By: Money Navigator Research Team
Last Reviewed: 09/01/2026
FACT CHECKED
Quick Summary
- A frozen (restricted) business bank account is usually still open, but your access to money and payment features is limited (sometimes partially, sometimes fully) while checks, disputes, or enforcement processes run.
- A closed business bank account is terminated: the provider ends the relationship, the account stops accepting normal activity, and any remaining balance is typically returned only after internal checks, holds, and reconciliation.
The practical difference is operational: frozen = pause with constraints, closed = exit with clean-down.
This article is educational and not financial advice.
What “frozen” means in practice
A frozen account (often described as restricted, under review, or temporarily suspended) usually means the account is still in place, but one or more of the following may be blocked:
outgoing bank transfers
card spending and cash withdrawals
setting up or paying Direct Debits / standing orders
adding new users, cards, or payees
inbound payments being held for review (in some cases)
Freezes can be partial (some functions work) or full (most functions stop). In many cases, the provider will not share detailed reasons immediately, particularly where financial crime controls apply (see the Money Laundering Regulations 2017 and the “tipping off” restrictions under the Proceeds of Crime Act 2002).
If you want a broader explainer of why freezes happen at all, see our guide: Can a business bank account be frozen?
What “closed” means in practice
A closed account means the provider has ended the relationship. Once closed:
inbound payments may bounce back or be returned (timing depends on scheme rules and provider processes)
Outgoing payments and card use stop
Direct Debits and standing orders linked to the account are likely to fail or be cancelled
You typically retain some level of access to statements/history (how and for how long depends on the provider and product)
Closures can happen with notice (contractual) or without notice where the provider considers it necessary (for example, serious risk signals, fraud concerns, or terms breaches). Even where an account is closed, providers may still need to keep records and may be limited in what they can say.
The immediate practical impact: payments, cards, and cash flow
If the account is frozen, the business often still exists but becomes operationally constrained. The details matter:
Direct Debits / standing orders: what fails, what can still be paid, and how mandates behave varies by provider and restriction type – see Direct Debits and standing orders when a business account is frozen.
Card payments and terminals: merchant services can keep taking sales even if settlement is disrupted, depending on setup – see What happens to card payments when a business account is frozen.
Card settlement payouts: even if sales continue, payouts can be delayed or routed differently – see Card settlement payouts when a business account is frozen.
Trading continuity: whether the business can continue trading depends on how reliant it is on that account and what else is in place – see Can a business still trade if a bank account is frozen?.
If the account is closed, the practical impact is simpler but harsher: the account stops being usable as a “hub” for payments. The operational burden shifts to rerouting income streams, updating payee details, and dealing with failed mandates and returned payments.
Summary Table
| Scenario | Outcome | Practical impact |
|---|---|---|
| Account is frozen (partial restriction) | Some features still work; others blocked | Cash flow can continue but becomes unpredictable and admin-heavy |
| Account is frozen (full restriction) | Most outgoing activity stops; inbound may be held | Bills, payroll, and supplier payments can fail without warning |
| Freeze relates to HMRC action | Restrictions follow an enforcement/legal route | Timeline and permissions can differ from normal bank reviews |
| Account is closed with notice | Provider ends relationship on contractual terms | Some time to reroute mandates, but failures still happen if missed |
| Account is closed without notice | Immediate shutdown of payment capability | Incoming payments bounce; urgent operational disruption |
| Freeze escalates to closure | Account ends after review | Funds may be returned only after holds/checks complete |
Where the money goes: balances, holds, and reconciliation
Whether frozen or closed, the most important operational question is what happens to funds already in the account and funds in transit.
On a freeze: money may remain visible but unusable (or partially usable). Some providers allow limited inbound activity while blocking outbound movement; others hold inbound funds too.
On closure: providers commonly apply a “clean-down” process, which can include returns processing, dispute holds, chargeback-related holds, and verification steps before releasing any remaining balance.
Providers may also be constrained in how much detail they can share during financial-crime related reviews (again, see the Proceeds of Crime Act 2002 alongside the Money Laundering Regulations 2017).
The National Crime Agency (NCA) is the UK body associated with suspicious activity reporting frameworks, which is why references to “reports” and “consent/defence” processes sometimes appear in provider communications.
Frozen doesn’t mean the bank is insolvent (and closed doesn’t either)
“Frozen” and “closed” are account status decisions, not the same thing as a bank failing. If a bank (or building society) were to fail, a different framework applies (including FSCS protection for eligible deposits at authorised firms).
FSCS rules can be nuanced across brands and banking groups – see the FSCS guide to banks and building societies and our explainer on whether money in a business bank account is protected by the FSCS.
Separately, not all “business accounts” are provided by banks: some are provided by payment or e-money firms. That can affect protections and processes, but “frozen vs closed” still describes the operational status (restricted vs terminated).
Scenario Table
| Level | Example | What’s happening | What you typically see |
|---|---|---|---|
| Scenario-level | Compliance review triggers | Provider pauses access to verify activity | Outgoing transfers/cards stop or become limited |
| Scenario-level | Terms breach / relationship exit | Provider decides to terminate | Account is closed; payments start failing |
| Process-level | Investigation and information requests | Provider asks for documents / explanations | Back-and-forth messages; limited transparency in some cases |
| Process-level | Returns and scheme processing | Inbound payments may be returned | Customers/suppliers report bounces or delays |
| Outcome-level | Freeze lifted | Controls removed | Normal access resumes (sometimes with new limits) |
| Outcome-level | Closure completed | Balance returned after holds/checks | Final transfer out, minus unresolved holds/disputes |
Compare Business Bank Accounts
Freezes and closures aren’t only about “good vs bad” behaviour – they’re also about provider policy, sector appetite, and how quickly checks can be completed.
