By: Money Navigator Research Team
Last Reviewed: 13/01/2026
FACT CHECKED
Quick Summary
In many cases, a business can apply to open a new business bank account even if an existing account is frozen – but approval is not guaranteed, and the reason for the freeze matters.
Where the freeze relates to anti-money laundering checks, suspected fraud, missing verification, or a court/tax enforcement action, banks may delay, decline, or restrict the new account until required checks are completed or legal limits are clear. Moving or receiving funds can also be restricted even if a new account exists, depending on the type of freeze.
This article is educational and not financial advice.
What “frozen” usually means (and why it matters)
A frozen business bank account is typically a restriction on some or all activity: outgoing payments may be blocked, incoming payments may be paused, cash withdrawals may be stopped, or the account may be locked entirely.
The practical effect depends on why it’s frozen. A freeze triggered by a bank’s compliance checks is different from a restriction driven by a legal order.
The Financial Ombudsman Service summarises common reasons banks freeze accounts as suspected fraud/scams, suspected money laundering/illegal activity, or a court order. (See the Financial Ombudsman Service guidance on frozen accounts and blocked payments.)
For a deeper breakdown of freeze types (and how they differ from closures), see our guide on HMRC enforcement vs bank compliance freezes and the difference between a frozen and closed business bank account.
Can you open a new business bank account while another is frozen?
The general position: “possible to apply” isn’t the same as “will be opened”
A freeze on one account does not automatically block every new application – banks assess new applications on their own onboarding rules, risk checks, and legal obligations.
However, if the same underlying issue applies to the business (or its controllers), a new bank may:
pause onboarding while it completes verification or enhanced checks
ask for additional information about the business and transactions
decide not to proceed
The FCA notes that where a firm cannot complete required customer checks under the Money Laundering Regulations, it must not open (or continue) a business relationship, and that firms may decline, suspend, or terminate accounts where they suspect financial crime. (See the FCA report: UK Payment Accounts – access and closures (PDF).)
When opening a new account may be effectively blocked
Even if an application is accepted in principle, real-world use can be limited when:
there is a court order affecting funds
the freeze is connected to an investigation where banks may restrict information sharing
the business cannot satisfy identity, ownership, or source-of-funds expectations during onboarding
If the existing freeze relates to unresolved verification, it can also lead to delays elsewhere. Our explainer on why business bank account applications get delayed covers common hold-ups.
The key constraint: restrictions can follow the money, not just the account
A common misconception is: “If the old account is frozen, a new account fixes it.” In practice, restrictions can attach to the funds (or to the underlying risk concern), meaning a new account may not restore normal banking until the trigger is resolved.
This shows up in anti-money laundering scenarios. The UK government has published detailed guidance on how the Proceeds of Crime Act framework interacts with bank account operation, exemptions, and when a Defence Against Money Laundering (DAML) disclosure may be relevant. (See GOV.UK guidance on POCA money laundering exemptions and DAML reporting obligations.)
A practical, non-legal explanation of DAML requests and what they are (and are not) is also set out in a regulator-hosted resource: Gambling Commission video page explaining Defence Against Money Laundering (DAML).
Summary Table
| Scenario | Outcome | Practical impact |
|---|---|---|
| Bank compliance freeze pending checks | Account may be partially/fully restricted while checks run | Payments, payroll and supplier transfers may fail; new account applications may be delayed or reviewed more closely |
| Suspected fraud/scam risk | Payments may be blocked while the bank investigates | Incoming funds may be held; disputes and merchant issues can escalate if refunds/chargebacks are affected |
| Court-ordered restriction | Bank must follow the order’s terms | Opening a new account may not allow funds to move if the order restricts dealing with assets |
| HMRC enforcement action affecting funds | Bank may have to restrict access or remit funds | A new account does not remove liabilities; cashflow planning becomes difficult |
| Account closure pathway after review | Bank ends the relationship after restrictions | Businesses may face reduced options and longer onboarding elsewhere |
| Verification gaps (ownership, ID, activity) | Application cannot progress until checks are satisfied | Expect requests for documents and explanations of transactions |
What banks tend to check when a freeze exists (and why approvals get harder)
Banks’ onboarding and monitoring duties are risk-based. Industry guidance commonly referenced by firms describes ongoing monitoring and enhanced scrutiny for higher-risk relationships. (See JMLSG guidance on customer due diligence and ongoing monitoring (PDF).)
