By: Money Navigator Research Team
Last Reviewed: 08/01/2026
FACT CHECKED
Quick Summary
Money held in a UK business bank account can be protected by the FSCS, but only when it’s a deposit with a UK-authorised bank, building society, or credit union and the business is an eligible depositor under the FSCS deposit protection rules.
Since 1 December 2025, the standard deposit protection limit is £120,000 per eligible depositor, per authorised firm under the FSCS deposit limit increase guidance, and that limit usually applies across all accounts that share the same banking licence.
If your provider is not a bank (for example, an e-money or payments firm), your balance typically is not protected by the FSCS as a deposit. Those firms generally rely on safeguarding under the FCA’s payments and e-money safeguarding framework, which is different from FSCS deposit compensation and can lead to different outcomes if the firm fails.
Core Explanatory Sections
1) What the FSCS protects (and what it doesn’t) for business money
The Financial Services Compensation Scheme (FSCS) is the UK’s statutory compensation scheme that can pay compensation when an authorised firm fails and cannot return customers’ money. For businesses, the key protection people usually mean is deposit protection described on the FSCS banks and building societies protection page.
Deposit protection is about two things:
Where the money sits (a UK-authorised deposit taker), and
Who legally owns the deposit (the eligible depositor).
This is why two “business accounts” can look similar but have very different protections depending on whether the balance is a deposit at a bank or e-money held by a payments firm.
For background on how banks distinguish personal vs business usage and what that can affect operationally, see:
Under the FSCS deposit limit increase guidance, the standard deposit protection limit is £120,000 per eligible depositor, per authorised firm. In practice, that usually means the FSCS looks at the combined total across your accounts within the same authorised bank (including brands that share a licence).
This “per authorised firm” detail is where many misunderstandings start: you can hold multiple accounts, and even use multiple brands, but if they share the same underlying authorised firm, the limit is usually applied to the combined total.
To confirm whether a firm is covered and whether brands share a licence, you can use the FSCS bank and savings protection checker, which is built for this exact purpose.
3) Business structure matters: who is the “protected entity”?
For deposit protection, the “protected entity” depends on whether your business is a separate legal person.
Sole trader: The FSCS explains in its deposit protection Q&As that sole traders are not separate legal entities. In practice, that means the FSCS limit can apply across the sole trader’s personal and business accounts held under the same authorised firm.
Limited company / LLP: The FSCS also explains that a limited company or LLP is a separate legal entity, so the company/LLP is treated as the eligible depositor for its deposits (up to the limit), separate from any personal deposits a director holds.
Other entity types: Partnerships and other business arrangements can be treated differently depending on legal form and account ownership, which is why the FSCS focuses on the named account holder and eligibility rules in its deposit guidance.
The FSCS also notes that most businesses are eligible depositors, while some categories (for example certain financial services firms) are excluded under the scheme’s rules.
4) Temporary high balances: extra protection can exist, but it’s tightly defined
The FSCS can provide extra protection for certain temporary high balances (THBs) – potentially up to £1.4 million for six months – under the conditions described in the FSCS temporary high balances guidance.
THBs are evidence-based and relate to specific qualifying events (for example certain property transactions, inheritance, or redundancy-related payments).
The FSCS guidance also sets out exclusions and the type of documentation typically needed, which matters because the scheme generally assesses THB eligibility when a failure event happens.
5) If a bank fails, what happens to business deposits?
For protected deposits, the FSCS states it aims to pay compensation within seven working days in most straightforward cases, although more complex situations can take longer.
From a business perspective, the practical impact is often about access and timing, not just entitlement:
Even short delays can disrupt payroll, supplier payments, or tax payments.
Complex ownership setups (client money, pooled accounts, trusteeship) can take longer because the FSCS may need to verify beneficial ownership before paying compensation.
