Opening a Limited Company Bank Account
Registering a limited company has several benefits. For many businesses, it’s the logical step up from sole trader status.
After registering a limited company, be prepared to take on administrative responsibilities, such as managing your company’s finances.
Limited companies are considered separate legal entities from their owners and require independent bank accounts.
If you’re looking to open a business bank account for your company, read this guide. By the end, you should know how to open a limited company account, the type of business bank account you need, the cost, and how to find the best business account for your company structure, to name a few.
Let’s get started!
Is a Limited Company Required to Open a Bank Account?
Legally, you are required to open a business bank account as a limited company. You cannot choose to manage your business’ finances in your personal bank account because a Ltd Company is a separate legal entity to you and requires its own bank account.
In fact, when you have a business bank account, preparing your annual accounts and tax returns is much easier. Fewer mistakes, and your company’s turnover and profit are clear to see.
Having a business bank account makes tracking your limited company’s income and expenditure more manageable. A business account boosts the credibility of your company.
Bear in mind that you must be an Ltd. company to set up a Ltd Company business account. That means you need to have registered your business with Companies House. Otherwise, the government doesn’t know you exist. You’d have no records of your finances and no means of paying your taxes, which is a legal requirement for UK residents.
After registering at Companies House, you get an online record of your company registration number and date of formation. The majority of business owners in England and Wales are legally obliged to list their businesses on Companies House.
Getting started on Companies House is simple. If you’re yet to register, don’t be disheartened, it won’t take that long. Registering isn’t free, however, and you need to like the idea of having your information listed online, like your business address and financial information.
Most banks require that you have been registered on Companies House for at least 48 hours before starting your application process. Learn more about the process of setting up an Ltd. company on Companies House here.
What Bank Account Do I Need for a Limited Company?
As a limited company, you need a business bank account, which is different from a personal account. Business bank accounts come at a monthly cost and offer benefits to businesses using them.
Your business account is intended solely for business payments. Any personal payments should be handled separately, in your personal account, using a separate debit card. This makes it easier to differentiate between your own finances and your business’ finances when the tax season comes around. It’ll also reduce your risk of being penalised by HMRC for inaccurate filing of company information online.
How Do I Open a Limited Company Bank Account?
The process of opening a business bank account for your company in the UK is similar to when opening your current account. If directors and shareholders are based in the UK, setting up a business bank account should be straightforward.
Here’s how to set up a limited company bank account in the UK, step-by-step:
Step 1: Research Your Options
Many banks and lending providers offer business banking options in the UK. But, not every offering is the same. Some business banking options might have a higher monthly cost than others or offer certain perks, such as 0% interest rates and a free banking duration after signup.
Choosing the most popular business banking provider can be tempting, but this doesn’t necessarily mean you’re getting the best deal. Hence, before deciding, consider the features of each business current account offering and read up on reviews. Research your options carefully and use comparison sites to get an idea of what’s out there.
What’s more, some banks might not let you open a company bank account if your credit history is rocky. If you struggle to find a bank that will take you on, reach out to the bank you use for your personal banking.
Step 2: Decide On Banking Options
The bank you choose to open a current account with will most likely offer several tiers of business banking options. Therefore, it’s essential to consider the features provided by your bank and decide on which are most relevant to you.
For instance, if your business requires international banking, find a bank that offers lower fees, or, if you can find it, no fees at all for payments received or sent in a currency other than GBP.
Also, think about whether you’d prefer a bank that offers online baking. Not all business current accounts can be accessed online, though most now offer apps for online banking. The convenience of online banking makes it a must for many limited businesses.
If you want to manage your account online, the best option is to choose a purely digital banking app, like Starling and Monzo. However, keep in mind that making cash deposits can be more difficult if you opt for an online-only banking app.
Step 3: Provide the Bank With Your Details
Your chosen bank may have specific information requirements for your company before you can open a business current account. Typically, you need to provide the bank with documents that prove your incorporation. You also have to show proof of your personal address and identification, as well as contact details, like your phone number.
