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Setting up a Business Bank Account

How easy is it to set up a business bank account? Read all about it.



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 provide any of the financial details they ask you for, then your accountant will be able to help you with whatever you need.

What is a director’s current account used for?

As a limited company director, the money in your business bank account doesn’t belong to you personally but can be withdrawn through a director’s loan. A director’s loan is the money you take from the company which doesn’t fit into either of the following categories:

  • Money you have previously paid or loaned the company
  • Salary, dividends or an expense payment

A director’s current account is a record of any of the money that you borrow from your company. It’s not a real account, but rather a record which exists in your accounting records.

At the end of the company’s financial year, you will either owe the company money or the company will owe you. This will be recorded in the balance sheet of your annual accounts.

Can I open a business account online?

Most providers won’t let you open a business bank account online, but you can start the process on their website before you meet with a representative in one of their branches. 

Documents needed for business bank account

To open a business bank account, it’s likely that you will need the following information:

  • Proof of ID for all limited company directors
  • Proof of address
  • Your business details, including the registered address, business contact details and Companies House registration. Most banks will ask for a copy of your business documents such as a certificate of incorporation.

How can Nixon Williams help you set up a business bank account?

All businesses need a bank account, so to assist you with this task we have a facility with Metro Bank, to open bank accounts for our clients.

Key Features and benefits:

  • All applications will be open within 2-3 working days – Metro bank have a dedicated team who will guarantee that all business bank account applications will be opened within 2-3 working days (once all documents are received). Missing information/documents will delay the account opening.
  • 200 free transactions per month – we appreciate that on average a contractor will make around 30 transactions per month, however, when using a direct debit this can quickly escalate.
  • No minimum balance required to open the account.
  • Free online banking – free online banking for the first 12 months, and free after 12 months provided a minimum balance of £2,000 is maintained in the bank account. A £15 admin fee will be incurred after 12 months if the balance is below £2,000.
  • Free business banking app for complete flexibility when on the go.
  • Full cheque book and banking facilities – bill payments, standing orders and direct debits
  • Monthly statements
  • Funds may be held in sterling, euro or US dollar – no charge for foreign transfers, Euros and US dollars. No charge for using a debit card with the EU. However, there are charges for external foreign transfers.
  • A true debit card – cards that are called ‘deferred debit cards’ can incur additional charges when being used, similar to that of a credit card. Metro Bank provides all clients with a debit card with no annual fee.
  • Competitive tiered rates of interest – so the larger the balance the greater the return. No interest on the current account.
  • In-store access 7 days a week – this account can be used at all Metro branches – a business banking representative can help in any store 7 days a week open early until late.

 The above package is exclusive to Nixon Williams clients only.

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

To open your business bank account, please contact a member of our new business team on 01253 362062.

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