Business bank accounts for UK limited companies

Limited companies are distinct legal entities that are responsible for their own finances. This means that all business-related income and expenditure must be accurately recorded and fully traceable at all times. Whist not a legal requirement, it is highly beneficial to use a separate bank account if your company is trading. This will enable you to draw a clear distinction between your company’s income and expenditure and your own personal finances.

You will find it easier to keep accurate accounting records, prepare annual accounts and company tax returns and work out your own Self-Assessment tax returns as a shareholder-director. Aside from the administrative benefits, a bank account in your company name will legitimise the credibility of your business for customers, suppliers and service providers.


1. How to open a UK business bank account

It is a relatively easy process to open a bank account for a company that has UK-resident directors and shareholders. Most banks offer a range of accounts to suit a variety of needs. You will be required to provide the bank with copies of your incorporation documents, and personal ID and proof-of-address documentation for each director. You will also be subject to a routine credit check if you are to be named on the account as an authorised signatory.

2. Do I need a bank account for a dormant company?

No, there is no need to open a one for a dormant limited company. We would suggest keeping it that way until you start trading. If any money is paid into, or out of, a bank account registered in your company name, your business will no longer be classed as dormant. We do, however, strongly recommend opening an account as soon as your company does become ‘active’ for corporation tax purposes.

What is a dormant company?

3. Will my company still be dormant if I pay cash into my business bank account?

A dormant limited company should not have any ‘significant accounting transactions’ during its accounting period, and this includes money being paid into or out of your company bank account. Additionally, dormant companies are not permitted to buy or sell goods and services, rent or buy property, pay employees or directors, earn or pay interest, pay bank charges or fees, receive or issue dividend payments, or pay accountancy and legal fees or the cost of company formation through a business bank account.

If you wish to keep this dormant status, we’d advise against a business bank account at the present time. In fact, we would suggest closing the account altogether because there no need to have one whilst your company is inactive. You are simply increasing your chances of losing the dormant status. The only permissible transactions that can be put through the bank account of a dormant company are:

  • Payments for shares from the first shareholders.
  • Paying fees to Companies House for filing annual confirmation statements and changing the company name.
  • Paying late filing penalties to HMRC.

All other kinds of incidental payments should be paid to or from a personal account to avoid forfeiting your dormant status. If and when your company becomes active, you should open a dedicated bank account as soon as possible to keep your company finances in order.

4. Can I make my company bank account dormant?

Bank accounts are never officially dormant until they are closed; therefore, if your company is not trading and it is not spending or receiving any money, you should close the account. There is no need to have one when your are not trade.

Before doing so, you should ensure all bills and other liabilities are paid, including bank charges and fees. Cancel all direct debits and standing orders. Contact all suppliers and service providers to ensure no further payments will be taken. When you are confident that everything is in order, call or visit your local branch to close the account.

Our online company registration package for non UK residents

5. How to add a new director to a business bank account

Every bank has its own regulations and protocols for adding directors and other authorised signatories to business bank accounts. Therefore, you should contact your bank to determine the requirements for changing your banking mandate.

Ordinarily, however, a new director will be required to visit a branch in person to provide photographic ID (passport, driving licence, or National Identity card) and a recent credit card/utility bill for address verification (mobile phone bills are not accepted). The new director will probably be asked to provide the following details:

  • Title and full name, including middle name(s) and any previous name(s)
  • Residential address
  • Date of birth
  • Country and city of birth
  • Country of nationality and residence
  • Position in company
  • Previous address details – if at current address for less than 3 years
  • Telephone number(s)
  • Personal bank account details
  • Usual signature

The director’s ID and address credentials will be verified, and a routine credit-check will be carried out to determine his or her suitability. Many banks will not approve a new signatory if he or she has adverse credit history. Likewise, any person who is an undischarged bankrupt or disqualified director will not be permitted to act as an authorised signatory.

6. What to do with your business bank account if you change your company name

If you change the registered name of your firm after company formation, you must ensure the title (name) on all business bank accounts and loans agreements is changed as soon as possible, but you must wait until Companies House has approved your the new name and issued a change of name certificate.

To change the title of your company bank account(s), you will have to complete a form for your bank. Every bank will provide a different form for this purpose, so you should contact them in the first instance to find out whether this is done online or in-branch. You will probably have to provide a copy of the certificate of name change, and you may have to notify HMRC if you have any direct debits set up.

Company names – everything you need to know

7. Will my company bank account be audited?

Key changes were introduced to limited company and LLP audit and reporting requirements on 6th September 2012 that has removed the need for the financial accounts and bank accounts of many small and medium-sized private companies and LLPs to be audited. A ‘small’ company will qualify for audit exemption if it can satisfy at least two of the following criteria:

  • It has an annual turnover below £6.5 million
  • It has assets worth less than £3.26 million
  • It employs fewer than 50 people

Small companies that are eligible for audit exemption are permitted to file abbreviated accounts with Companies House, but they must file full statutory accounts with HMRC as part of their annual Company Tax Return.

Regardless of the size of your company, an audit of your annual accounts, which includes business bank accounts, must still be carried out if the articles of association requires you to do so, or an audit is requested by shareholders who own at least 10% of the company’s value of issued share capital or 10% of any class of company shares.

Carrying out an audit is an excellent opportunity to review the financial position of the business and/or provide reassurance to existing and potential lenders and investors. It may be worth discussing your options with an accountant.

What is an audit?

An audit is a review of financial accounts carried out, and confirmed by, an independent accountant who is qualified to act as an auditor. This review will include a full stock take and analysis of accounting records and business bank accounts to ensure the accuracy of all financial transactions and the figures stated in the company accounts.

It is advisable to operate a separate bank account for your limited company to ensure complete corporate transparency. In the event of an audit, it will be far easier to trace and account for all money spent and received by your company.

By Chris Tapley, Content Writer for 1st Formations.