Business bank account for contractors and limited company contractors

The short answer

Contractors who work through their own limited company, often called a personal service company, have simpler banking than most businesses: a handful of client payments a month, a salary and dividends out, and tax set aside. The account does not need to do much, but it should do those things cleanly. This page covers what to look for and how the main accounts compare.

Does a contractor’s company need its own account?

Yes, in practice. The company is a separate legal person. Your clients or agency pay the company, the company pays you, and every movement between the two has a tax treatment: salary, dividend, expense or loan. Run company money through your personal account and it lands on the director’s loan account, which has its own rules. If you owe the company money at the year end and do not repay it within nine months, the company pays a 33.75% charge on it (GOV.UK).

Opening a company account is quick with an app-based bank. On Monzo, the person applying must be a director, the company must be active (not dormant) at Companies House, with an active director, and Monzo says most accounts open the same day. Our guide to the documents you need to open a business account lists what to have ready.

IR35 and your bank account

The off-payroll working rules, known as IR35, make sure a contractor who would be an employee if engaged directly pays broadly the same Income Tax and National Insurance as an employee. They apply contract by contract.

• Who decides. In most cases the client decides your status and gives you a status determination statement. If the client is a small business outside the public sector, your own company decides.
• Inside IR35. The fee-payer, usually the agency or client, deducts Income Tax and employee National Insurance from fees paid to your company. Payments arrive net.
• Outside IR35. Your company receives the full fee and pays its own Corporation Tax, with you drawing salary and dividends.

IR35 does not change which bank you use, but it changes how much to set aside. On a contract inside IR35, the personal tax has already been deducted; on one outside it, your company needs to reserve Corporation Tax and you need to plan for tax on dividends. HMRC’s check employment status for tax tool helps with the status question. If you have contracts on both sides, separate Tax Pots for each kind of reserve keep it straight.

Paying yourself

HMRC’s guidance on taking money out of a limited company sets the rules. To pay a salary, the company must register as an employer and run PAYE. To pay dividends, the company must have enough available profit, hold a directors’ meeting to declare the dividend, keep minutes even if you are the only director, and write a dividend voucher for each payment.

At the bank, this means a monthly salary payment, dividend transfers that match vouchers, and expenses reimbursed with receipts. Using a clear payment reference for each (“Salary March”, “Dividend 2”) makes the year-end accounts quicker. UK transfers on Monzo Business are free, so frequency does not cost anything. Our guide to paying yourself from a limited company goes through salary, dividends and the director’s loan account in detail.

Corporation Tax is due nine months and one day after the end of the company’s accounting period (GOV.UK). On Monzo Pro and Team you can have up to 3 Tax Pots, each taking a percentage of every incoming payment, moved automatically. A typical contractor set-up is one pot for Corporation Tax and one for VAT.

VAT and the Flat Rate Scheme

VAT registration is compulsory once taxable turnover over the last 12 months goes over £90,000, or you expect it to in the next 30 days (GOV.UK). Some contractors register voluntarily below it, because VAT-registered clients can reclaim the VAT they are charged.

The VAT Flat Rate Scheme lets you pay HMRC a fixed percentage of turnover instead of working out VAT on each purchase. You can join if you expect VAT taxable turnover of £150,000 or less, excluding VAT, in the next 12 months. The catch for contractors is the “limited cost business” rule: if you spend very little on goods, you pay a higher rate of 16.5%. Contractors who mainly sell their time and buy few goods are likely to fall into that category, so check HMRC’s calculation before joining.

Whichever scheme you use, VAT collected belongs to HMRC, which is exactly what a Tax Pot is for. Monzo Business does not file VAT returns itself; you file through accounting software, and Pro and Team sync with Xero, FreeAgent, Sage and QuickBooks.

Giving your accountant access

Most contractors have an accountant, and the bank account should make their job easy. There are two ways to do that with Monzo Business.

1. Accounting software sync. Pro and Team connect to Xero, FreeAgent, Sage and QuickBooks. Monzo says the sync runs “every few hours, every single day”, and auto-exports to Google Sheets, Google Drive and OneDrive are included. Your accountant then works in the software, not the bank. Monzo also has an offer of 6 months' free Xero with Pro, 8 months with Team (new Xero customers, until 31 May 2027).
2. Collaborator access. Monzo’s multi-user page lists three access levels: admin, collaborator and expense cardholder. Collaborators “can do day-to-day tasks like bookkeeping and making payments”, and Monzo gives “your accountant” as an example of a team member with different access. Collaborator access is available on Pro and Team; spending limits for collaborators and expense cardholders need Team.

Check in the app how many team members your company can add on Pro. Monzo publishes a team of up to 15 for limited companies on Team, with first 6 team members included and £5 a month per extra team member.

Monzo Pro or Team for a one-person company?

For most one-person contracting companies, Pro is enough. Pro (£9 a month, first month free) includes Tax Pots, invoicing, accounting integrations, virtual cards, connected accounts and custom categories. That covers invoicing clients, reserving tax, syncing with your accountant’s software and giving them access.

Team (from £25 a month) adds expense cards, payment approvals, bulk payments and a bigger team. Those are tools for a business with staff spending company money. A solo contractor has no one to give an expense card to and no payments to approve but their own.

We pay for Team ourselves, and we are honest about why: part of the reason is the savings rate. Monzo’s savings page advertises up to 3.25% AER (variable), while its features page shows 1.30% AER (variable), and the rate depends on your plan; check the app for yours. A contractor holding a large Corporation Tax reserve for months may want to work out whether the rate the app shows on Team covers Team’s extra cost; for a solo company with a modest balance, it is unlikely to. Our is Pro worth it page has the maths, and the Team plan page explains what Team adds.

Accounts for contractors compared

Competitor figures: Starling, Tide pricing, Revolut Business plans and Mettle fee information, checked 9 October 2026.

Honest summary: if you want the cheapest sound option, Starling’s free account or Mettle with FreeAgent are hard to argue with. If you want automatic tax set-aside and a sync to your accountant’s software from the account itself, Monzo Pro is worth its fee for many contractors. Compare in detail on Monzo Business vs Starling, or read our broader guide for limited companies.

If you open Monzo Business through our link, we both get £50. It applies on any plan, but only if you have never had a Monzo account of any kind and you download the app, apply, add money and make a first card payment within 30 days.