This is why businesses often compare more than fees: onboarding depth, support routes, account features, and how resilient operations are if an account is restricted can all matter.
For a neutral comparison starting point, see our hub: Business Bank Accounts. For continuity planning during restrictions, this related guide explains what opening another account can look like when one is restricted: Can you open a new business bank account if one is frozen?
Frequently Asked Questions
Yes, providers may give limited detail, particularly where financial crime controls apply. UK law includes restrictions around “tipping off” in certain circumstances, which can constrain what can be disclosed during an ongoing review (see the Proceeds of Crime Act 2002).
In practice, messages often look generic (“account under review”, “we need more information”) even when the underlying issue is specific. That can feel like stonewalling, but it can also be a feature of the legal framework rather than a customer-service choice.
Usually, yes – “restricted” is often the provider’s wording for a freeze. The important detail is whether the restriction is partial (some activity allowed) or full (most activity blocked).
Two restricted accounts can behave very differently: one might allow incoming payments but block outbound transfers; another might block everything except viewing balances. The status label matters less than the exact permissions still available.
They can fail, pause, or be blocked from being set up, depending on the type of freeze and the provider’s controls. Even when a provider allows some account activity, automated payment rails may be disabled because they can move money without a real-time approval step.
This is why frozen accounts often create “silent” disruption: mandates remain in place with the counterparty, but the bank side refuses the payment. For a deeper breakdown of behaviours and knock-on effects, see Direct Debits and standing orders when a business account is frozen.
Sometimes. Card acceptance and card settlement aren’t always the same provider, and different setups route funds differently. You may be able to continue taking sales even if payouts are delayed or withheld.
The practical risk is a cash flow gap: sales happen, but funds don’t arrive when expected. For the mechanics (including terminals, online payments, and payout behaviour), see What happens to card payments when a business account is frozen and Card settlement payouts when a business account is frozen.
Not necessarily. Closed usually means the account is no longer usable, not that funds are forfeited. Providers typically return remaining balances once they’ve completed internal checks, processed returns, and accounted for any holds tied to disputes or card scheme rules.
However, timing can be the hardest part. Where funds are in dispute, subject to returns processing, or linked to unresolved liabilities, the “final transfer out” can take longer than people expect – especially compared with a normal account closure.
Yes. A freeze can be the “review phase” and closure can be the “final decision”. If checks can’t be completed, requested information isn’t provided (or is inconsistent), or the provider decides the relationship is no longer acceptable under its policies, the account may be closed.
This is one reason freezes feel high-stakes: the operational disruption is immediate, and the end state is uncertain until the provider finishes its process.
Not always. HMRC-related restrictions can follow enforcement or legal processes that are distinct from a provider’s internal compliance review. The experience can look similar (restricted access), but the pathway, permissions, and timelines may differ.
If you’re trying to distinguish which route you’re dealing with, these explainers separate the concepts: HMRC freeze business bank account and HMRC enforcement vs bank compliance freezes.
It can happen, depending on the provider’s terms and the reason for closure. Some closures are served with notice periods; others can be immediate where the provider believes it’s necessary (for example, serious misuse or fraud concerns).
From an operational standpoint, “without notice” matters because inbound payments may bounce and mandates may fail immediately. That’s why closure often has a more abrupt systems impact than a freeze, even though both can stop outgoing payments.
Sometimes – but it depends on how the business takes money (card, bank transfer, cash), how it pays suppliers, and whether alternatives exist. A freeze can be survivable for some operating models and crippling for others.
The nuance is that “trade” includes more than sales: it includes fulfilling orders, paying staff, meeting tax obligations, and handling refunds. This is covered in more detail here: Can a business still trade if a bank account is frozen?
Most providers have an internal complaints process, and where a complaint is eligible you may be able to escalate to the Financial Ombudsman Service.
The FCA explains the general complaint pathway on its consumer pages (see how to complain to a financial business), and the Ombudsman outlines how it considers disputes relating to banking and payments (see Financial Ombudsman Service banking and payments complaints).
Eligibility and outcomes depend on the facts, the firm type, and what can be evidenced. Even when a provider’s actions are frustrating, some constraints come from legal duties (including financial crime rules) rather than a purely discretionary choice.
The hidden mechanism is that “frozen vs closed” is less about a label and more about control state. A freeze is typically a risk-control tool: keep the relationship open, restrict movement, and validate. Closure is a relationship decision: end access, unwind flows, and complete returns/holds.
Most confusion comes from the middle ground: partial freezes that still show a balance, delayed settlements from card systems, and communications that feel vague because the provider may be limited in what it can disclose.
Understanding the difference helps set expectations about what usually changes first (payment rails) and what often takes longest (returns, disputes, and final reconciliation).
Sources & References
FCA consumer guidance on how to complain to a financial business
Financial Ombudsman Service guidance on banking and payments complaints
FSCS explainer on banks and building societies protection