A Guide to Business Banking for Limited Companies

As a limited company, you’ll need to operate a business bank account. Most banks won’t allow the use of a personal account for business use, it will usually contravene their terms and conditions. Whilst it can be tempting to use a personal account in order to avoid the fees associated with a business account, it is useful to know that most will offer free banking for an initial period. Let’s take a look at what to consider when choosing a business bank account.

Do I need a business bank account?

Whilst it’s not a legal requirement for a limited company to have a business bank account, there is a need to keep your company’s money separate from your own personal funds. As the account will need to be in the name of your business, the bank will be aware that you are a limited company, and so it will make you use one of their business account products.

From a professional point of view, it is also better to use a business account. Clients may not trust paying a personal account, and larger organisations are unlikely to allow it at all.

How does business banking work?

The rules on what you can and can’t take money wise out of your limited company are strict. Aside from your salary, dividends and expenses, there is nothing else you can take. Anything you do take outside of these will be classed as a director’s loan which is subject to set rules on how much you can take, the tax payable on it and how and when you need to pay it back.

Any money you take from your limited company is subject to personal tax, so if you have recently changed from sole trader, be sure to avoid using your personal account for business transactions.

How do I open a business bank account?

To open a business bank account, you will need proof of ID for all named company directors; proof of personal address; the full business address and your contact details; Companies House registration number and your estimated annual turnover. You may also need evidence of a clean credit record and banking history.

Generally you won’t be able to open a business bank account online, although you may be able to start the application and then complete it via a one-to-one meeting at the branch. In some cases you may be able to walk in and organise setting up your account on the same day, although this is not always possible.

What should I look for in a business bank account?

Different banks offer different incentives so it is worth taking some time to look into what you can get.

Look for things like no charges for an initial period, followed by keen charges. Look at general maintenance fees and charges for transactions and always think about the long term rather than just the honeymoon period. Also check whether you will be given a personal adviser who will help you with your banking needs; account management via an app for convenience; telephone banking so you can avoid the queues in branch; syncing with your online accounting software; an overdraft facility to help with cashflow, and foreign transfers, useful if you have clients abroad.

In Summary

There is plenty to consider when choosing a business bank account. Your bookkeepers will be able to advise you on your options and will know which offer the better benefits for the long term.

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