How to Set Up a Business Bank Account for Your Limited Company

How to set up a business bank account for your limited company

If you contract through your own personal service company (PSC), one of the first practical jobs after incorporation is sorting out your banking. This guide walks through why a separate account matters, what you'll need to apply, and how to think about choosing a provider. It is general education, not a recommendation of any specific bank or a statement about your own tax or legal position.

Do contractors need a separate business account?

In short: yes, in practice. Your limited company is a distinct legal entity from you personally, and current GOV.UK guidance on running a limited company is explicit that the company's banking must be kept separate from your personal banking, with a business bank account described as the simplest way to achieve that separation (GOV.UK: Company and accounting records).

Business.gov.uk's current guidance on setting up as a formal business reinforces this, stating that a limited company should open a separate bank account for the company (Business.gov.uk: Setting up as a formal business).

For contractors, this isn't just a compliance box-ticking exercise. Mixing personal and company money makes it much harder to keep clean accounting records, track client payments, calculate what you can draw as salary or dividends, and demonstrate to HMRC (or, if it ever becomes relevant, to a client or the Fair Work Agency) that your company operates as a genuine separate business. A muddled bank account is also simply a headache come year-end accounts and Corporation Tax return time.

What you'll need to open a business bank account limited company contractor

Opening a business account for your PSC is generally straightforward once your company is incorporated at Companies House. According to Business.gov.uk's guidance on opening a bank account, the information typically required includes:

• Details of all company directors
• The company registration number
• The date of incorporation

(Business.gov.uk: Open a bank account)

Most providers will also want to see your registered office address, a description of what your company does (useful to have your contracting sector and typical assignments summarised), and identification and proof of address for directors and any significant shareholders. Because contractor companies are usually very simple structures (often a single director and shareholder), the application process tends to be quicker than for larger trading businesses, but it's worth having your incorporation documents and ID ready before you start.

Choosing the best business bank account for contractors

There is no single "best" account, and the government guidance sourced here does not endorse or recommend any particular bank or provider. It sets out separation and onboarding requirements, not product comparisons. That means choosing between traditional high-street banks and newer digital-only providers is a decision to make based on your own priorities, ideally with input from your accountant. Points contractors commonly weigh up include:

• Monthly or transaction fees, since some providers offer free banking for a limited period or for lower transaction volumes
• Integration with accounting software, which can save time on bookkeeping if you use cloud accounting tools
• Ease of setup, particularly relevant if you need an account open quickly to receive your first invoice payment
• Support for company formations, as some providers offer combined company formation and banking packages
• Access to business support, such as dedicated relationship management, though this matters more for growing businesses than for most single-director PSCs

A contractor accountant will often have practical, up-to-date views on which providers work well for small PSCs, and many can help with the application itself.

Keeping your company and personal finances separate

Once the account is open, the discipline of using it properly matters as much as opening it. Pay client invoices into the business account, pay all business expenses from it, and only move money to yourself via recognised routes such as salary, dividends, or properly recorded expense reimbursement. This is the practical expression of the separation that GOV.UK's guidance on company and accounting records requires, and it makes your annual accounts, Corporation Tax return, and any HMRC enquiry far simpler to handle.

Keeping finances properly separated also supports the broader picture of your company operating as a genuine business rather than a disguised employment arrangement, which is one of many factors that can be relevant when working practices and IR35 status are considered. It doesn't determine status on its own, but it's part of running your company properly.

Where to go from here

If you're setting up a new PSC ahead of your next assignment, pair this with a look at our guides on contractor accountancy basics and, if you're negotiating rates for outside-IR35 work, our day-rate benchmarks. You can also browse outside-IR35 contracts currently listed on the board.

This platform does not determine, verify, or warrant IR35 status; the SDS is the client's legal responsibility. Contractors should take their own advice and consider IR35 insurance.