A brief guide to business banking

Taking time to compare business accounts before committing yourself can help you avoid unnecessary fees and transactional charges. Running a business bank accounts comparison also allows you to take note of limited offers and see if your current business bank account is giving you the best value for money.

Maintaining a business account is a UK legal requirement if you own a limited company but there are plenty of reasons to use one even if you don’t. A dedicated bank account allows you to track your salary, dividends, expenses and pension payments. It’s well worth seeing how more established business bank accounts compare with newer offerings as they are certainly not all created equal. A common requirement is the maintenance of a minimum balance level, which might prove a barrier to entry for new contractors.

A brief guide to business banking

If you’re starting a new business, it is possible to find business bank accounts with no credit check requirements. Be sure to evaluate the “no credit check” business bank accounts carefully as some banks dangle enticing offers like a limited free banking period, only to ratchet up the costs when the offer expires.

Frequently Asked Questions

  • What are the best business bank accounts for contractors?

    When trying to find the best current account for your business, it’s important to set out with a clear idea of what bank services are important to you. With few exceptions, contractors aren’t going to need a high volume transaction account – you’ll need your business account to draw your salary, receive payments from clients and pay expenses.

    Most contractors’ banking priorities will involve a combination of speed of initial setup, responsive customer service, minimal transaction fees/punitive costs and access to online, telephone and app-based banking. A lot of banks offer free business banking, although for the majority, this is for an introductory period only. If you choose to go with a free business bank account that’s only free for a limited period, make sure that the fees they will eventually charge are within your budget and that the additional services they offer are worth the outlay.

    The additional services offered with a UK business bank account can vary enormously; some banks offer things like overdrafts, free business cheque books and debit and credit cards, but some don’t. It’s worth reading the bank’s offer carefully and not take anything as a given. It’s also worth noting that the interest rates on even the best business accounts are almost uniformly poor and that if you want to put money aside for big expenditures such as insurance, it might be worth setting up a separate deposit account for this purpose.

    Opening a business bank account can be a surprisingly lengthy process and you should factor this into your decision. Some banks charge an application fee and could potentially invite you for an in-person interview to review your business practices before you are accepted or rejected. Indeed, do not take it for granted that just because you hold a personal account with a bank you’ll be accepted for a business account. You can avoid a lot of delays if you open a business account online but you might lose out on a more proactive and personal approach to customer service.

    If speed is important to you, or if your credit rating is bad, applying for a business bank account with no credit check might be the way to go, although you might find that the terms of such an account are less favourable than others. If you have an accountant you may find that they have a special relationship with a particular bank, which can help speed things up from an administrative point of view.

Download our Guide to Money Management

Juggling your personal and business finances is one of the biggest challenges of being a contractor. In this guide we’re going to talk about how to manage your money and also what entitlements you can expect regarding things like holiday, sickness pay and parental leave.

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Frequently Asked Questions

  • What are the best business bank accounts for contractors?

    When trying to find the best current account for your business, it’s important to set out with a clear idea of what bank services are important to you. With few exceptions, contractors aren’t going to need a high volume transaction account – you’ll need your business account to draw your salary, receive payments from clients and pay expenses.

    Most contractors’ banking priorities will involve a combination of speed of initial setup, responsive customer service, minimal transaction fees/punitive costs and access to online, telephone and app-based banking. A lot of banks offer free business banking, although for the majority, this is for an introductory period only. If you choose to go with a free business bank account that’s only free for a limited period, make sure that the fees they will eventually charge are within your budget and that the additional services they offer are worth the outlay.

    The additional services offered with a UK business bank account can vary enormously; some banks offer things like overdrafts, free business cheque books and debit and credit cards, but some don’t. It’s worth reading the bank’s offer carefully and not take anything as a given. It’s also worth noting that the interest rates on even the best business accounts are almost uniformly poor and that if you want to put money aside for big expenditures such as insurance, it might be worth setting up a separate deposit account for this purpose.

    Opening a business bank account can be a surprisingly lengthy process and you should factor this into your decision. Some banks charge an application fee and could potentially invite you for an in-person interview to review your business practices before you are accepted or rejected. Indeed, do not take it for granted that just because you hold a personal account with a bank you’ll be accepted for a business account. You can avoid a lot of delays if you open a business account online but you might lose out on a more proactive and personal approach to customer service.

    If speed is important to you, or if your credit rating is bad, applying for a business bank account with no credit check might be the way to go, although you might find that the terms of such an account are less favourable than others. If you have an accountant you may find that they have a special relationship with a particular bank, which can help speed things up from an administrative point of view.

    Contractors can compare bank accounts here and out which option works for their business.

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