If you’re considering operational access risk more broadly (separate from firm failure), we cover restrictions and access issues in:
6) E-money, fintech accounts, and “safeguarding” (not FSCS deposit protection)
Some “business accounts” are not bank deposit accounts. They may be provided by e-money institutions or payment institutions, where your balance can be legally treated as e-money or “relevant funds”, not a bank deposit. In those cases, FSCS deposit protection generally does not apply if the payments/e-money firm itself fails.
Instead, those firms are typically required to safeguard customer funds under the FCA safeguarding requirements for payments and e-money firms, which is a different mechanism from FSCS deposit compensation.
There is an important nuance: if safeguarded funds are placed at a bank, depositor protection rules may apply if the bank holding the safeguarded funds fails, and the Bank of England summarises relevant points in its FSCS and depositor protection overview. That is still not the same as “FSCS covers my e-money provider”, but it helps explain why failure scenarios differ depending on where safeguarded money is held.
Summary Table
| Scenario | Likely FSCS position | Practical impact for a business |
|---|---|---|
| Business current account held with a UK-authorised bank | Deposit protection can apply up to £120,000 per eligible depositor, per authorised firm | If the bank fails, compensation is often fast in straightforward cases, but short-term disruption is still possible |
| Limited company holds accounts under multiple brands that share a licence | Balances are typically aggregated under the same authorised firm for the limit | Multiple “brands” may not increase total protected funds if the licence is shared |
| Sole trader has both personal and business accounts at the same bank | The limit can apply across both because the sole trader is the same person | Business and personal cash at the same bank may be assessed together |
| Business uses an EMI/payment firm account that holds e-money | FSCS deposit protection usually does not apply if the EMI/payment firm fails | Outcome depends on safeguarding and insolvency; access and timing can be uncertain |
| A qualifying temporary high balance sits at a UK-authorised deposit taker | Additional protection can apply up to £1.4m for six months | Evidence may be required and timelines can be longer than standard deposit claims |
Deposit vs e-money vs “funds in transit”: where business money can sit
| Where the money is sitting | Typical legal character | Relevant protection mechanism | What tends to cause surprises |
|---|---|---|---|
| Bank current/savings account with a UK-authorised deposit taker | Deposit | FSCS deposit protection up to the limit | Shared licences can aggregate balances unexpectedly |
| EMI “business account” balance (non-bank) | E-money / safeguarded relevant funds | FCA safeguarding framework (not FSCS deposit protection for EMI failure) | “Bank-like app” does not necessarily mean “bank deposit” |
| Card processor/merchant acquirer holding settlements | Funds in transit under settlement terms | Contract + safeguarding structure (varies) | Payout timing and reserves can change during risk events |
| Client/pooled accounts (agent holds funds for clients) | Beneficial ownership can be complex | Ownership verification may be required before compensation is calculated | Complexity can extend timelines and increase admin burden |
Compare Business Bank Accounts
When comparing business bank accounts, it helps to separate two questions:
Is the provider a UK-authorised deposit taker for this account type?
If not, is it an e-money/payments account relying on safeguarding rather than FSCS deposit protection?
Money Navigator’s Business Bank Accounts hub groups account options and provider types in one place, and our reviews (for example Tide review and Starling review) cover practical details like account structure and day-to-day usage.
Frequently Asked Questions
If a limited company holds money as a deposit with a UK-authorised bank, building society, or credit union, the FSCS deposit rules can apply as described on the FSCS banks and building societies protection page.
Because the company is a separate legal entity, the FSCS generally treats the company as the protected depositor for those deposits. The FSCS explains entity treatment (sole trader vs limited company/LLP) in its deposit protection Q&As, which is the key reference for how compensation is calculated by account holder type.
Sole traders are not separate legal entities, and the FSCS explains this in its deposit protection Q&As. That distinction matters because protection is linked to who legally owns the deposit.
As a result, the limit can apply across the sole trader’s personal and business accounts held at the same authorised firm. This is one of the most common “I didn’t realise that” outcomes when people assume a business account automatically creates a second FSCS limit.
FSCS deposit protection is usually not per account. It is generally applied per eligible depositor, per authorised firm, as set out in the FSCS deposit limit increase guidance.
