Keeping on top of your business finances is one of the most important tasks when setting up and running a business. Opening a dedicated business bank account is the first step in making the process as seamless as possible. A business bank account may appear similar to a personal account at a basic level; however, having a dedicated business account offers many benefits to you as a limited company owner.

This article explores whether you need to open a new ​account as a limited company business owner, the advantages of opening a dedicated business bank account, and things to consider when choosing a provider.

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What is a Business Bank Account?

A business bank account is a bank account that is opened and used solely for business use, for business-related transactions only. A business bank account allows payments to be made from and to the company name rather than the company owner as an individual.

As a limited company owner, you can apply for a business bank account to help to keep your personal and business transactions separate.


Do you Need a Business Bank Account as a Limited Company Owner?

Although it may not be a legal requirement to have a business bank account as a limited company owner, it is heavily advised to help to make managing reconciliation and Making Tax Digital (MTD) management easier for you and your business.

As a limited company, the money that the company makes belongs to the business rather than you personally and are classed as separate legal entities.

Having a dedicated business bank account ensures that your business’s financial activity is kept separate from your personal finances to avoid any confusion, particularly when it comes to corporation tax returns and business expenses for your limited company.


Advantages of Having a Business Bank Account

There are several advantages to opening a business bank account as a limited company. You’ll be able to use the account in the same way that you would your personal account, but some other factors make it a sensible choice for a limited company owner:  

  • Manage your finances more efficiently

Having a dedicated business bank account, specifically for business purposes, helps to save you time on the administration involved when sorting through and allocating your business vs. personal transactions for your tax returns.

  • Establish trust and credibility

Having a business bank account that your clients can pay into allows your business customers to pay the company in its trading name rather than you as an individual, which in turn helps to prove your credibility as a business and build trust with your clients, in particular, new customers.

  • Build a business credit rating

This is particularly relevant if you are considering applying for a business loan or credit card, as a business bank account allows you to build a credit rating for the business, whereas a personal bank account would not.


How to Choose a Business Bank Account

You can open a business bank account with many high street banks and online providers, and there are many options available. When choosing the provider for you, it is essential to do your research and opt for the best choice for you. For example, would you like to be able to visit a physical location, or are you happy with online banking services or a mobile banking app? You may wish to use the same supplier as your personal account, as they already have many of your details, which can speed up the process.

When considering your provider, you should also check and assess the following:

  • Ensure that the provider is supported by the Financial Services Compensation Scheme (FSCS). This scheme which the Financial Conduct Authority (FCA) regulates, protects you financially by protecting up to a limit of £85,000 per person per financial institution should the bank collapse.
  • Ensure that the provider uses the Confirmation of Payee Scheme. This is a name-checking service specifically for UK-based payments, which ensures that the details entered during a transaction match the name of the business, which helps to prevent accidental payments to the incorrect person or account.
  • Are there any bank charges or fees that may be incurred during your day-to-day transactions? Each bank charges a different amount for different types of transactions and has additional monthly fees or annual fees for the business bank account itself.
  • Does the provider offer a bank feed service? This service connects your transactions to your accounting software automatically, giving you an up-to-date view of your company’s financial performance and saving on admin time.
  • Any other things to consider, such as overdraft or savings accounts fees, credit or debit card fees, interest rates, foreign currency services (if trading or doing business internationally), and any additional transaction charges or costs you may incur.


What Do You Need to Set Up a Business Bank Account?

Once you’ve chosen your provider, you’ll be required to submit several documents and details to open up a UK business bank account:

  • Proof of ID in the form of a passport, driving license, or National ID card.
  • Proof of address in the form of a utility bill, recent bank statement, or council tax statement.
  • Contact details, business name, and complete business address, including postcode.
  • Companies House registration number (limited companies and partnerships).
  • Expected annual turnover and cash flow forecasts.

At DS Burge & Co, we can help you to select a bank account provider and prepare you for the application process, ensuring your financial forecasts are in a good place for your application to be improved. Contact our expert team to find out more about our services, including business tax advice.