To open a company account, you must be a company director. If there are more company directors, and you’d like them to have access to your account, you need to provide the bank with relevant information about them, too.
Note that not all banks allow multiple directors to access the same account, and those who do might ask for extra payment for this benefit.
Remember: The details you provide must be accurate. You’ll only slow the application process down if your information is incorrect.
Step 4: Start Banking
Depending on the bank you go with, you might have to wait from days to weeks for your business current account to be processed and your debit card(s) to be sent to you in the post.
Once receiving your card, you can start banking straight away. If you’ve previously used your personal bank account to make business payments, now you can switch current accounts to your new business account. It’d be best if business payments were made to or from one account for the sake of accurate record-keeping.
Step 5: Consider Hiring an Accountant
Hiring an accountant is imperative for managing your business bank accounts because limited companies must uphold financial responsibilities. In addition, ensuring your bookkeeping is up-to-date is time-consuming, and there are legal ramifications if you fail to keep accurate records of your accounts.
Using an accounting service isn’t what it used to be. If you prefer, you can still choose the old-fashioned option and hire a local accountant, usually at a higher fee, to manage your accounts and schedule monthly in-person meetings to update you on their progress.
Nowadays, though, using an online accounting service is a more popular choice. You have access to a team of qualified accountants who will efficiently and accurately manage your accounts behind the scenes. This option tends to be better for business owners who don’t have the time to sit down with an accountant every month or those who are looking for a simple, affordable solution that requires minimal work on their part.
How Long Does It Take to Open a Limited Company Bank Account?
Factoring in time for your research and time for your bank to process your request, it can take between 1 and 4 weeks to open a company bank account from start to finish.
Some of the time-consuming aspects of opening a business account are as follows:
- Identity checks on yourself and other directors;
- Review of provided information;
- Waiting for your bank card to arrive via the post.
Giving inaccurate information to the bank also hinders the process, so make sure your information is correct, even if you’re in a hurry to set up your business account as soon as possible.
Speed up the process of opening a business account by:
- Having registered with Companies House for at least 48 hours before starting your business account application;
- Choosing a bank that offers a faster startup service. It isn’t always easy to know which banks do this but look online for estimated processing timeframes and customer reviews;
- Setting a business account with a bank you’re already registered with as a personal user.
Can I Open a Limited Company Bank Account Online?
You might be wondering whether opening a business banking account still requires an in-person meeting with a representative of your chosen bank. Simply put, no, not usually.
Typically, you can at least start the process of opening a company account online. However, by the end of the process, you might be required to phone your local banking branch to finalise your details.
If you’d rather avoid any time-consuming admin, consider opening your business account with a bank that’s purely online, such as Monzo. You may need to send a photo identification over the app, but it’s unlikely that your setup will require a phone call. Certain digital banking platforms, like Starling, still let you deposit cash in various Post Office branches.
Of course, some people would prefer to speak to a person in the account opening process. You can still visit your local banks and have a sit-down meeting with a representative if that would make you feel more comfortable. There’s no extra fee for an appointment, and it may prove particularly invaluable if you’re currently feeling overwhelmed about the process of getting your own company debit card.
How Much Does a Limited Company Bank Account Cost?
The cost of using a business account for your company varies widely depending on a number of factors, including:
- The features you opt for in your business account;
- The bank you choose;
- Specific fees and overdraft charges;
- Signup offers, deals, or discounts.
Opening an account is free, but you may have to pay a monthly fee going forward, which increases with inflation over the years.
This fee is typically relatively inexpensive for basic business accounts and can be as low as £5. And your monthly fees may be waived for a period, too. Depending on the deal you find, you might not have to pay a fee for the first 6 months to 1 year of using the account.
In short, owning a business account won’t put you out of pocket. Fees are minimal, and you can often find signup offers that should help you save even more money while your small business is taking off. You may even get certain fee types waived if your business earns over the bank’s cash threshold for fees.
Which Bank Offers the Best Business Account?