That means multiple accounts in the same business name at the same authorised firm are typically aggregated for the limit. If you want to check whether accounts sit under the same authorised firm (including brands), the FSCS protection checker is designed to help confirm that.
Often yes, but the practical question is whether the brands share a banking licence. The FSCS addresses shared licence groupings and how that affects compensation in its banks and building societies deposit protection information.
If your accounts are under the same authorised firm, the limit usually applies to the combined total. This is why “different brand” does not necessarily mean “separate FSCS limit”.
If a provider is an e-money institution or payment institution rather than a deposit-taking bank, the balance may not be a protected deposit, so FSCS deposit protection generally does not apply if the e-money/payments firm fails.
Instead, those firms typically rely on safeguarding under the FCA safeguarding rules for payments and e-money firms. The outcomes and timelines in an insolvency can therefore differ from a bank deposit failure, particularly if there are safeguarding shortfalls or reconciliation issues at the point of failure.
The standard deposit protection limit is £120,000 per eligible depositor, per authorised firm under the FSCS deposit limit increase guidance. Amounts above that may not be protected under the standard rules if the bank fails.
This doesn’t comment on the likelihood of a bank failing; it simply reflects how the scheme calculates protection. For businesses, the key is understanding whether balances are deposits at a deposit taker and whether multiple accounts/brands are grouped under one authorised firm.
Temporary high balance protection can apply in specific circumstances, and the FSCS explains the criteria and evidence requirements in its temporary high balances guidance. It is not a blanket “large balance” extension; it is tied to defined events and conditions.
For businesses, the main practical point is that THB eligibility is generally assessed when a failure happens and supporting documentation is reviewed. That means THB protection can be relevant in a failure scenario, but it usually isn’t something the FSCS “pre-approves” for a balance in advance.
The FSCS says it aims to pay protected deposits within seven working days in most straightforward cases, as described on the FSCS banks and building societies protection page.
However, the FSCS also notes that more complex situations can take longer, including THBs and cases where beneficial ownership is not immediately clear. Where complexity applies, the business impact is typically about access timing and payment continuity rather than the headline eligibility rule.
If both are deposits with a UK-authorised deposit taker, the FSCS generally applies protection in the same structural way across eligible deposits held with the same authorised firm, consistent with the FSCS deposit protection overview.
What changes the analysis is provider type and legal structure, not whether the account is labelled “current” or “savings”. If the product is not a deposit (for example it is e-money), then safeguarding rather than FSCS deposit protection may be the relevant framework.
Start by checking whether the provider is a UK-authorised bank/building society/credit union for deposits, and whether any brands you use share the same banking licence. The FSCS protection checker is the most direct tool for that.
If the provider is a payments/e-money firm, the question becomes how safeguarding works under the FCA safeguarding requirements and where safeguarded funds are held. That distinction often explains why two “business accounts” can behave very differently in a firm failure scenario.
The hidden mechanism is that “business account” is a product label, but FSCS protection depends on the legal nature of the balance (deposit vs e-money) and who legally owns it (sole trader vs separate legal entity).
The most common real-world surprises happen because of shared licences (brands grouped under one authorised firm), entity structure (sole traders aren’t separate), and non-bank providers (safeguarding rather than deposit compensation).
Understanding those three mechanics doesn’t remove operational disruption risk, but it makes “is this protected, and how?” far more predictable.
Sources & References
The standard limit and the 1 December 2025 change are explained in the FSCS deposit limit increase guidance, including how limits apply across authorised firms.
The scope of deposit protection and the usual payout timeframe are set out on the FSCS banks, building societies and credit unions protection page.
Business structure examples (sole traders vs separate legal entities) are covered in the FSCS deposit protection Q&As for banks and building societies.
Temporary high balance rules and documentation expectations are described in the FSCS temporary high balances guidance.
A high-level overview of how the FSCS works is available in the Bank of England explainer on the FSCS.
The safeguarding framework for payments and e-money firms is set out in the FCA safeguarding requirements.