Banking for contractors,
consultants and freelancers
When you start out as a contractor, consultant or freelancers, you will need a business bank account. Even though it may seem convenient to use your personal bank, this may not be the best option for your business. And when you run a Limited Company, your business bank account needs to be different from your personal bank account.
Business banking transactions
There will be various business transactions that you will have to make. Here are some examples of what you will need to do:
Receiving payment from clients
Paying yourself your salary
Paying out dividends
Paying PAYE tax and National Insurance for you and your employees
Paying annual Corporation Tax
Claiming for personal expenses
Paying business expenses
How to choose your business bank
Before you choose a bank for your business account, you need to do some research into what they offer and how that corresponds to your needs. There are a few important considerations to take into account:
Charges & fees
Some banks don’t charge fees for every day banking so you may not need to worry about any charges. However, many banks do charge for things like debit card use, issuing or paying cheques, transferring money and withdrawing cash.
Many banks will offer great introductory rates which may seem too good to be true, but after these expire, fees can soon increase. It’s best to choose a bank that provides free business banking. This will suit new businesses until they need to upgrade or take advantage of any additional features.
Ease of access
Most banks now offer customers an online service. Opting for online banking saves the hassle of writing and posting cheques, or using telephone banking. There are several advantages to online banking such as real time statements which can be beneficial for things such as quarterly VAT returns. As beneficial as online banking might be, you may need to be careful about any hidden fees when using online banking.
You also want to choose a bank where you can set up an account in a short amount of time. With money laundering regulations in this country, there are minimum requirements for proving your identity and history when you open a bank account. With this in mind, you will be subject to some checks when you apply to open your business bank account. There will be several documents that you need to prepare such as your certificate of incorporation, copies of your memorandum and articles as well as details of any shareholders you have. The bank will also require proof of identity such as your passport.
Depending on how long they take to do these checks, it can take anywhere from a few days to four weeks to set up a business bank account.
Compatibility with your accounting software
To make life easier for yourself, it's a good idea to choose a bank that is compatible with your accounting software, so that you will get real time information about your financial position.
Here at Focus we have partnered with Mettle, the free business account by NatWest that helps small businesses start, run and grow. It’s built for small businesses, startups, limited companies and sole traders.
Customers can apply for an account in minutes, create and send customised invoices and connect to accounting software to help keep track of their books.
The account comes with a UK account number and sort code and an in-app chat feature so that customers can speak to real people when they need help.
Mettle in return has partnered with FreeAgent, which means customers can now sign up for the accounting software through the Mettle app and seamlessly sync all their business transactions.