By: Money Navigator Research Team
Last Reviewed: 12/01/2026
FACT CHECKED
Quick Summary
A business can sometimes keep trading while an account is frozen, but “trading” becomes constrained by how money can be received, accessed, and paid out. In practice, the biggest blocker is usually cashflow plumbing (getting customer money in and paying costs out), rather than the ability to sell goods or perform services.
Whether trading can continue depends mainly on why the account is frozen (bank compliance restrictions vs a court order such as an account freezing order), what parts of the account are restricted (outgoing only, incoming only, or both), and whether other parts of the payment stack (card acquirer, PSP, marketplace, FX provider) also restrict funds at the same time.
This article is educational and not financial advice.
What “frozen” means in practice (and what it doesn’t)
A “frozen” business account usually means the bank has placed restrictions that stop some or all of these actions:
Outbound payments (faster payments, CHAPS, Bacs, card spend, cash withdrawals)
Inbound payments (customers paying in, transfers landing, card settlement credits posting)
Account access (online banking logins, cards, cheque books)
Specific funds (a hold against a balance, or ring-fencing pending checks)
It does not automatically mean the business is “shut down” or insolvent. It means the firm’s primary cash account is not operating normally, which can make day-to-day trading hard even if demand, staff, and suppliers are in place.
For a wider “what causes it” explainer that focuses on the bank/HMRC triggers, see our guide on HMRC freeze a business bank account and the breakdown of HMRC enforcement vs bank compliance freezes.
Why accounts get frozen: three broad routes that affect trading differently
1) Bank compliance restrictions (AML / fraud / sanctions screening)
Banks have legal and regulatory duties around anti-money laundering and financial crime controls. In the UK, those duties sit around frameworks including the Money Laundering Regulations 2017 and Proceeds of Crime Act 2002.
A common real-world pattern is: the bank sees activity it can’t reconcile quickly (unusual inflows, mismatched counterparties, chargeback spikes, rapid pass-through funds, new jurisdictions), and applies a restriction while it requests information.
Trading impact: Sometimes the business can still sell, but cannot reliably collect or pay from that account until checks complete.
2) Court-based restrictions (e.g., account freezing orders)
A freeze may also arise from a court process that restricts dealing with funds (for example, an “account freezing order” under POCA-related powers). The bank then has less discretion, because it must comply with the order’s terms.
Trading impact: Even if customers can pay, the business may not be able to use the funds as working capital.
3) HMRC and other creditor enforcement routes
Some enforcement routes can feel like a “freeze” because they stop money moving, even if the mechanism differs (for example, directing a bank to pay a debt, or pursuing court action). HMRC has published material on Direct Recovery of Debts that helps explain one route used in certain conditions.
Trading impact: The effect varies: some actions are targeted at specific liabilities or funds; others can make the main account unusable.
The cashflow reality: what still works, what typically stops
Sales can continue, but getting paid may not
If customers can still place orders, the business may still be “trading” in a commercial sense. The operational issue is often the payment rails:
Card payments: card terminals/online checkout might still take payments, but settlement may be delayed or held elsewhere in the stack. This is why it matters to understand what happens to card payments when a business account is frozen.
Bank transfers: if inbound transfers are blocked, invoices can’t be paid into that account.
Direct debits/standing orders: these may fail, pause, or be returned, impacting recurring revenue and key bills. See direct debits and standing orders when a business account is frozen.
Paying suppliers, staff, and tax is where trading usually breaks down
Even if sales continue, trading may become non-viable if the business cannot pay:
Suppliers (stock, materials, logistics)
Payroll and contractor invoices
Rent, rates, utilities, insurance
VAT/PAYE/Corporation Tax and other obligations
If the main operating account is frozen, many businesses discover that “continuing to trade” quickly becomes a question of whether lawful alternative cashflow routes exist and remain stable – and whether counterparties will accept them.
“Frozen” is not the same as “closed”
A closure ends the banking relationship; a freeze is typically a restriction (sometimes temporary, sometimes extended). That distinction matters for timelines, refunds, and payments already in flight. See difference between a frozen and closed business bank account.
