One of your first tasks as a new contractor is to choose and open a business bank account.
Read on to find out more about choosing the best account, and compare banking fees.
- Do you need to open a separate bank account?
- What type of account do most contractors need?
- How to compare business bank accounts
- Is your bank feed compatible with FreeAgent?
- Is there such a thing as a free contractor bank account?
- Our comparison table of 12 banking providers
- A look at two challenger bank accounts – Tide and Zempler
- Business savings accounts
- How do you open a business bank account?
- How the FSCS protects your deposits
Scroll down for our business bank comparison table of the main high street and challenger names.
Open a free Tide business account
Easy banking for contractors — plus get £50 cashback when you sign up through us.
Do you need a separate bank account as a contractor?
This depends on the business structure you choose to trade under.
Limited company
As a limited company is a distinct legal entity, you cannot use your personal account for business transactions.
You must open a dedicated account for your limited company.
Umbrella company
Umbrella contractors, who are PAYE employees, do not need a separate business bank account.
Sole trader
If you’re a sole trader (self-employed), you are the business; there is no legal requirement to open a separate account.
However, there are practical reasons to separate your business and personal transactions.
It makes accounting far easier, and your accountant will appreciate it too.
Find out more in this guide to different business structures and bank accounts.
What type of bank account do contractors need?
If you are a limited company contractor, your bank transactions usually follow a common pattern.
Incoming transactions
- Payments from your recruiter, agent, or client – typically weekly or monthly
Outgoing transactions
- Dividend payments to shareholders
- Salary to director and other employees
- Expense reimbursements
- Payments to pension, life insurance, etc.
- Accountancy fees
- Taxes (VAT, Corporation Tax)
So, the number of transactions is generally low. Unless you operate another type of business via your company (e.g. an eBay business), you won’t need a high transaction bank account.
The primary goal is to pay as little as possible for business banking, avoid punitive charges, and maximise the benefits and extras available.
This guide focuses on current accounts. Also worth a read: our guide to business savings accounts.
How to compare bank accounts and avoid unnecessary charges
Most high street banks offer ‘free business banking’ to new companies, sometimes for up to 30 months.
In recent years, challenger banks have emerged offering free, no-frills online-only banking.
Here are factors to consider when choosing a bank for your business:
- Does the bank offer ‘free’ banking or an introductory period without charges?
- Are there ongoing fees or charges after any introductory period?
- Can you open an account online, or do you need to visit a branch?
- Is the account online-only?
- Do you need branch access?
- Do you prefer an established high street bank or a challenger?
- Does the bank offer Open Banking (see below)?
Is your bank account compatible with FreeAgent via Open Banking?
Most contractors use FreeAgent (FA) accounting software, which we’ve used since 2010. It’s an excellent time saver.
FA connects to a growing number of bank feeds automatically — updating the software with your latest transactions.
Check out this article listing banks integrated with FA via Open Banking. Major banks and challengers, such as Tide, Mettle, and Cashplus, are included.
Learn more about business bank integration with FreeAgent and Xero.
Is there such a thing as a free contractor bank account?
Very little is truly free in business banking. Banks offer ‘free’ accounts because they profit from interest on deposits, which is rarely passed on.
As the table below shows, many banks offer free or low-cost business banking.
High street banks usually revert to charging after initial free periods. Challenger banks, such as Tide, tend to offer permanently free accounts.
Compare business bank accounts
Table last updated July 2025.
