Practical, UK-focused guidance on choosing a business bank account for construction companies, with FSCS safety, fees, lending access and setup requirements explained in plain English.
Building firm money management - made straightforward
Running a construction business means handling staged payments, retentions, subcontractor invoices and CIS deductions while keeping projects moving. A dedicated business bank account is more than a tidy way to get paid. For limited companies it is essential because the company is a separate legal entity. For sole traders it is strongly recommended, both for clean records and because many banks restrict business use of personal accounts. The right account helps you invoice on time, track costs by job and prepare accurate VAT and tax returns without a scramble.
Choosing a provider is not just about the headline monthly fee. It is about safety of funds, cash deposit charges, accounting integrations and whether you might need an overdraft for wages and materials before a client releases the next stage payment. This guide sets out what to know, how to decide and the pitfalls to avoid so your banking supports your site schedule, not the other way round.
Who will find this useful
If you are a UK sole trader, limited company director or project lead in construction or the trades, this guide is for you. It suits anyone setting up their first business account, switching providers or weighing digital-first against high street support.
What a business account does for construction
A business current account separates your firm’s money from personal finances, which is required for limited companies and best practice for sole traders. Separation keeps your bookkeeping, insurance records and tax filings clear. It also helps you look professional with main contractors, lenders and suppliers.
Specialist features matter in construction. Accounts with easy invoicing, payment references by project, and integrations to tools like FreeAgent can reduce admin. Some banks run sector teams that understand performance bonds, long payment terms and retentions, offering more informed support. Safety is key too. Most UK business accounts with banks are covered by the Financial Services Compensation Scheme up to £85,000 per legal entity per bank. Some e-money accounts rely on safeguarding instead, which is different from FSCS protection.
How to set up smoothly and avoid delays
Open early. Banks will ask for proof of identity and address for all owners or directors, your registered business details, and for companies, your Companies House information. Expect questions about your trade, expected turnover, typical transaction values and the source of funds. Having insurance certificates, key contracts and subcontractor details to hand can speed things up if your work is considered higher risk.
Decide whether you need branch access. If you pay in cash or cheques, check deposit methods and fees via branches or the Post Office. If you are largely digital, look for strong mobile apps, instant notifications and Open Banking links to your accounting software. If you anticipate uneven cashflow, choose a provider that can couple day-to-day banking with an overdraft or revolving credit. That can be invaluable between stage payments.
Finally, plan your payment flows. Set up separate spaces or sub-accounts for VAT, CIS and retentions. Many modern accounts allow you to ring-fence funds by label so payroll and materials do not raid tax money by mistake.
Why the choice really matters
A suitable account reduces friction on site and in the office. Fees aligned to your usage can save money when you handle frequent small supplier payments or cash deposits. Integrated tools reduce errors and late invoices. Sector-aware relationship managers can be more realistic about lending for plant, vehicles or bridging working capital.
A well-chosen account turns cashflow from a stress point into a planned system that supports every project phase.
Safety matters too. Construction firms often hold sizeable balances to cover materials, wages and retentions. FSCS protection caps at £85,000 per legal entity per bank. Sole traders’ personal and business balances with the same bank count together, while limited companies have a separate £85,000 limit from the owner. If you regularly exceed these levels, consider spreading funds across institutions that offer FSCS cover.
The upsides and trade-offs
| Pros | Cons |
|---|---|
| Clear separation of business and personal finances for clean tax and compliance | Monthly fees and transaction charges can add up if misaligned with usage |
| Access to features like invoicing, payroll and accounting integrations | Some app-only providers do not offer overdrafts or complex lending |
| Potential FSCS protection up to £85,000 per legal entity per bank | E-money accounts use safeguarding, not FSCS, which may not cover provider failure |
| Sector support from banks with construction teams and relationship managers | Cash and cheque deposit fees via branches or Post Office can be higher |
| New business offers with months of free banking reduce early costs | Onboarding checks can delay payments if documents are not ready |
Pitfalls to watch before you apply
Check whether your chosen provider offers FSCS protection. If it is an e-money institution, funds should be safeguarded in ring-fenced accounts, but that is not the same as FSCS if the provider fails. Understand how much cash you will deposit monthly. Cash handling can be expensive after any free period, and pricing varies by provider and deposit route. Review integration options with your accounting software to avoid double entry and mismatches on CIS or VAT.
If you operate as a limited company, never run trading through a personal account. Besides breaching your bank’s terms, it risks messy records and insurance complications. Sole traders should still keep finances separate, as most personal accounts restrict business use. Finally, think ahead about finance. If future overdrafts, asset finance or bonding could be important, pick a bank that already supports those facilities rather than discovering limits later.
Other routes to consider
- High street banks with sector teams - for relationship support, lending and bonding discussions.
- Digital-first business accounts - for low fees, fast onboarding and strong app features.
- Trade-focused accounts with cashback - for ongoing savings on materials and tools.
- Building society business accounts - for conservative service and FSCS protection where available.
- Multi-account setup across banks - to spread balances and stay within FSCS limits.
Frequently asked questions
Q: Do I legally need a business account for my construction company? A: Limited companies should use a separate business account because the company is a distinct legal entity. Sole traders are not always required, but most banks restrict business use of personal accounts and separation makes tax simpler.
Q: How safe is my company’s money? A: Most bank business accounts are covered by FSCS up to £85,000 per legal entity per bank. Some e-money providers use safeguarding instead. If you hold larger balances, consider spreading funds across FSCS-protected banks.
Q: What documents will the bank ask for? A: Expect proof of identity and address for owners or directors, registered business details, Companies House information for limited companies, and details on turnover, transaction volumes and source of funds. Insurance and key contracts can help.
Q: What fees should construction firms focus on? A: Look at monthly account fees, free banking periods, transfer charges, cash and cheque deposit fees, card fees and costs for international payments. Also check the price of any add-on services you will actually use.
Q: Can I get an overdraft with an app-only business account? A: Some providers do, many do not. If bridging gaps between stage payments is likely, choose a bank that pairs the current account with overdrafts or revolving credit on terms that fit your cash cycle.
Quick next steps
- Map your monthly payments, cash deposits and software needs.
- Shortlist three accounts that match this usage pattern and safety needs.
- Apply early so onboarding does not delay your first site payments.
How Switcha supports your decision
Switcha will connect you with the best options for what you are looking for. We compare pricing, features and safety considerations relevant to UK construction firms, then help you move forward with confidence. No jargon, just clear choices that fit how you work.
Important information
This guide provides general information for UK readers and is not financial or legal advice. Always check current terms, eligibility and protection status with providers before applying, and consider professional advice for your specific circumstances.
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