PSC Bank Accounts: Banking for Personal Service Companies

Why Your PSC Needs Its Own Bank Account

Your PSC is a separate legal entity from you personally. This distinction is fundamental to everything from tax compliance to legal liability, and it extends to banking:

• Legal requirement — as a separate legal entity, your limited company must have its own bank account. Company funds belong to the company, not to you as the director.
• HMRC compliance — HMRC requires clear separation between personal and company finances. Mixing them creates problems with Corporation Tax calculations, VAT returns and dividend records.
• Bank terms and conditions — using a personal account for business transactions breaches most banks’ T&Cs. Banks can and do close personal accounts used for business purposes.
• IR35 investigations — if HMRC opens an IR35 enquiry, mixed finances complicate your defence. Clean, separate records demonstrate professional business conduct.
• Accountant efficiency — your specialist contractor accountant needs clear transaction records. A dedicated business account makes year-end accounts, VAT returns and Corporation Tax filings straightforward.

For a complete overview of contractor banking requirements, see our main guide: Contractor Bank Accounts for Limited Companies & Freelancers.

Companies House Identity Verification: What PSC Directors Must Know

From 18 November 2025, identity verification became a legal requirement for all directors and Persons with Significant Control. This is one of the most significant changes to company law in years and directly affects every PSC director.

What Changed

The requirement is part of the Economic Crime and Corporate Transparency Act 2023, which overhauled Companies House powers to combat fraud and economic crime. The key provisions for PSC directors are:

• All existing directors and PSCs must verify their identity — this is not optional. Without verification, your company cannot file its confirmation statement or annual accounts.
• Verification via GOV.UK One Login — you can verify directly through the government’s identity service, which uses biometric checks against your passport or driving licence.
• Or through an ACSP — alternatively, you can verify through an Authorised Corporate Service Provider, which includes most accountants and solicitors. Your specialist contractor accountant can handle this for you.
• Deadline is your next confirmation statement date — you must complete verification before your company’s next confirmation statement is due. Check your filing deadline on Companies House.
• New directors must verify immediately — anyone appointed as a director after 18 November 2025 must verify their identity as part of the appointment process.

Why This Matters for PSC Banking

When opening a new business bank account, providers will increasingly cross-reference your identity verification status with Companies House. Ensuring your verification is complete before applying for a new account avoids delays.

IR35 and Your PSC Bank Account

IR35 is the tax legislation that determines whether a contractor working through a PSC is genuinely self-employed or effectively an employee of the end client. It is assessed engagement by engagement, and the outcome affects how you are taxed — but it does not affect your ability to hold a business bank account.

How IR35 Status Works

When deciding whether a contract amounts to employment or self-employment, there are three essential questions to consider. These form the “irreducible minimum” — if any part is missing, the contract cannot be employment:

• Personal service — is there a requirement for the worker’s personal service? A genuine right to send a substitute removes this requirement and is inconsistent with employment.
• Control — is there a sufficient degree of control over the worker? A comprehensive job specification outlining what service is provided, where, and the hours is normal in self-employment — but the client must not control how the service is performed.
• Mutuality of obligation — is there an obligation to offer and an obligation to accept future work? If not, there cannot be sufficient mutuality to form a contract of employment.

Inside IR35

If an engagement is determined to be inside IR35, tax and National Insurance are deducted at source by the fee-payer (usually the agency or end client). However, your PSC still needs its own bank account. You will still use it for:

• Receiving net payments after tax deductions
• Claiming allowable expenses
• Paying dividends from retained profits
• Managing Corporation Tax on any remaining profit
• Paying accountancy fees, insurance and other business costs

Outside IR35

If an engagement is outside IR35, you retain full control of your finances through your PSC account. Your company receives gross payments from clients, and you manage salary, dividends, Corporation Tax and VAT through your business account.

The Blanket Bans Myth

After the 2021 off-payroll reforms, some end clients implemented blanket bans on engaging PSC workers. This was a risk-averse response to avoid making IR35 status determinations. Crucially, these bans were about engaging PSC contractors — they have no impact on your ability to open or maintain a business bank account.

What to Look for in a PSC Bank Account

PSC directors have specific requirements that differ from other small businesses. Here is what to check when choosing a provider:

• Accepts single-director limited companies — some high street banks have legacy multi-signatory requirements that are poorly suited to the typical PSC structure where one person is director, shareholder and PSC. Ensure your provider accepts sole-director companies without complications.
• FSCS protection — your limited company is a separate legal entity and gets its own £120,000 FSCS cover, separate from your personal accounts. Make sure your provider is FSCS-protected, not just an Electronic Money Institution (EMI).
• Accounting integrations — Corporation Tax, VAT returns and dividend records all need clean data. Look for integrations with Xero, QuickBooks, FreeAgent or Sage to keep records accurate and Making Tax Digital compliant.
• Tax management tools — the ability to set aside money for quarterly VAT payments and annual Corporation Tax. A separate savings pot or instant-access saver prevents the common problem of spending money earmarked for tax.
• Expense management — built-in tools for categorising transactions, uploading receipts and tracking IR35-compliant expense claims. This saves time and ensures your accountant has what they need at year-end.
• Fast onboarding — contractors often need bank accounts quickly when starting new engagements. A provider that can approve and activate your account within days rather than weeks gives you a head start.

