can save a significant amount of time by using web-based services for the whole thing from paying your staff to setting up direct debits and viewing your transactions 24/7.
  5. If direct contact is important to you, find a bank which will provide you with a dedicated business account manager. They will have experience of dealing with limited companies, and will be able to help with any queries or enquiries you have.
  6. You may also find out whether any other banking facilities are available to you to support your contracting business. These may include faster payments, access to historical statements, the handling of international currency payments, a credit and/or debit card, access to a loan or overdraft, and what the charges and fees are for these services.
  7. Most of the premium banks offer free banking to new companies, however our suggestion to you is that always compare the ongoing charges you will be faced with once the free period is over, as – like so many others – you may be reluctant to switch accounts once your business has become established.
  8. It is essential to check the interest on deposit accounts, particularly important for contractors who run an ongoing cash surplus. Many banks also offer additional long-term deposit options and corporate investments, such as bonds
Some of the credentials you will need to open a business bank account:
  • The name and addresses of all company directors
  • Any previous names / addresses (if you’ve lived at your current address for under 3 years).
  • Your date or birth, nationality and residency status.
  • Details of your personal current account (sort code / account number)
  • Your limited company details (you’ll need to have formed a company before setting up your account) – including your company’s registered number and registered address.
  • Photo ID (passport, driving licence, etc.)
  • Proof of the applicant director’s home address (originals).
  • Company paperwork, such as your certificate of incorporation, a letter from your accountant, an HMRC letter, etc. Check with the bank you’re applying to for their ID requirements.
If in case you seek any advice, tax planning services or accounting services for your limited company; silence your mind and contact Guide UK Umbrella Services on 01235 424717.
Guide UK Umbrella Services.