Go Limited How to Set Up a Business Bank Account for Your Limited Company
Go Limited How to Set Up a Business Bank Account for Your Limited Company
So, you've decided to set up a limited company. You've chosen a name, told your clients and customers that you're transitioning from being a sole trader, and you're ready to take on projects. But, do you have a business bank account to use?
At Go Limited, we've seen a lot of limited company contractors throw themselves into growing their business, forgetting to set up a business bank account beforehand. Here's why it should be at the top of your 'to do' list.
Setting Up a Limited Company? You'll Need a Business Bank Account and Here's Why
When you've reached the stage of contracting when you're ready to set up a limited company, it's something to celebrate. It's a sign that you're moving from being a sole trader or freelancer, into a fully fledged, successful business. But, amidst the excitement of realising you've reached a big milestone, you need to think about what it means in terms of finances, administration and your responsibilities as a limited company director. One thing that often gets overlooked in the limited company setup process is opening a dedicated business bank account.
Unlike sole traders, a limited company is its own legal entity in the eyes of the law, which means your business' money isn't technically yours until it's paid to you as salary or dividends. Keeping personal and business finances separate is more than just good practice as a contractor, it's a compliance requirement if you want to keep everything above board.
Why Opening a Business Bank Account is Essential
1. Legal Compliance - HMRC and Companies House expect a business to have clear, separate records showcasing your business' finances. This is a lot easier when you have a business bank account to track everything.
2. Professionalism - Clients, customers and suppliers are likely to take you more seriously when payments come from a business account. It reflects well on the business as a whole.
3. Simplified Accounting - Separate accounts make bookkeeping, VAT returns and year-end reporting a lot easier, and there's less chance of you making a mistake.
4. Audit Readiness - If HMRC investigates, which does happen, you'll have clear and accessible financial records for them to look at.
5. Creditworthiness - Building a business banking history can help you secure loans, credit or overdrafts in the future, which you're likely to need if you want to grow your business.
Without a dedicated business bank account, your business' finances can become confusing and time-consuming to sort out, not to mention tangled in with your personal spending.
How to Choose the Right Limited Company Bank Account
There are a lot of options out there, but you need to make sure that you're choosing the right business bank account for your limited company. Though the majority are similar, the exact bank and account you choose can have an impact on your day-to-day business operations, cost and convenience.
Compare Costs and Fees - Before you choose a limited company bank account, compare the costs and fees of each. Business accounts often have monthly maintenance fees and transaction charges, so look for monthly account fees, charges - for deposits, withdrawals and transfers - and international payment fees if you trade overseas.
Prioritise Digital Banking Features - It doesn't matter how much you spend as a business, a good mobile banking app and online portal are non-negotiable. With digital banking, you can access real-time transaction tracking, get instant payment notifications, and have the ability to set up multiple authorised users, all without having to contact the bank yourself.
Accounting Software Integration - There's a lot to track as a business, especially when it comes to ingoing and outgoing payments. To streamline things, find a bank account that you can link your account to software like Xero, QuickBooks or FreeAgent. This can reduce human error and save you hours of admin time.
Consider Your Business Banking Style - If you handle a lot of cash or need regular face-to-face service, a bank with a local branch might be better. But, if you're entirely digital, digital banks might be a cost-effective and convenient option.
Added Banking Benefits - Some business bank accounts include extra perks, such as invoicing tools, expense tracking, cashback, rewards and access to business advice. Though you shouldn't choose an account solely for the benefits, they can help you to choose between two otherwise identical accounts.
How to Set Up a Bank Account for Your Business
Setting up a business bank account for your limited company is likely to be easier than you think, especially if you go down the digital route. But, you do need to be prepared, and have all the documentation you need in place before starting the process.
Gather Your Limited Company Details - To set up a business bank account, you'll need your certificate of incorporation, memorandum and articles of association, and Companies House registration number. You'll also need your registered business address.