The business banking scene is changing, and there are constantly new deals and discounts to make the most of. But being the most cost-effective doesn’t automatically make a banking provider the best.
When choosing a business account for your company, don’t just go off a recommendation from a friend. There’s a wide range of banks to choose from, some more traditional, and some catered to businesses that are happier to embrace technology or prefer digital banking.
The best business current accounts in 2021, offered by high street banks and digital banks, are:
1. HSBC
HSBC offers free banking (i.e. no monthly fee and no standard account charges on payments) for the first 18 months. After that, you need to pay £6.50 per month for 1 year before choosing a tariff, such as electronic banking. In addition, you can use HSBC’s business account if your business has a turnover of up to £10 million.
HSBC also offers free online banking options and more perks, including:
- Get spending and cash flow insights;
- Arrange in-app overdrafts.
However, you can’t make international payments with HSBC’s online banking account. Keep that in mind.
2. Santander
Santander is another popular high street bank, offering two options for businesses: A Business Current Account and a 1|2|3 Business Current Account.
The first option is ideal for companies opening their first business account, having traded for less than 12 months. You get an arranged overdraft (from £500 to £25,000, unsecured), and you’ll need to have a good credit history to qualify.
The account costs £5 per month for the first 18 months. After that, it costs £7,50 per month, and you have a monthly cash deposit limit of £1,000.
The second option is better if cashback is essential to you. You get cashback at a rate of up to 3pc, depending on how much you put into your account annually.
If you deposit less than £200,000, you get a 1pc turnover of up to £100 cashback per annum. If your turnover is more than £200,000, you get up to £200 cashback, and anything more than £300,000 generates £300 cashback every year.
3. TSB
TSB offers a Business Plus account, particularly beneficial for limited companies. In fact, sole traders, partners, and directors can all use TSB’s Business Plus account, whether they’re opening a new account or switching from another bank.
After an initial 6 months of free banking, you pay £5 per month. If your average balance within a specific month is more than £10,000, the fee will be waived.
4. Barclays
Barclays offers a Startup Business Account that gives you free banking for one year. You’ll also be given access to the Barclays Business Direct team, which may prove invaluable if you’re starting out and have many questions.
There are specific accounts for more established businesses, too, one for businesses with a turnover of up to £400,000 per annum and one for companies earning between £400,000 and £6.5 million. Barclays also offers monthly loyalty rewards in the form of cashback from account charges, depending on your annual turnover.
5. NatWest
Choose between two business accounts offered by NatWest: Startup and Business. If you’re over 18, living in the UK, and have a right to be self-employed, you can open either of these accounts.
Businesses that have been trading for less than a year and earn less than £1 million in profits per year should choose the Startup account. They benefit from free banking for 18 months, after which they must move onto the Standard Published Tariff.
If you have already been trading for more than a year, you’re eligible for the NatWest Business account. An extra perk for businesses earning over £2 million is that they get the exclusive services of a relationship manager.
NatWest has a mobile banking app, too, called Mettle. There’s no minimum transaction fee and no monthly fee. The app is suitable for a limited company with up to two owners or a sole trader.
6. Lloyds
With Lloyds’ Business Current Account for New Businesses, you get 12 months of free day-to-day banking, providing your turnover is less than £3 million. That is applicable whether you’re opening a new account or switching from another one. Once the free banking period ends, you need to pay a £7 monthly fee.
Larger businesses with a turnover of more than £3 million can benefit from this popular high street bank’s business accounts, as well.
7. Starling Bank
Starling Bank offers one of the better digital banking solutions for a sole trader or limited company owner. You can sign up for a Starling Bank business account with no monthly charge, and it comes with an overdraft (up to $150,000).
Additional tools are offered at an extra cost (£7/month), including email integrations, invoices, and VAT recorded on transactions. And if you pay extra, you can even have accounts in different currencies.
Starling Bank has many Post Office branches across the country, enabling you to deposit money (£3 charge per deposit) from wherever you are. Integrate your Starling Bank business account with Quickbooks, Xero, and FreeAgent.
