Bank accounts for limited company IT contractors

When you start out as a limited company contractor, one of your first tasks will be to open a business bank account.

As your limited company is a distinct legal entity in its own right, you cannot use your personal account for business purposes. Umbrella contractors, who are PAYE employees, do not need to open a separate bank account.

Almost all contractor companies operate in the same way; they receive weekly or monthly transactions from their end client or agency, and make payments out in the form of salary, dividends and expenses, as well as direct debit payments to their accountants, insurers, and executive pension scheme (if appropriate), etc.

Most contractors do not therefore need high-transaction business bank accounts, which would be more suitable for a retailer. The main goal is to pay as little as possible for your business banking, avoid punitive charges, and gain as many added extras as possible.

Compare limited company bank accounts, and avoid unnecessary charges

Most of the high street banks offer ‘free business banking’ to new companies, for periods of up to 24 months in some cases. It is important to find out what costs will be applied once your initial banking period expires, as most day-to-day business accounts charge per transaction, or apply a monthly standing charge.

The following details were correct at the start of February 2018.

Cashplus Business Account

An attractive alternative to the big High Street names comes in the form of the Cashplus Business Account. One of the biggest advantages this account offers is the ability to apply online, and receive an account number and sortcode almost immediately. This could be very handy if your client / agent requires your bank details rapidly.

You won’t have to go through a credit check, or meet a ‘business banking adviser’. There are no charges for incoming transactions, or outgoing direct debits.

You can find out more, and apply online here.

Consider a separate deposit account

It is almost impossible to find a business current account that pays a decent amount of interest, especially in the current climate. Most current accounts pay zero interest, or minimal interest in exchange for a monthly account fee.

You may also consider opening a separate business deposit account to put aside any future tax liabilities (such as Corporation Tax and Value Added Tax).

You will receive a higher amount of interest than for a current account, although you may have to give notice to withdraw funds in some cases.

What do you need to open a bank account for your company?

Whether you decide to apply for an account via an intermediary, or directly, you will typically need to have the following information to hand. Please note that you do not need to provide proof of ID mentioned below in order to open a Cashplus account (see above).

• 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 you apply for an account with a high street bank, you may well be invited for a ‘meeting’ with a business banker. This is a formality, but don’t be surprised if you’re asked about how you plan to run your business and your future funding requirements. If you’re applying online, you may avoid the need to go into a branch at all.