Prepare ID for Directors and Shareholders - Banks are legally required to verify the identity and address of company directors, and anyone with significant control of your limited company. Accepted documents include passports or driving licences, as well as recent utility bills or bank statements.
Complete the Application - Most banks allow you to apply for a business account online, but some require an in-person meeting. This could mean you need to go into the branch, where they'll ask for details about your business activities, expected turnover and typical transactions.
Pass Banking Checks - Before setting up your limited company bank account, the bank will run a handful of checks. This includes credit checks on directors, fraud prevention checks, and money laundering compliance checks.
Activate Your Account - Once your business bank account has been approved, you'll receive the sort code and account number, as well as your online banking information. You'll also receive a business debit card, and possibly a cheque book if you need one.
Tips and Tricks for Business Bank Account Management
Once you've got your bank account up and running, you need to focus on managing it. If you manage a business bank account well, you'll save time, money and stress in the long run.
Keep it Strictly Business - It's important that you avoid the temptation to use your business card for personal expenses. Always keep your personal spending and business spending separate.
Schedule Regular Reconciliations - Don't forget to match business transactions with your bookkeeping software at least monthly, to ensure everything is reconciled. This reduces the chance of errors, which can be hard to solve if they're not noticed until a much later date.
Set Up a Tax Savings Account - As a limited company, you'll need to pay tax, and this means keeping money aside to cover the bill. It's a good idea to automatically transfer a percentage of the business' income to cover VAT, corporation tax and PAYE.
Automate Banking Where Possible - A lot of limited company banking can be automated. Use direct debits for recurring payments and invoice reminders to chase clients automatically, to ensure nothing is missed.
Monitor Cash Flow Closely - Keep an eye on incoming and outgoing payments so you're never caught short. You don't want to suddenly be hit with a bill, only to realise you don't have enough to cover it.
Review Banking Terms Yearly - Don't stick with a bank that's no longer offering good value, especially as switching is easier than ever. Make a point to review banking terms yearly, and determine if there's a better option out there for you.
Should You Hire a Limited Company Accountant to Handle Your Finances?
Though there's nothing stopping you from managing your own banking and bookkeeping, it's a lot to take on. For many directors, a limited company accountant makes everything a lot simpler, with the benefits quickly outweighing the cost. An accountant helps you to ensure compliance with tax and limited company law, gives advice on tax efficiency to reduce liabilities legally, and handles payroll, VAT returns and tax filings. They're also able to provide financial insights so you can make data-driven decisions, and liaise with HMRC on your behalf, saving you time and stress. Even if you start out managing your own accounts, consider at least having an accountant review your books quarterly or annually to catch errors before they snowball into much bigger issues.
At Go Limited, we're here to guide you through the process of setting up a limited company, and that includes setting up a business bank account. If you want your business to hit the ground running, you need to have everything in place before you launch, including your finances.
FAQ:
1. Is it a legal requirement for a limited company to have a business bank account?
In the UK, there is no law explicitly requiring a limited company to hold a business bank account. However, under company law, a limited company is a separate legal entity from its directors and shareholders. This means it must keep its finances separate from personal funds. HMRC and most accountants strongly recommend using a dedicated business account to maintain clear financial records, simplify tax returns, and avoid issues during audits.
2. Can I use my personal bank account for a limited company?
Technically, you could use a personal account, but it is almost always discouraged. Most banks prohibit business use of personal accounts in their terms and conditions, so they may close your account if they discover business activity. It also makes bookkeeping messy, increasing the risk of tax errors or HMRC queries.
3. Do I need a certain type of bank account for a limited company?
Yes – ideally, you should open a business bank account specifically registered in the company's name. Many banks offer accounts tailored to limited companies, with features like multi-user access, accounting software integration, and tools for managing VAT, PAYE, and invoices.
