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Business
Published
14/10/2021
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Business

Landlords: key things to know about business bank accounts for property investment

Hollie Chapman
Content Manager

It's good practice to separate your personal finances from your business. For landlords, this is particularly important, especially if you are planning to grow your property portfolio. If you own property through a limited company, separating your business finances is a legal requirement.

In this blog, we take a detailed look at bank accounts for limited company and private landlords. We cover:

  • legal requirements and key considerations for limited company bank accounts

  • key reasons for having a separate bank account for your personally owned property

  • things to consider when choosing a bank account, and

  • what documents you need to open a business bank account for a limited company

Business bank accounts for SPV / limited company landlords

There are many business bank accounts available to landlords, from both online/app-based and traditional high street banks. Senior accountant and Provestor Client Manager, Chris Littlewood, has pulled together 3 key things landlords need to know about bank accounts for limited companies.

1 / A business bank account is a legal requirement for companies

If you’re using an SPV / limited company, you’ll need to open a business bank account in your company’s name. This is because your company is a separate legal entity from you as an individual and it is a legal requirement to keep your personal and business finances separate.

We go into detail about how to choose a business bank account and what documents you need to open one for your limited company later in this blog.

2 / Check your bank’s eligibility criteria before setting up your company

The eligibility criteria for setting up a business account differs between banks, which may impact the account you can get for your limited company structure.

  • Some banks may require a company to be owned and controlled by a single individual who is resident within the UK. This is typically reflected by the status of a UK director who also has at least 75% of the company's issued share capital including voting rights.

  • Getting your company structure right, not only for tax efficient purposes but also practical ones, is strongly recommended. This may impact your access to bank accounts or even external financing such as mortgages in the future.

If your preferred bank does not offer you an account then you may need to seek an alternative provider or even reconsider your company control and ownership if this is causing you issues.

3 / Pre-bank account property expenses can be recorded against your company

If you’re in the process of setting up your limited company and bank account, you might already have a few property transactions through your personal bank. It’s important to record all eligible expenses against your company’s accounts so you don’t miss out on tax relief. The good news is that you can record expenses paid for personally through most accountancy software.

  • The Provestor software allows these to be recorded through a handy Expense entry system, meaning the company does not lose out on any tax relief for incurred expenses while you are setting up your company business bank account.

  • You might have also processed large property transactions through your personal account. These will need to be reflected as a director’s loan within your accounting records for the company. Again, this can be done in a few clicks in the Provestor software.

Some companies opt for complicated multiple account structures. Our advice is to keep it as simple as you can. Remember: more accounts means more admin!

Do I need a separate bank account for rental property I own personally?

Even when you hold investment property in your own name and do not use an SPV / limited company, it’s good practice to separate your personal finances from your business, particularly if you are growing your portfolio.

When starting out with your first buy-to-let, you may plan to run everything through your personal account. Whilst there’s no legal requirement to have a separate bank account if you own BTL property personally, there are a number of reasons why you might consider this.

Having a specific bank account for your property business allows you to keep your rental income and property transactions separate from your day-to-day spending. It also reduces risk and protects your personal assets from your business and vice versa.

Below we’ve outlined three key reasons for using a separate bank account for your personally owned rental property portfolio:

Recording expenses

  • You pay tax on your rental profits after allowable expenses have been deducted. If you’re not accounting for every eligible business expense (or they get lost in your everyday spending), then you will likely be paying more tax than you need to.

  • Having a separate account will also save you time as it’s much quicker and easier to find property transactions in an account specifically for your property without sifting through your personal bank statements.

Growth

  • If you have one buy-to-let property, you might be managing fine with your personal account. However, if you have plans to scale up your business and grow your property portfolio, it could quickly get out of control.

  • Keeping your property finances separate means you’ll have a much better idea of the cash you have available in your business to invest in growing your portfolio.

Making Tax Digital

  • From April 2024, landlords will be required to report their accounts quarterly rather than annually under the government’s Making Tax Digital (MTD) scheme.

  • To become MTD compliant you will need to use accounting software, such as Provestor’s property accountancy software to submit your accounts to HMRC.

  • A separate bank account (and one that is Open Banking compatible) makes it much easier to reconcile transactions within your accounting software, saving you time. We’ve listed the bank accounts that link to the Provestor software below.

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How to choose a bank account for rental property

There are a few things to consider when choosing a bank account for your rental property business. The majority of the high street and online only banks provide business banking services so there is a wealth of choice available. Here are some things to think about:

  • What sort of transactions are you going to be making?

    • This affects how you’ll work with the bank and what they’ll charge for the service. How are people going to pay you? If it’s all electronic transfers, little or no cheques and cash, then ‘transaction charges’ are likely to be minimal.

    • Think about how much of your business relies on cash payments: does your tenant pay the rent in cash, do your tradesmen prefer cash? Some bank accounts charge for paying in and withdrawing, so if you frequently deal in cash this is something to consider.

  • How do you like to bank? Do you want face-to-face access and a counter service, or do you prefer to do the majority of your banking online? If online is the answer, you probably won’t need to consider how close your local branch is.

  • Service standards. Talk to other landlords or check our property investment forums to see what banks they use and how happy they are with the service.

  • Restrictions. Check for limitations on payments within the bank account, particularly for large payments and longer processing times.

  • Charges. Many business bank accounts charge a monthly fee, however there are options that are free, particularly from digital banks. Compare monthly service fees as well as transaction costs to work out the most cost-effective solution for you.

How to open a property business bank account

You can’t open a business account in the company name until the limited company is formed. Once you’re ready, you can apply for many business accounts online or over the phone.

The process is similar to opening a personal account, so you’ll need:

  • Proof of ID, and

  • Proof of address details (usually for the past three years).

You’ll also need the following documents relating to your company:

  • Proof of company incorporation

  • In some cases, you’ll need your company UTR (Unique Taxpayer Reference) or TIN (Tax Identification Number for non-UK nationals) may also be required. Your UTR is a distinct 10-digit number issued by HMRC shortly after your company’s incorporation.

Provide the bank with your trading address when opening an account. This ensures you receive important correspondence.

Banks that link to Provestor property accounting software

As Provestor is FCA regulated we can connect directly to many banks making your bookkeeping a smoother, less time consuming process.

We currently support the following banks through Open Banking:

  • Starling

  • Barclays

  • Santander

  • Cashplus

  • CaterAllen

  • NatWest

  • RBS

  • Tide

  • Revolut

  • TSB

  • Yorkshire

  • Clydesdale

  • Bank of Scotland (Business)

  • Lloyds Personal

Beta

  • HSBC

  • Lloyds

  • Monzo

  • Nationwide

  • MBNA

  • BarclayCard

  • BarclayCard (Commercial)

  • Virgin Money

  • Virgin Money (ess)

  • Wise

Expert guide to limited companies

Learn about key considerations when setting up a limited company for property investment.

Learn about limited companies

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Hollie Chapman
Content Manager

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