In practical terms, where there’s already a freeze elsewhere, a new provider may focus on:
Business identity and ownership: legal form, directors/partners, and beneficial owners
Nature of trade: what the business does, typical customers, and transaction patterns
Source and purpose of funds: why money is being received/sent and how it relates to the stated business model
Consistency of information: whether documents and explanations match account behaviour
Our guide on what documents banks check for business bank accounts explains typical document categories, and why business bank account applications get rejected covers frequent decision points.
Some restrictions are driven by tax enforcement powers rather than a bank’s internal monitoring. One example is Direct Recovery of Debts (DRD), where HMRC can require banks/building societies to pay funds directly from accounts under certain conditions and safeguards. (See the HMRC issue briefing on Direct Recovery of Debts.)
This matters because a new account may not “solve” an HMRC-driven issue if:
liabilities remain outstanding
enforcement action can be directed at accounts the business controls
cashflow is already disrupted by restrictions and related operational knock-ons
If you’re assessing trading impact during restrictions, see can a business still trade if a bank account is frozen?
Scenario-level / process-level / outcome-level
| Scenario-level trigger | Process-level mechanism | Outcome-level result |
|---|---|---|
| Risk signal from transactions or counterparties | Enhanced monitoring and internal review pathways | Temporary holds, limits, or freezes while queries are resolved |
| Incomplete verification/KYC data | Onboarding cannot complete required checks | New account opening paused, delayed, or declined |
| Suspected financial crime risk | Reporting / consent frameworks may apply | Provider restricts activity and may limit what it can explain |
| External legal direction (court/tax) | Mandatory compliance with the instrument | Funds access constrained regardless of provider preference |
| Relationship exit decision | Account closure process begins after restriction | Loss of banking facilities; longer lead times to re-establish |
FSCS: does deposit protection help when an account is frozen?
FSCS protection is about firm failure (a bank/building society/credit union going out of business), not day-to-day account restrictions. A frozen account is typically a service restriction rather than a sign the provider has failed.
That said, it’s still useful to understand current deposit protection limits in case of a firm failure. FSCS confirms the deposit protection limit rose to £120,000 from 1 December 2025, with temporary high balance protection up to £1.4 million for certain life events. (See the FSCS page on the deposit protection limit increase to £120,000.)
The Bank of England also summarises how protection applies per eligible person per authorised firm and explains how brands under a shared licence affect the limit. (See the Bank of England overview of the Financial Services Compensation Scheme and deposit protection limits.)
If you’re trying to restore business operations: what “works” vs what’s blocked
A freeze can disrupt operational rails such as card settlements, Direct Debits, payroll, and supplier payments. Opening a new account may help operationally only if the new provider can complete onboarding and the funds you need are not legally constrained.
Where payments are already failing, understanding the mechanism matters more than “finding a workaround”. In many situations, the limiting factor is one of:
the provider’s obligation to complete checks before continuing services (as outlined in the FCA report: UK Payment Accounts – access and closures (PDF))
a legal restriction affecting the funds or account operation (as discussed in the GOV.UK guidance on POCA money laundering exemptions and DAML reporting obligations)
Complaints, explanations, and timelines (what to expect)
Banks may not be able to share detailed reasons for restrictions in every case, particularly where financial crime concerns or legal constraints exist. Even so, service complaints can still exist around communication, proportionality, and handling.
The Financial Ombudsman Service explains its approach and the standard complaint pathway, including that firms are expected to respond within specific timeframes (15 days in many cases, and within 35 days where more time is needed) before the complaint can be escalated. (See the Financial Ombudsman Service guidance on frozen accounts and blocked payments.)
This does not mean an Ombudsman outcome will require a bank to lift a lawful restriction. It does mean the handling, fairness, and resulting harm can be assessed where relevant.
Compare Business Bank Accounts
Different business account providers vary on onboarding speed, eligibility appetite, and the type of supporting information requested – and those differences become more noticeable when an application is higher-friction (for example, where activity is complex or verification is detailed).
For a neutral starting point on features and typical considerations across providers, see our hub on business bank accounts. Provider-specific overviews are also available, including our Tide business account review and Starling business account review.
Timing expectations (and why “instant” isn’t always instant) are covered in how long it takes to open a business bank account.
Frequently Asked Questions
Opening a new account is not automatically illegal. Banks regularly onboard customers who are switching providers or running multiple accounts.