Summary Table
| Scenario | Outcome | Practical impact |
|---|---|---|
| Outgoing payments blocked, incoming still allowed | Money can enter but cannot be used normally | Revenue may build up but working capital becomes trapped; suppliers and payroll may go unpaid |
| Incoming blocked, outgoing still allowed | Hard to get paid into the account | Trading may continue briefly if other funds exist; invoicing and settlements may need rerouting |
| Both incoming and outgoing blocked | Account effectively unusable day-to-day | Trading often becomes constrained quickly because neither collection nor payment can rely on the account |
| Restriction limited to specific transactions/counterparties | Partial functionality | Some revenue streams or suppliers work; others fail, creating uneven operational risk |
| Court-based restriction (e.g., freezing order) | Bank must follow order terms | Access to funds may be restricted regardless of explanations provided to the bank |
| Freeze triggers wider stack restrictions (PSP/acquirer) | Multiple holds across providers | Even if sales still happen, cash may be trapped in more than one place at once |
How freezes cascade across the payments stack (the “second freeze” problem)
A bank account freeze often triggers a knock-on effect:
Card acquirers / payment service providers may hold settlement funds, delay payouts, or increase reserves when risk flags appear. The UK framework for payment services sits under bodies including the Financial Conduct Authority (for regulated payment services providers) and firms’ own risk controls.
Marketplaces and platforms may pause disbursements if the linked payout account becomes restricted.
Refunds and chargebacks can then add further pressure: if refunds can’t be issued smoothly, disputes may increase, which can prolong holds elsewhere.
This is why “can we trade?” often becomes “can we keep the whole payment loop functioning: take payment > deliver > refund if needed > settle funds”.
Scenario-level / Process-level / Outcome-level
| Level | What gets constrained | What that means for “still trading” |
|---|---|---|
| Scenario-level | The reason for the freeze (bank compliance vs court process vs enforcement action) | Determines how quickly restrictions can change, what information the bank may request, and whether the bank has discretion |
| Process-level | The rails and dependencies (bank transfers, card settlement, direct debits, PSP payouts, marketplace disbursements) | Trading may continue in one channel while another collapses; cash can be trapped outside the main bank account |
| Outcome-level | The operational result (working capital trapped, bills unpaid, customer refunds delayed, supplier holds) | A business may be “selling” but not sustainably “operating” if obligations can’t be met in a normal cycle |
What “trading” can look like during a freeze (without assuming it’s viable)
Trading during a freeze often shifts into one of these patterns:
Service delivery continues, cashflow pauses: work is completed, but invoices and settlements are delayed.
Sales continue via channels that still settle: some customer payment routes function, while others don’t.
Trading slows to essential activity only: limited purchasing and limited fulfilment because the payment cycle is uncertain.
Trading effectively stops: because staff/suppliers cannot be paid or because refunds/chargebacks spiral.
Where a business can open and use an alternative banking relationship depends on onboarding checks, account terms, and whether restrictions are linked to the underlying risk factors rather than the single account. Our explainer on opening a new business bank account if one is frozen covers the typical constraints and why “just open another” is not always straightforward.
Complaints, escalation, and protections (what exists and what doesn’t)
FSCS deposit protection: FSCS protection can apply to eligible deposits if a bank fails, but it is not a tool to “unfreeze” an account. The details are set out by the Financial Services Compensation Scheme.
Financial Ombudsman Service: If a business believes its bank has treated it unfairly or mishandled a complaint, routes may exist via the Financial Ombudsman Service (eligibility depends on business size and status).
Direct Debit mechanics: if direct debits are returned, the Direct Debit Guarantee explains the scheme protections (primarily designed for payers), but it doesn’t force a bank to restore account functionality.
Compare Business Bank Accounts
When a freeze happens, businesses often realise how dependent operations are on basic features: reliable inbound/outbound payments, clear transaction reporting, multi-user access, and support routes.
Our hub lets readers compare common features across providers in one place: Compare business bank accounts.
Frequently Asked Questions
A freeze does not automatically make trading illegal. A business can still enter contracts, deliver services, and invoice customers. The core issue is whether the business can lawfully receive and use funds and meet obligations as they fall due.
In practice, legality can intersect with the reason for the freeze. If the restriction is connected to financial crime controls, attempts to route around controls can create further problems with counterparties and providers.
Where a court-based restriction applies, dealing with funds may be explicitly restricted regardless of commercial need.
Not always. Card acceptance can sometimes keep working because it is processed through a card acquirer or payment service provider, not directly through the bank account itself. However, settlement (payouts) can be delayed or held, and refund/chargeback flows can change.
