Business Bank Accounts for Limited Companies

Getting set up the right way

Opening a dedicated business bank account is not just good practice for a UK limited company - it is a legal requirement. Keeping company money separate from personal funds protects you, keeps your records clean, and makes life far easier at tax time. It also signals professionalism to clients and suppliers, which can help when you start building your business reputation.

Today, you can open a business account almost entirely online. Digital banks are quick to set up and integrate neatly with accounting software, while traditional banks offer depth of services that some established firms value. Both routes can work well, provided you meet eligibility rules and choose the features that fit your operations.

Simple separation of money is the foundation of clean books and stress-free compliance.

Quick next steps

• Confirm your company details at Companies House are correct.
• Decide what you need: speed, low fees, cash deposits, lending, or software integration.
• Shortlist two digital options and one traditional bank to compare.

Who this guide will help

This guide is for UK directors and finance leads of limited companies who want clear, confident choices about business bank accounts. If you are newly incorporated, scaling up, or switching providers for better tools and pricing, you will find practical steps and facts without the jargon.

What a business account does for your company

A business bank account is a current account held in your company’s name. It handles income, payments, payroll, taxes, and day-to-day spending. For UK limited companies, using a personal account for company transactions is not permitted. A dedicated account keeps your financial trail transparent for HMRC and simplifies bookkeeping.

There is no legal limit on the number of business accounts you can hold. Many companies run more than one - for example, a primary current account, a tax pot, and a separate account for projects or savings. This can improve cash flow control and reduce the risk of overspending.

Eligible deposits are protected up to £120,000 per banking group under the Financial Services Compensation Scheme. That creates a safety net for company cash held with UK-regulated institutions.

How to open and manage an account effectively

Most UK banks now offer online applications for limited companies. Digital challengers often approve accounts within minutes, while traditional banks may take longer due to additional checks or in-branch verification. Be ready to provide proof of identity, proof of address, company registration details, and information on directors and persons of significant control.

Banks typically require directors and PSCs to be UK residents and the business to have a UK-registered address. These checks support anti-money laundering rules. If you have non-UK directors, allow extra time and expect additional documentation.

Once open, link your account to accounting software such as Xero, QuickBooks, or FreeAgent. Automatic feeds reduce manual entry and cut errors when reconciling invoices, expenses, and VAT. If you handle cash, compare deposit fees across providers and deposit points like the Post Office or PayPoint, as charges can vary.

Digital vs traditional - which fits?

Why getting this right matters

A compliant business account keeps you on the right side of the rules and gives you a professional foundation. Clean separation makes audits, funding applications, and tax returns far smoother. It also helps you track profitability by customer, product, or project without muddling personal spending.

Running your finances through a business account supports the creation of a business credit profile. That history can help when applying for a company credit card, overdraft, or loan. With no legal limit on the number of accounts, you can ring-fence funds for PAYE, VAT, or Corporation Tax, and create digital envelopes to manage growth.

Finally, built-in tools such as invoicing, spending analytics, and instant notifications can improve control and reduce fraud risk, particularly when multiple team members need access.

Weighing it up: benefits and trade-offs

Watch the fine print

Always review eligibility criteria before applying. Most banks require UK-resident directors and PSCs, plus a UK-registered office. If ownership is complex or directors live overseas, banks may ask for extra verification and the onboarding timeline can extend. Have incorporation documents, ID, proof of address, and information on your business activity ready.

Check the fee schedule carefully. Some providers charge for cash paid in at the Post Office or PayPoint, while others include a monthly free allowance. Card use abroad, international transfers, and CHAPS payments may attract separate fees. If your account pays interest, it is taxable as company profit, so include it in your Corporation Tax calculations.

FSCS protection applies up to £120,000 per banking group, not per brand. If you hold large balances, consider spreading funds across separate banking groups to maintain protection coverage.

Other ways to move and manage money

1. Merchant accounts for card payments, settled into your business current account.
2. Payment service providers like Stripe, Square, or PayPal for online and in-person sales.
3. Business savings accounts for surplus cash and ring-fenced tax pots.
4. E-money accounts from regulated fintechs for quick setup and budgeting features.
5. Building society or credit union business accounts where available.
6. Prepaid expense cards with central controls for team spending.

Common questions

Q: Is a business account legally required for my limited company? A: Yes. Limited companies must use a dedicated business bank account and cannot run company transactions through a personal account.

Q: Can I hold more than one business account? A: Yes. There is no legal limit. Many companies use multiple accounts to separate tax, operating cash, and projects.

Q: How quickly can I open an account? A: Digital banks may approve within minutes if checks pass. Traditional banks often take longer due to additional verification.

Q: Are my company funds protected? A: Eligible deposits are protected up to £120,000 per banking group under the FSCS. Consider spreading larger balances across groups.

Q: Do I pay tax on interest from a business account? A: Yes. Interest is taxable. Limited companies include it in profits subject to Corporation Tax. Banks often pay interest gross, so ensure it is reported.

How Switcha can help

Choosing the right business account should feel straightforward. Switcha will connect you with the best options for what you are looking for, from fast digital setups to established high street names. We compare features, fees, and integrations so you can open with confidence and get back to running your business.

Important information

This guide provides general information only and is not financial, legal, or tax advice. Always check eligibility, fees, and protection directly with providers, and consider professional advice tailored to your company’s circumstances.