Which business bank account as a contractor is best?

If you’re contracting as a limited company, your business bank account isn’t just where your money lives – it’s a tool for managing your business.

With 2025-26’s new tax changes now in force, Making Tax Digital (MTD) a reality, and the challenges of a fluctuating income to manage, choosing the right business current account can make a big difference to your day-to-day work as a contractor.

Here’s what we’d encourage limited company contractors and other flexible workers to look out for, and what to consider, when choosing a business bank account, writes Nick Biggam, commercial director of Zempler Bank.

Keep your business and personal finances separate

Mixing personal and business finances in one bank account is a guaranteed headache, especially when it comes to paying taxes around HMRC deadlines.

With the introduction of Making Tax Digital (MTD), setting up a dedicated business bank account is essential to stay compliant.

A business-only current account also makes it much easier to manage your business accounts, complete your tax returns and get a clear overview of your cash flow.

If you’re VAT registered, you already have to submit your VAT return via an MTD-enabled platform. And if you earn more than £50,000, you’ll soon have to file your income tax self-assessment digitally too.

Be aware, it’s likely that corporation tax will follow the same route in the future, so it’s tricky not to see how opening an account with smart banking tools now will better prepare you for new regulations once they come into effect.

Go digital -- but do it smartly

So-called ‘digital-first’ banks have made it easier and quicker to set up a business account than ever, and if you try to set up account and don’t find it straightforward, then they’re not really a digital-first bank!

With Zempler, for example, opening a business account takes minutes. It also brings a world of business-focused tools built specifically for freelancers, contractors and micro-businesses, to your fingertips.

These tools do more than just save time. They help create financial discipline so you can spend more time focusing on your actual business.

Limited company bank account tools: essentials or nice-to-haves?

To get a truly modern, up-to-date business bank account (as of mid-April 2025), look for features like:

• Tax pots that automatically set money aside for taxes so you can better avoid shortfalls;
• Receipt scanning to log expenses as you go, thereby banishing the nightmare of envelopes stuff with paper receipts;
• Spend categorisation to track business expenses and streamline end-of-year accounting;
• Invoicing to create and send invoices and track payments against deadlines;
• Accounting integrations with major platforms to simplify your MTD obligations;
• MTD VAT tools for VAT-registered businesses to submit VAT returns directly from your banking app.

With a business bank account, ask yourself -- what matters most to you and your contractor company?

It can be tempting to choose your bank based on how much it costs – especially when there are free accounts out there.

It’s understandable. But often, this approach doesn’t factor in that some banks charge extra for what you may consider ‘basic’ services – cash withdrawals, payments abroad, and even inbound payments. That means you get penalised just for getting paid!

These costs can add up fast.

Watch out for hidden costs but don’t stress the interest

If your bottom line matters most, look for accounts that give you the best balance of cost versus functionality, based on your business needs.

For our part, we’ve really tried to balance the genuine concerns of contractors here, by offering an account with no monthly fee but then also no charge for incoming payments.

And while earning interest is important if you’re sitting on significant long-term funds, the difference between banks is usually minimal and less impactful to micro businesses.

Penultimately, don’t press ‘skip’ on bank account Terms and Conditions (Ts&Cs)

When you come to compare limited company bank accounts, definitely shop around to feel like you’ve got a good grasp of the market.

But also, unlike downloads and other purchases that contractors tend to make online, do not skip the small print.

The opposite in fact -- read the Ts & Cs thoroughly.

Limited company bank account considerations, including when a ‘bank’ isn’t a bank

When contractors compare banking providers against each other, we’re big believers in keeping the ‘big picture’ in mind. And invariably, that ‘big picture’ means Regulation and Protection.

What do we really mean here? Well, they may look like them, but not all business account providers are fully regulated banks.

Some operate as Electronic Money Institutions (EMIs), which means they don’t offer the same safeguards and assurances for your money and data.

What is the Financial Services Compensation Scheme (FSCS)?

Opening an account with a fully regulated bank means your money is protected under the Financial Services Compensation Scheme (FSCS), up to £85,000.

Under the FSCS, your bank is held to higher standards for data security, operational processes and customer service.

So when choosing a bank, it’s prudent to select one that strikes a balance between modern, digital tools and established banking regulations.

Find the balance between cost and convenience: the four ‘Rs’

Your business bank account should make life easier, not more complicated.

Whether you’re a first-timer contractor or rethinking your setup in light of MTD, strongly consider a business current account that ticks off the four ‘Rs:’

1. Offers digital tools RELEVANT to your contracting biz or tech consultancy operation;
2. Gets you READY for Making Tax Digital
3. Comes with FSCS protection and full REGULATION
4. Balances cost with performance, making it a REALISTIC, viable account for your business.

Finally, check us and our approach out…

As a modern, digital bank, we’re striving to combine the best of both worlds -- tiered accounts tailored to different contractor needs with the trust and protection of a proper bank.

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Editor's Note: The content of this article is not guidance from Zempler Bank.

Zempler Bank makes no representations or warranties of any kind, explicit or implied with respect to the contents of this article. Without limitation, Zempler Bank specifically excludes and disclaims all express or implied warranties and conditions to the extent permitted by law, and any action taken using such content is strictly at the user’s risk.