The operational risk is that sales continue but cash does not arrive where it is needed. For the detailed mechanics and why terminals and payouts can behave differently, see what happens to card payments when a business account is frozen.
Direct debits and standing orders can be returned, paused, or fail depending on what the bank has restricted (outgoing payments, incoming payments, or both). Some freezes are “outgoing only”, which can interrupt standing orders and bill payments while still allowing money to enter.
Even where the scheme rules exist, they don’t guarantee continuity of service during a restriction. The business impact is typically practical: missed supplier payments, arrears, and broken recurring billing cycles. The moving parts are covered in direct debits and standing orders when a business account is frozen.
Payroll can only run if the payment route is available and the funds are accessible. A freeze that blocks outgoing payments usually stops payroll from being processed from that account, even if the business is still generating sales.
Where payroll cannot be met, the “still trading” question often becomes secondary to immediate operational continuity and legal obligations to staff. The freeze itself may be temporary, but the knock-on effects (missed wages, staff attrition, and halted operations) can be immediate.
Not necessarily. A restriction can be applied for a range of reasons, including routine compliance reviews, suspected fraud, sanctions screening hits, or documentation gaps. Banks often limit what they can say while checks are ongoing, which can feel like “an investigation” even when the matter is administrative.
That said, some freezes are connected to formal processes, including court-based restrictions. UK financial crime law includes mechanisms that can affect access to funds, such as those in the Proceeds of Crime Act framework. The underlying reason matters because it changes what the bank can do and what information it may be able to share.
There is no single universal timeline because “frozen” describes an outcome, not one process. A bank’s internal checks may resolve quickly in some cases and take longer in others, especially where multiple counterparties or jurisdictions are involved or where documentation arrives in stages.
Where legal processes are involved (for example, court orders or statutory mechanisms linked to suspicious activity reporting), different timelines and constraints can apply. The practical takeaway is that timeframes can be uncertain, so trading continuity planning often hinges on whether the wider payments stack also becomes restricted.
Some businesses can, but it depends on onboarding checks, disclosures, and provider appetite. A freeze can also flag wider concerns that affect new account applications, particularly if the risk indicators are connected to the business model, transaction patterns, or unresolved verification questions.
There is also a practical distinction between opening an account and being able to use it as a full operating account (for example, receiving settlements or setting up payment rails). For constraints and common hurdles, see can you open a new business bank account if one is frozen.
Refund capability depends on the channel. Card refunds can sometimes be initiated via the payment provider even if the bank account is restricted, but the funding and settlement mechanics can become complicated if balances are held or if reserves are imposed.
If refunds cannot be processed promptly, disputes and chargebacks may increase, which can lead to further restrictions elsewhere in the payments stack. This can create a feedback loop where trading continues briefly but becomes less sustainable as customer service obligations pile up.
If outgoing payments are blocked, suppliers generally cannot be paid from that account in the normal way. Existing invoices remain due under their terms, and suppliers may change credit terms or pause fulfilment if payments do not arrive.
Where the business is relying on incoming payments that are trapped or delayed, it may become difficult to keep stock moving or services delivered. This is where “trading” becomes a narrow concept: sales may exist, but the business may not be able to perform reliably without functioning payment rails.
Banks typically have an internal complaints process. If a complaint is not resolved, some businesses may be eligible to escalate to the Financial Ombudsman Service for banking complaints (eligibility depends on business type and size).
Separately, FSCS protection is about bank failure, not service restrictions, so it is not a mechanism to challenge a freeze. FSCS eligibility rules are explained in FSCS protection for deposits. For payment scheme mechanics (like direct debits), scheme rules such as the Direct Debit Guarantee can explain outcomes, but they do not compel a bank to lift restrictions.
“Can we still trade?” is usually the wrong first question. The hidden mechanism is that modern trading is a linked chain of permissions across multiple firms: the bank account, the card acquirer, the payment service provider, and sometimes a marketplace or platform.
A freeze at one point often triggers cautious behaviour elsewhere, because each firm is managing its own legal obligations and risk exposure.
So the practical constraint is rarely the ability to sell; it is the ability to complete the full payment loop (collect funds, access working capital, pay obligations, and process refunds/disputes) without any part of the chain halting.
Understanding which link is restricted – and whether the restriction is discretionary (bank compliance) or mandatory (court/enforcement) – is what determines whether “trading” is a workable description or just a temporary label for activity that cannot be funded.