Business bank account for freelancers
As a freelancer you will need to create a business bank account that you can use to receive payments for your work from your clients.
You are under no legal obligations to open a business account to deal with your work related finances. However, it’s a good idea to do so as it can help you track your businesses expenses and income from your clients.
Freelancers will typically use their bank account to:
- Receive money from clients for the work they do
- Pay their own salary and dividends – if they have set up a limited company
- Pay their corporation tax and VAT – again if they have set up a limited company
- Pay for work related expenses
- Set up direct debit payments for their mobile phone, insurance, accountancy fees etc.
If you have an accountant, they may be able to point you in the direction of which bank to go with. And although an accountant’s advice is valuable, you should make sure that you also shop around to find the ideal bank to go with for your business bank account.
How to choose your business bank account
Points to consider when choosing your business bank account:
1. What are the charges and fees for the business account?
You need to make sure that you have all the information on any potential business bank account that you might create. Banks may have special offers such as free banking for the first 12-24 months, however it is important to find out how much their charges and fees are after this introductory period. On the other hand, there are banks that offer a business account free of charge, as long as you meet their criteria, which is usually a minimum balance in the account.
2. Does the bank offer online and telephone banking?
Online banking is a must for anyone, however it’s even more important for freelancers to be able to bank on the go, as it means you can save time to focus on your work. Online banking can allow you to see your bank statements in real time and set direct debits, making your banking experience much easier than having to go into branch. It’s also worth checking out what their telephone banking service is like as at some point you are likely to want to be able to call them.
3. Does the bank have the option to open a deposit account as well?
If you are a freelancer who formed a limited company then you will have to pay corporation tax and quarterly VAT payments. So you may prefer to have a deposit account, where you can put deposits on a regular basis, instead of coming up with the funds annually. You can also receive a higher amount of interest than for a current account.
4. What are the interest rates for the business accounts?
You will need to look at the interest rates offered for business accounts by different banks. This is because, some business bank accounts pay interest on balances and some do not. As the interest on current accounts is minimal, you may wish to focus on the interest rates of their deposit or savings account if they have one and you are planning to put aside your tax liabilities as above.
5. Does the bank offer any further services?
Although you may be completely happy with the services that the bank offers, make sure to inquire about any other services that could help you. For example, some extra services they may offer to you as a freelancer include: faster payments, access to historical statements, the handling of international currency payments, a credit and/or debit card, access to a loan or overdraft. Make sure to find out the price for all these additional services.
What you will need to open an account
Here is some of the information you often have to provide the bank that you choose to bank with:
- Name and addresses of the company directors
- Date of birth, nationality and residency status
- Photo ID such as passport or driving licence
- Any previous names and addresses
- Personal current account details
- Limited company details (if registered as a limited company owner)
- Proof of address
- Certificate of incorporation
- Letter from your accountant
- HMRC letter or certificate
The specific information you will need depends on the bank you choose to open your account with, however this list should give you a good idea of what most of them will expect.
Some banks offer the option of creating an account online, however keep in mind that some may require to go into branch to create an account.