Managing Your PSC Finances

Understanding the typical transaction pattern through your PSC bank account — from tax payments to expense reimbursements — helps you choose the right provider and manage cash flow effectively.

Typical PSC Transactions

• Incoming: client or agency payments — usually one to four per month depending on your billing cycle.
• Salary: monthly director’s salary payment to your personal account.
• Dividends: periodic dividend payments, typically monthly or quarterly.
• Corporation Tax: annual payment (or quarterly instalments for larger companies).
• VAT: quarterly payments to HMRC if VAT-registered.
• Expenses: business expenses including travel, equipment, software and home office costs.
• Accountancy fees: monthly or annual payments to your specialist contractor accountant.
• Insurance: professional indemnity, public liability and other business insurance premiums.

Salary and Dividend Split for 2025/26

For 2025/26, the most tax-efficient director salary remains £12,570 (the personal tax-free allowance), avoiding income tax while providing Corporation Tax relief as a business expense. Dividends are taxed at 8.75% (basic rate), 33.75% (higher rate) or 39.35% (additional rate), with a £500 tax-free dividend allowance. From April 2026, dividend rates increase by 2 percentage points.

For a detailed breakdown of the optimal split, see: What’s the Best Salary & Dividend Split for a Limited Company?

Setting Aside for Corporation Tax

Corporation Tax rates for 2025/26 are:

• 19% on profits under £50,000 (small profits rate)
• 25% on profits over £250,000 (main rate)
• A marginal relief applies between £50,000 and £250,000

Setting money aside as you earn — rather than waiting until your filing deadline — avoids the common trap of spending Corporation Tax reserves. A separate savings pot or instant-access account makes this straightforward. For more: Contractor Taxes Explained.

VAT Quarterly Payments

If your PSC is VAT-registered (mandatory once turnover exceeds the £90,000 threshold), you must submit quarterly VAT returns and payments to HMRC. Setting aside approximately 20% of your VAT-able income each month ensures you are prepared when the quarterly deadline arrives.

FSCS Protection for Limited Companies

One of the key advantages of operating through a PSC is that your company is a separate legal entity. This means it qualifies for its own FSCS protection — up to £120,000 — entirely separate from your personal accounts at the same bank.

How This Works in Practice

If you hold both a personal current account and your PSC’s business account at the same FSCS-protected institution, each is covered separately:

• Your personal account: protected up to £120,000
• Your PSC’s business account: separately protected up to £120,000

This is different from sole traders, who are not separate legal entities. For sole traders, the £120,000 limit applies to all accounts at the same institution combined — personal and business together.

Check Your Provider

Not all business account providers are FSCS-protected. Electronic Money Institutions (EMIs) may look and feel like banks but do not offer the same safeguards. Always verify that your provider holds deposits with an FSCS-protected banking partner before committing. For example, the Tide Current Account and Tide Instant Saver are provided by ClearBank, which is FSCS-protected — so both your current account balance and savings are covered up to £120,000.

For more on the December 2025 FSCS increase: Contractor Savings Protection Hiked.

Switching Your PSC Bank Account

If you already have a business bank account and want to move to a better provider, the Current Account Switch Service (CASS) makes the process straightforward:

• Transfers all payments, direct debits and standing orders to your new provider
• Completes within 7 working days
• Automatically closes your old account
• Redirects any payments sent to your old account for up to 36 months
• Free to use — introduced by the government to encourage competition in business banking

Most digital-first providers support CASS and let you initiate the switch from their app.

Tip: Before switching, notify your accountant and update your invoicing templates with your new bank details. Inform clients and agencies directly too. The CASS redirects payments for up to 36 months, but a proactive approach avoids delays. For more, see the contractor bank accounts hub guide.

Related Guides

About This Guide

This guide is produced by ContractorUK in partnership with Tide, focusing on the specific banking needs of PSC directors. It draws on ContractorUK’s IR35, tax and limited company resources to address the questions most relevant to personal service company contractors in the 2025/26 tax year.

For personalised advice on your company structure, IR35 status and banking setup, speak to a specialist contractor accountant.

Tide Business Current Accounts are provided through ClearBank. To find out more, read Tide’s Terms & Conditions.

Frequently Asked Questions