8. Monzo
Monzo is another popular choice for digital or online banking for business. If you’re the limited company director or a sole trader, you can open a business account with Monzo. There’s also multi-user access for limited companies, which is handy.
To apply for a Monzo business account, you need to have a personal account. If you pay £5 per month for Monzo Business Pro, you can integrate Monzo with Quickbooks, FreeAgent and Xero. Monzo Business Pro gives you access to Tax Pots and 6 months of free access to Xero.
Monzo Lite is the lower tier account option, offering streamlined features at no extra charge.
9. Revolut
If your business travels and trades overseas, Revolut is an excellent digital banking option to consider. When you sign up for a Revolut account, you can easily spend abroad. The app has partnered with several brands, such as Deliveroo, Google Ads, Apple, and Samsung.
Revolut offers several accounts:
- The Free account;
- The Grow account, at £25 per month;
- The Scale account, at £100 per month.
There’s also the Enterprise account. It can be tailored to your business’ needs and doesn’t offer set monthly fees.
10. Tide
Tide lets you sync your accounts with Sage, Quickbooks, Xero, and more. Schedule advance payments, check your account balance at any time, tag expenditures with labels, and create invoices with Tide’s business offering.
Tide Business is intended for small and medium businesses. You can choose to pay £9.99 for the Plus option, which comes with a free expense card that allows up to 20 transfers per month. Alternatively, for £49,99 per month, you can choose the Cashback option, which offers all the Plus features as well as a dedicated account manager and 0.5pc cashback on your Tide card.
If you prefer, you can even stick with the free version of the Tide app, which offers minimal charges for cash transfers and business loans directly from the app. You can also deposit your cash at Post Office locations with Tide, at the cost of £1 per deposit.
Remember: Even the biggest, award-winning banks can take a break from allowing new businesses to sign up for their services from time to time. So, do your due diligence before reaching out to any bank.
Additional Administrative Responsibilities of Limited Companies
Setting up a business bank account is only a tiny part of the financial admin you have to deal with as a company registered in England.
Once you’ve registered with Companies House and set up your business account, start keeping a record of your finances. Submit your annual accounts to Companies House accurately and on time and submit a corporation tax return, too.
Alongside your financial responsibilities, you also have to submit an annual Confirmation Statement to Companies House.
With the new Making Tax Digital rules approaching, you have to get into the habit of accurately keeping a record of your finances throughout the year, the soonest.
On top of this, as a taxpayer, you’ll be required to purchase accounting software to file your taxes rather than filing them straight into HMRC.
Many business owners start as sole traders because it’s convenient to submit just yearly accounts and pay annual taxes and national insurance. In fact, sole traders don’t even have to register their details on Companies House or submit monthly or quarterly accounts, too.
Still, even if you can become a limited business, the sole trading status might not suit your business model. In that scenario, you’ve no choice but to take on these additional administrative responsibilities. If that’s your case, consider hiring an accountant, or, at the very least, using accounting software.
How Mazuma Can Help With Limited Company Account Service
Most small businesses have enough responsibilities to deal with as it is. If you don’t want the hassle of logging your accounts on Companies House or dealing with separate business bookkeeping, it’s worth handing your responsibilities over to an expert.
At Mazuma, we pride ourselves on offering a flexible, affordable monthly accounts management service to limited businesses of all sizes. We can help you open your account and choose between the available account providers, ensuring you’re aware of those offering specific deals and discounts to new customers. We’ll then manage your account on your behalf, ensuring that payments, receipts, bills, and expenses are logged accurately and consistently.
Along the way, we’ll provide you with monthly reports based on data from our award-winning accounting software and offer free business advice. You’ll have your own dedicated accountant who’ll get to know your products and services over time.
We’ll even submit your taxes and VAT returns on your behalf. However, note that you’ll need to be a Mazuma customer for the entire tax year to be eligible for this service.
We really do cover every aspect of accounting your business might require. We can handle your personal accounts, too, if you’d rather be completely free from financial responsibility.
