When starting up your own company you are naturally going to have a range of regular payments applicable to the business. This can range from; monthly invoices, accountancy fees, mileage, business stationary or simply a train ticket. We breakdown the benefits of opening a business account, when it is mandatory to do so and who we recommend.

Who needs to have a business bank account?

Many individuals will voluntarily hold a business bank account for the goods or services they provide. This gives the reassurance and clarity on which transactions have been placed through the business. But when is it mandatory to open one?

Sole Trader

As a sole trader YOU are your business. You are not identified as separate legal entity from the business. This means you can legally use your personal bank account for both personal and business transactions.

Umbrella Company Contractor

When contracting through an umbrella company you are technically an employee of the PAYE Umbrella. This means all financial payments to end clients or recruiters will be managed through their own internal systems.

Limited Company Contractor

As a limited company owner you are classed as a SEPARATE LEGAL ENTITIY from the business. You are a director but also an employee. Therefore, all transactions must be made through the business and not paid for by yourself.

What are the benefits of opening a business bank account?

It is not compulsory to have a business bank account, however it is advisable for the following reasons:

  • Full transparency on all business transactions.
  • Clear trail on payments from the end client.
  • All claimable expenses clearly identified through bank statements – less room for error to ensure you claim full corporation tax relief on all business expenses.
  • Simplicity for tax returns – for your annual tax return this will save you time and resources in trying to confirm details with your accountant, one place for all transactions will make the process much smoother.
  • Greater credibility in the eyes of HMRC – should there be in any discrepancies, HMRC will have full confidence that all transactions are in one place.

How do you choose which banking provider?

When speaking to our clients some prefer the comfort of using the same bank they use for their personal needs. Whilst both high street and online banking providers offer the option of a business bank account, consider the following before choosing:

  • Do they have a minimum threshold amount? Some banks require your business bank account remain under a set amount to avoid unnecessary charges. Ensure you know the limit and if it can be maintained.
  • Are you required to deposit a set amount to open the account? In some cases, some banks will require anything from £1 – £5,000 to secure a business bank account. Ensure this is clear being signing up.
  • Do they charge extra when going over a set number of banking transactions? Specialist banking providers who understand the needs of contractors and freelancers will ensure that the business banking package includes the correct number of business transactions to avoid any charges. On average this is around 30 banking transactions per month. Consider how much extra you will pay if you go over these amounts and if this is only applicable to the first year or for the lifetime of the account.
  • Do the bank statements feed into your bookkeeping software? Consider whether the package you have can sync to your bookkeeping software. Systems such as FreeAgent are compatible with many banks whereby all your business transactions will feed through to FreeAgent giving you an accurate view on your tax status.

Who do we recommend at Integro Accounting?

We recommended some of the top business banking providers in the market. These are all specialist in their fields for independent professionals, and further details on what they can offer can be found on the links below:

For further advice, please do not hesitate to speak to a member of our team on 0207 0962659 or email christian@integroaccounting.com