From a finance and tax point of view, contractors are no different from other types of business, meaning that they can hugely benefit from having their own dedicated current account.
A business account is a great financial tool to get paid, manage expenses, and keep your finances in good working order.
Latest reviews of business accounts for contractors
Get £150 cashback when you open a Tide business bank account using the code 150BOOST.
The Tide business account offers three different pricing plans, with its free option likely to be most suitable for contractors, sole traders and freelancers. As your business grows, you can upgrade your plan at any point, so long as you are happy to pay a monthly fee. All plans enable you to sync your account with accounting software like Quickbooks, Sage, KashFlow and Xero. You'll also be able to automatically categorise transactions, send, pay and track invoices and upload receipts. ATM withdrawals cost £1 each, while other transaction fees will depend on the plan you have chosen. The 2 paid-for plans offer the most benefits, including in-app and phone support, plus a 24/7 legal helpline. It should only take 10 minutes to open your Tide business account and no credit checks will be carried out. Your Tide card should arrive within 2 to 4 working days.
Pros
24/7 customer support
Categorised spending
FCA regulated
Quick set-up
No monthly fees
Easy to manage accounts and track payments within the app
Ability to set up direct debits and standing orders
No annual or monthly fee when you apply using the Finder link.
This account from Zempler is a straightforward business account with no monthly or annual fees, making it a great option for contractors. You can sign up for a Zempler business account in a matter of minutes and once your application is approved, your card should arrive within 3 to 5 working days. Through the account you'll be able to deposit cash or money via bank transfer, use your card online, instore or to withdraw cash, pay bills, suppliers and expenses online, and sort and categorise spending on the go via the app. If you employ staff, you'll also be able to order up to 20 additional cards and track expenses and block certain transactions. The account can also be integrated with accounting software to make managing your finances that bit easier. Any funds you deposit into the account will be protected by the Financial Services Compensation Scheme (FSCS) up to £85,000.
Pros
Open an account in 5 minutes
"Cashplus iDraft" once eligible
Currency cards for travel
Online services in addition to the mobile app
Cons
Charge to have your bank card issued
Traditional bank still needed for majority of your business finance needs
£8 per month. Fee waived if account balance £6000+
Arranged overdraft
Requires credit check
24 months' fee-free monthly and transactional business banking for switchers.
This straightforward business bank account from Metro Bank is designed to support businesses with a turnover of under £2 million a year. There are no monthly account fees, provided you keep your balance at £6,000 or more, otherwise you’ll be charged £6 a month. Fees apply to certain transactions, but card purchases and cash withdrawals in both the UK and Europe are free of charge. Account holders will also have a local business manager to support their business, as well as access to smart accounting software, including digital receipt capture and direct bank feeds with Xero. What’s more, Metro Bank has partnered with Enterprise Nation to give you a year’s free access to their network of business support. You can apply for an account in branch or online and the account can be managed via your mobile phone. An arranged overdraft is available.
Pros
No monthly fees
Easy to open
Fee-free card transactions in the UK and abroad
Access to accounting software
Cons
Fees apply to certain transactions
No interest paid on balances
Interest applies to overdraft
Accounting integrations
Xero
Account fee
£8 per month. Fee waived if account balance £6000+
Do you need a business bank account as a contractor?
If your business is set up as a limited company, then yes. As your business is a separate legal entity, its finances must not be mixed with your personal ones.
If you are set up as a sole trader instead, technically there is nothing stopping you from using your personal account for professional purposes. However, it’s not advisable because it will make it harder to separate the two things, work out how much you earn exactly, keep track of paid invoices and so on.
Using your personal account for business purposes is also likely to violate your bank’s terms and conditions.
How to open a business account if you are a contractor
Depending on the account provider you choose, you will be able to open the account in person or online.
You will need to provide both your business and your personal details and documents, including:
Your business name and address
Companies House registration number if you’re a limited company
Certificate of incorporation
Your own personal details and contact information
A form of ID
Proof of address
Estimated business turnover
Personal bank or financial statements
Eligibility criteria and required details and documents can vary from bank to bank.
How to compare business bank accounts for contractors
There is no such thing as dedicated business accounts for contractors, so you’ll have to make do with what the market has to offer to small businesses in general. Some things to consider are:
Application process. Setting up a business account can take time with some banks, while others are quicker and easier to deal with. As a contractor, you may not need a super complicated account with lots of features, so it’s worth looking for a more straightforward and sleek option.
Costs and fees. Business accounts tend to be more expensive than personal accounts, so always check them carefully.
Managing the account. How do you prefer managing your account? Online, in person, over the phone? Some banks will not offer all the options, so it’s worth considering this in advance.
App and digital services. These days having a good digital banking service and a slick banking app makes all the difference, especially for a busy contractor who doesn’t want to spend a lot of time dealing with banking administration.
Customer service. If anything goes wrong, you want a bank that can help you sort things out quickly and efficiently. Having a look at the bank’s reviews online can’t hurt.
Extra features. A lot of business bank accounts include features that can help you manage your business finances, such as overdrafts, invoicing and accounting services, and budgeting features in the banking app.
As a contractor, you might find it useful to have a look at online-only business accounts, especially if you don’t deal with cash and are comfortable with technology.
Online business accounts tend to be quicker to set up and cheaper, and pay particular attention to their mobile banking apps, which tend to work better and have more features.
Pros and cons of a business bank account if you are a contractor
Pros
If you own a limited company, you must get a dedicated business account.
It makes it easier to manage your business finances and keep track of payments.
Some business accounts are relatively easy and quick to set up.
You can get extra features to help you with your business finances, from overdrafts to accounting software integration.
You can manage most business accounts online or from your phone.
Cons
Business accounts usually have more fees compared to personal accounts.
Bottom line
Business bank accounts may sound complicated, but in fact it’s quite easy to get one for a small business, and it will help you organise your finances and manage them easily.
As a contractor, you probably want to look for a straightforward business account without too many frills, that can be accessed online in no time from wherever you are.
Frequently asked questions
As long as your business account is with a fully licensed bank, it will be covered by the FSCS, which means that your deposits are protected up £85,000.
If you choose a digital provider that is not a fully licensed bank, make sure that it is still registered with the Financial Conduct Authority. Most will have an electronic money licence, meaning that even if they are not protected by the FSCS, your deposits will be kept in so-called “segregated” accounts that cannot be accessed by the company, even if it were to go bust.
It depends on the bank, but if you choose a traditional bank (Barclays and the like) you will often have to visit a branch to open a business account, unless you are already an existing customer.
Yes, some banks do offer business accounts that are almost completely fee-free; have a look at Starling Bank, for example. You will likely have to pay a monthly fee if you want its most advanced features though.
We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you. Most of the data in Finder's comparison tables has the source: Moneyfacts Group PLC. In other cases, Finder has sourced data directly from providers.
Valentina Cipriani was a writer at Finder UK. She wrote news, features and guides about banking and credit cards, helping people to improve their financial lives. She holds an MA in International Journalism. See full bio
By switching your business bank account, you may be able to reduce your monthly fees or take advantage of different features like smart bookkeeping tools.
Considering a Revolut Business account? We take a closer look at the features and price plans available with these digital-only accounts.
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