| Bank | Free Banking? | Details |
|---|---|---|
| Barclays | 12 Months | Free digital banking for 12 months, then £8.50/month. Cheques and cash deposits 60p per transaction. |
| Co-operative Bank | Always | Free digital transactions; charges apply for cheques and cash deposits. |
| HSBC | 12 Months | Kinetic Account £6.50/month; electronic transactions free; cash and cheque fees apply. |
| Lloyds | 12 Months | £7/month after free period; electronic transactions free; 85p per cheque or credit item. |
| Metro Bank | Free if balance over £6,000 | Up to 30 free transactions if balance over £6,000; 30p each after. £6/month fee option includes 30p fees on all e-payments. |
| RBS | 24 Months | No monthly charge after free period ends. Automated payments 35p each. Includes free FreeAgent subscription. |
| Santander | None | Business Current Account £5/month for 18 months, then £12.50; standard transaction fees apply. |
| Tide Bank Account | Always + £50 cashback | Free business banking with no annual fee. Account set up in 5 mins. £50 cashback when funded. More info. |
| TSB | 30 Months | Business Plus Account £5/month, free if average balance over £10,000; free e-transactions; cheques and cash 70p per transaction. |
| Virgin Money | 25 Months | £6.50/month after promotional period; automated transactions 30p each; 65p per £100 cash handling; 30p per cheque. |
| Zempler Business Bank Account | Always | Free business banking with no annual fee. Account setup in 5 mins. Integrates with FreeAgent, Xero. More info. |
Tide Banking – £50 cashback, no annual fee, free transfers
Tide is a rapidly growing alternative to high-street names. Within a year of launch, 1 in 12 new accounts was opened with Tide.
There are no monthly or annual fees — this is genuinely free banking.
You can open an account within 5 minutes, and you’ll receive:
- A UK business bank account number and sort code
- Free contactless Mastercard
- Mobile and web banking
- Tide is very online-accounting friendly and integrates with FreeAgent
- Free transfers for 12 months
- Get up to £50 cashback when you fund your account, if you apply via the link below
- Connect to FreeAgent via Open Banking
- Open a savings account simultaneously and get 4.07% AER on your funds!
Read our review here, or apply online now (use code ‘ITCONTRACTING’ – our visitors have priority boarding).
Zempler Bank free Business Go bank account
Another alternative to high street banks is Zempler — a fully regulated British bank.
The Business Go account is free.
Here are some of the key features:
- Almost instant account set-up
- Integration with your accounting software (FreeAgent, Xero, etc.)
- Manage your account online or via a mobile app
- Integration with your other bank accounts via Open Banking, e.g. FreeAgent
- Open to all types of business — limited companies, sole traders, and partnerships
- Overdraft and credit facilities are available (unlike many other challenger banks)
- Business Extra account available for £9.95/month with extra features
- Zempler Bank accounts are FSCS protected — up to £85,000
Read our summary of the Business Go account here. Or you can apply online here.
Business savings accounts
For years, most business current accounts paid little or no interest. But since the recent Bank of England rate rises, you can now earn 3–5% on surplus company funds by moving money into a business savings account.
This can be useful for cash you’ve set aside to cover future VAT or Corporation Tax bills, or to build a buffer. The rates are far better than keeping everything in your current account.
There are three main types of business deposit accounts:
- Instant access – flexibility to move money in and out at any time, though rates are lower. Tide currently pays up 4% AER (variable) if you open a free current account alongside a savings account.
- Notice accounts – you must give 30–180 days’ notice before withdrawing funds, in return for a higher rate.
- Fixed term – lock money away for 6–12 months or longer for the most competitive returns.
High street banks, such as Lloyds, Barclays, and Virgin Money, typically pay around 2–3%, while specialist providers like Aldermore and Shawbrook, as well as Tide, often offer more.
For up-to-date rates, see Moneyfacts’ comparison tables.
What do you need to open a bank account for your company?
Whether you apply directly or through an intermediary, you typically need:
- The names and addresses of all company directors
- Any previous names/addresses (if you’ve lived at your current address for under 3 years)
- Your date of birth, nationality and residency status
- Details of your personal current account (sort code/account number)
- Your limited company details — including registered number and address
- Photo ID (passport, driving licence, etc.)
- Proof of the applicant director’s home address (originals)
- Company paperwork, such as a certificate of incorporation, an accountant’s letter, an HMRC letter, etc. Check with your bank for specific ID requirements
If applying for a high street bank account, you may be invited for a ‘meeting’ with a business banker.
This is usually a formality, but be prepared to explain how you plan to run your business and future funding needs.
Applying online can avoid this step entirely.
Is your business account protected?
The Financial Services Compensation Scheme (FSCS) covers business deposits, just as it does personal assets.
The FSCS protects up to £85,000 per account in the event of a bank’s failure.
Because a limited company is a separate legal entity, you receive the same protection for both personal and business accounts if held at the same bank.
However, if you’re a sole trader, you are not a separate legal entity, so the £85,000 limit applies to all accounts held at the same institution combined.