4. How do I open a limited company bank account?
You will typically need:
1. Your company registration number (from Companies House)
2. Proof of business address (e.g., utility bill, HMRC letter)
3. Proof of identity and address for all directors and significant shareholders (usually over 25% ownership)
4. Sometimes, your company's business plan or expected turnover
Many UK banks allow online applications, and challenger banks like Starling, Tide, and Monzo often have quicker setup times than traditional high-street banks.
5. Can a limited company have more than one bank account?
Yes – there's no restriction on the number of accounts you can hold. Some companies have multiple accounts for different purposes (e.g., one for operating expenses, one for tax savings). This can help with budgeting and cash flow management.
6. What happens to the bank account when my limited company stops trading?
If your company is dissolved or struck off, any funds in its account are transferred to the Crown (via the Bona Vacantia process). Before closing, you should withdraw or transfer the remaining balance and inform the bank to formally close the account.
7. Which business bank account is best for a UK limited company?
The "best" account depends on your needs:
1. Low fees & app-based banking: Starling, Tide, Monzo Business
2. Traditional branch access: Barclays, Lloyds, HSBC, NatWest
3. Accounting software integration: Tide, Starling, Metro Bank
4. It's worth comparing charges, transaction limits, and any free banking period offers.
8. Do I need a bank account before setting up a limited company?
No – you can register your company first and then open a bank account once you have the company registration number. In fact, most banks will require that number to process your application.
9. Can I change my bank account after forming a limited company?
Yes. You can switch banks at any time. You'll need to update your payment details with clients, suppliers, HMRC, and your accounting system. If you change your company name, you must also notify your bank and provide updated Companies House documentation.
10. Can I open a limited company bank account online?
Yes – many banks now allow 100% online applications. Challenger banks tend to approve accounts faster (sometimes in minutes), while high-street banks may take days or weeks, especially if additional checks are needed.
11. What documents do I need to open a UK limited company bank account?
1. Company registration certificate
2. Proof of company address
3. Photo ID (passport or driving licence) for directors/shareholders
4. Proof of personal address (utility bill, bank statement)
5. Some banks may also request recent accounts or tax returns if the company has been trading for some time.
12. Can a company limited by guarantee have a bank account?
Yes – charities, clubs, and non-profits structured as companies limited by guarantee can open a business account in the company's name. Requirements are similar, though some banks may have special not-for-profit account options.
13. Can I open a limited company bank account with Revolut?
Yes – Revolut offers business accounts for UK limited companies, with features like multi-currency support, virtual cards, and accounting integrations. Applications are completed online, and you'll need your company registration number, proof of ID for directors/shareholders, and details about your business. Revolut is an e-money institution rather than a traditional bank, meaning funds are safeguarded but not covered by the Financial Services Compensation Scheme (FSCS).
14. Can I open a limited company bank account with Starling Bank?
Yes – Starling provides business accounts for UK limited companies with no monthly fees, real-time notifications, and seamless accounting software connections. Applications are done via the Starling app, with approval often within a day. Starling is a fully licensed UK bank, so eligible deposits are protected by the FSCS up to £85,000.
15. Can I open a limited company bank account with Tide?
Yes – Tide specialises in quick-to-open business accounts for limited companies, often approving applications within minutes. They offer expense management tools, invoicing, and integration with bookkeeping platforms. Tide is an e-money institution, not a bank, so while funds are safeguarded, they are not FSCS-protected.
16. Can I open a limited company bank account with Monzo Business?
Yes – Monzo offers business accounts to UK limited companies with features like budgeting "pots," in-app invoicing, and integration with Xero and QuickBooks. Monzo is a fully licensed UK bank, so deposits are FSCS-protected up to £85,000. Applications are made through the Monzo app, and approval is typically fast.
Important:
Please note: Any rates and thresholds mentioned in this article are correct at the time of publishing and may be subject to change.
When choosing an accountant, look for one with proven experience and expertise in the contracting sector, particularly around areas like IR35, limited company tax matters and off-payroll working. Formal qualifications are important, but relevant hands-on knowledge matters just as much — especially in a complex and fast-changing landscape like this.
