5 must-know banking tips when setting up as a limited company

Find out how to approach business banking for the first time when establishing your company.

If you’re just starting out as a limited company or are intending to set one up, our guide highlights some essential business banking tips for new company owners.

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This guide is paid content brought to you by Tide. Register your limited company and get a free business bank account in 4 easy steps. Tide will pay the registration fee to Companies House on your behalf. T&Cs apply.

1. You need a bank account as a limited company

A limited company is a type of business structure where the company has a legal identity of its own, and your liability as the owner is limited to the capital you’ve invested.

Because of its distinct legal entity, the company’s finances must be kept in a separate account from your personal finances. So if your limited company is using banking services, you’ll have to open a business account for it.

2. You can register a limited company at the same time as opening a business account

Limited companies are privately owned by one or more people, and must be registered with Companies House, pay corporation tax and file annual accounts.

The online incorporation fee for registering at Companies House is £12. Several banking providers allow you to register your limited company at the same time as opening a business account, allowing you to tick off 2 essential finance tasks in one go.

As an authorised company formation agent, Tide, for example, offers the Companies House registration service for free when you open one of its business bank accounts, all within a single, streamlined process. So you’ll not only save £12, but will also save time on admin too! Tide has 4 business account plans to choose from – one of which has no monthly fee and is ideal for those starting out.

3. Use your business account to help you keep on top of your taxes

Any size of business can incorporate as a limited company, including those run and operated by a single person.

“Limited companies have an attractive tax structure due to the fact that profits are taxed at the lower corporation tax flat rate of 19% compared to the variable 20-45% income tax rate of sole traders,” Tide explains.

“This allows directors to optimise their personal tax by paying themselves a combination of dividends and salary, or by carrying over those earnings to another tax year by leaving the money in their business bank account.”

Keeping your business and personal financial activities separate also helps identify all the financial information you need for HMRC at year end. You can also use the features of a business account (that you won’t find with personal current accounts) to keep on top of your taxes.

“It can help with bookkeeping by using transaction categorisation – and Tide’s transaction categories align with those on the HMRC self-assessment form – or by using accounting tool integrations. It can also help with getting paid by sending invoices or by issuing direct debits,” adds Tide. “Monthly business account fees are also tax-deductible.”

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4. Take advantage of linked tools to help your manage your business finances

The evolution in digital banking means you can now link your business account to other financial tools, and take advantage of those to help keep on top of your business finances.

For example, the ability to connect your business account to accounting software – such as Xero, Quickbooks or FreeAgent – is becoming increasingly commonplace. This means you can seamlessly feed your banking transactions into the software that either you or your accountant uses to calculate your company’s annual accounts.

In a recent Finder survey of 362 business account holders, 46% said that accounting software integrations were an important feature of a business account.

Tide’s business accounts connect with 9 different accounting software packages. There is also the option to connect either your Tide account or your business account from a different banking provider to Tide’s free Cashflow Insights tool, which helps businesses to predict their cash flow – and plan for any potential dry patches – as well as access tailored credit and business loan products.

5. Check out the different fees and features on offer with business accounts

Unlike most personal current accounts, many business accounts come with fees. These can include monthly account fees and individual transaction fees, for things such as making an ATM withdrawal, paying in a cheque or making a direct debit payment. So it’s important you consider how you’ll be using your business account and how many transactions you might make when weighing up the fees on different accounts.

Some business accounts come with totally free banking for a set introductory period, while others don’t charge monthly fees. Some providers offer several tiers of account plans to choose from, so you could opt for a free business account with basic features or lower transaction limits, or consider paying a monthly fee in exchange for more account tools or higher transaction limits.

For example, Tide’s business account plan with no monthly fee involves a 20p transaction charge and £5 per month fee for each expense card you may want for your team. Whereas the “Plus” plan costs £9.99 per month and includes one free expense card and 20 transactions a month free, as well as phone support and priority in-app customer support. With both accounts, you can use your Tide card to make purchases in the UK and abroad for free.

To compare the features and fees of different business accounts available on the UK market, visit our dedicated business banking section.

The tax you need to pay depends on your individual circumstances and can change over time. This content is for information only - it's not tax advice. You're responsible for carrying out your own checks and for getting professional advice before making financial decisions.

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