The legal risk tends to arise from what happens next – for example, whether funds are subject to a legal restriction, or whether moving funds would breach an order or frustrate an investigation. This is why the reason for the freeze matters more than the fact of the freeze itself.
Banks do not typically broadcast “this account is frozen” to other banks as a simple status flag. However, providers rely on their own checks, information you provide, and risk signals they detect during onboarding and monitoring.
Where a freeze is connected to identity/verification issues, transaction patterns, or suspected financial crime, the same underlying concerns can surface during another provider’s checks, resulting in delays or a decline.
It depends on whether the new account is successfully opened and whether receiving funds is permitted under any applicable restrictions. A freeze can be partial, and some banks may permit limited credits while blocking debits, but there is no universal rule.
Where funds are subject to legal constraints (rather than purely an internal bank review), the existence of a new account may not change what can be received or used in practice.
A new account does not remove tax liabilities or negate enforcement powers. HMRC’s powers can involve directing banks/building societies to remit funds under defined conditions and safeguards. The HMRC issue briefing on Direct Recovery of Debts describes one such mechanism.
Operationally, a new account may still be relevant for day-to-day trading if onboarding is completed and funds needed for operations are not constrained. But the limiting factor often remains the underlying HMRC position, not which bank holds the account.
Banks may restrict an account while they review activity, complete verification, or assess suspected financial crime risk. The FCA discusses how firms may decline, suspend, or terminate accounts in those contexts, and that firms must not proceed where required checks cannot be completed. (See the FCA report: UK Payment Accounts – access and closures (PDF).)
In that environment, a new provider may also apply enhanced scrutiny. The practical consequence is that “applying elsewhere” can sometimes reproduce the same friction if the underlying questions remain unresolved.
Not necessarily. Some freezes are temporary while checks are completed, while others are a step on the path to relationship exit.
If you’re trying to distinguish outcomes and terminology, our guide on the difference between a frozen and closed business bank account explains how restrictions, suspensions, and closures typically differ in day-to-day impact.
Banks often ask for a combination of identity/ownership documents and evidence explaining the business model and typical transaction flows.
That can include formation documents, proof of address/identity for controllers, contracts/invoices, and explanations for high-value or unusual payments.
If the business has complex ownership, higher-risk counterparties, or irregular cashflow, requests can be more detailed. Our guide on what documents banks check for business bank accounts outlines the common categories and why they matter.
There’s no single timeline, because onboarding time depends on verification, risk level, and how quickly checks can be completed. A higher-friction application (for example, where extra documentation is needed) will usually take longer.
For a neutral overview of timing drivers, including why some applications stall, see how long it takes to open a business bank account and why applications get delayed.
Banks may provide limited explanations, especially where financial crime concerns or legal constraints apply. That can feel opaque, but it often reflects what the bank is permitted to say rather than customer service preference.
Where the complaint is about handling (communication, fairness, impact), the Financial Ombudsman Service guidance on frozen accounts and blocked payments explains how disputes are assessed and what evidence may be considered.
FSCS protection relates to a bank/building society/credit union failing, not to an account being restricted. A freeze is usually a service restriction rather than an insolvency event.
Even so, it’s useful to know the current limits: FSCS states the deposit protection limit rose to £120,000 from 1 December 2025 and explains temporary high balance protection in certain cases. (See the FSCS page on the deposit protection limit increase to £120,000 and the Bank of England overview of the Financial Services Compensation Scheme and deposit protection limits.)
Most people focus on the account that’s frozen. The more decisive factor is the reason the restriction exists – because that reason tends to follow the business across providers.
Where the trigger is a missing verification element, unusual activity, or an unresolved financial-crime concern, a new bank’s onboarding and monitoring processes are designed to surface the same questions.
Where the trigger is a legal restriction (court or enforcement), banking choice is secondary to the legal boundaries on dealing with funds. In other words: the constraint is usually the compliance/legal mechanism, not the specific brand of bank.
Sources & References
Financial Ombudsman Service guidance on frozen accounts and blocked payments
GOV.UK guidance on POCA money laundering exemptions and DAML reporting obligations
JMLSG guidance on customer due diligence and ongoing monitoring (PDF)
Gambling Commission video page explaining Defence Against Money Laundering (DAML)
FSCS page on the deposit protection limit increase to £120,000
Bank of England overview of the Financial Services Compensation Scheme and deposit protection limits