FSCS protection for business accounts: banks vs e-money accounts

The short answer

If your business account is with a UK bank, building society or credit union authorised by the Prudential Regulation Authority (PRA), the Financial Services Compensation Scheme (FSCS) protects eligible deposits up to £120,000 if that firm fails. The FSCS says it generally protects companies’ deposits regardless of the size of the company, and that it pays automatically, usually within seven working days.

If your business account is with an e-money institution, the FSCS does not cover it. The provider must safeguard your money instead, keeping it separate from its own funds. That is real protection, but it is a different mechanism with a slower and less certain route back to your money if the firm fails.

For most small businesses the difference only matters in two situations: when the account holds more than a few weeks of costs, and when the provider fails. The first is common, the second rare, which is why it is worth knowing which kind of account you have before it matters.

The limit and how it is counted

The FSCS describes the limit as £120,000 “per eligible person, per authorised firm”. Two words in that phrase do most of the work.

• Per eligible person. The depositor is the legal person who owns the money. For a limited company, that is the company, not the director.
• Per authorised firm. The limit applies to everything you hold with one banking licence, across all accounts and all brands that share it. Two current accounts and a savings account with the same bank share one limit.

The higher limit took effect on 1 December 2025, after the PRA reviewed it. The FSCS notes that the PRA is required to review the deposit limit at least every five years, so it will change again at some point. Only deposits have this limit: the FSCS has separate limits for investments, insurance and pensions.

Which businesses are covered

The FSCS assesses business deposit claims under the PRA’s Depositor Protection Rules. In plain terms:

The sole trader row catches people out. A sole trader with a business account and a personal savings account at the same bank has one limit across both, not two. If you trade as a sole trader and keep large balances, that is a reason to spread money across banks that do not share a licence. The sole trader accounts guide covers the options.

Size does not matter for deposits. The FSCS says it generally protects companies’ deposits regardless of the size of the company. (Size tests do apply to some other kinds of FSCS claim, such as insurance and investments, but not to bank deposits.)

Banks vs e-money institutions

UK business accounts come from two kinds of provider, and they are regulated differently.

How safeguarding works

The FCA explains that payment and e-money institutions must safeguard funds they receive in exchange for the e-money they issue, so that if the firm fails, customers get back the value of their money as completely and quickly as possible. In practice the firm must keep customer money separate from its own, so that it does not form part of the firm’s assets for its other creditors.

Safeguarding is not a compensation scheme. If the safeguarding was done properly, customers should get their money back; if records were poor or there was a shortfall, they may get less, and the process runs through an insolvency administrator rather than an automatic payment. The FCA found that some payments firms did not have sufficiently robust safeguarding practices, and in August 2025 it published stronger rules, with an interim “Supplementary Regime” coming into force on 7 May 2026.

The FSCS puts it plainly: it cannot protect money held with e-money institutions and payment providers. It adds that this does not necessarily mean the money is unsafe, because these firms are still regulated by the FCA, but that you will not benefit from its quick compensation service, and your money could be tied up for a while during an insolvency.

The FCA also expects these firms to make clear, where appropriate, that they are not banks and that the funds they hold are protected by safeguarding rather than the FSCS. So the provider’s own website footer or terms will usually tell you which it is.

Pots, vaults and partner banks

Many business accounts let you split money into pots, spaces or vaults for tax and savings. The FSCS’s advice is that the name does not matter: what matters is who holds the money and how. A pot inside a bank account is part of your deposit with that bank. A savings product offered inside an e-money app may be held with a separate partner bank, in which case it could be FSCS-protected even though the main account is not. Or it may not.

The FSCS suggests checking the terms in the app, asking whether the money is held directly in your name or in a trust arrangement, and remembering that if the partner bank is one you already use, the limit is shared. Where money is held on trust through another firm, the FSCS says compensation can take longer, up to three months.

Brands that share a licence

The FSCS limit applies per banking licence, not per brand. Banking groups often trade under several names, and if two brands share a licence, the FSCS treats them as one bank. Its own example: HSBC also trades as first direct, so money with both shares one limit. It gives a similar example for Nationwide and several former building society names.

This matters for businesses that spread a large balance across accounts to stay under the limit. Opening a second account with a sister brand does not add any protection. The FSCS recommends checking the FCA’s Financial Services Register, which lists the trading names each authorised firm uses.

Temporary high balances

The FSCS also protects certain temporary high balances up to £1.4 million for six months from when the money becomes yours or is first credited. The qualifying events it lists are personal life events: selling your main home, an inheritance, insurance payouts, retirement benefits, redundancy, divorce, and compensation payments, among others. Personal injury compensation can be protected without limit.

These rules are aimed at individuals. A business receiving an unusually large customer payment, a funding round or the proceeds of selling equipment should not assume the higher limit applies. If your company is about to hold far more than usual, the simpler protection is to spread it across banks on different licences. A director who personally receives proceeds from selling their main home is a different case; the FSCS asks for evidence and says it cannot confirm protection until a firm has failed.

If your balance is over the limit

Plenty of small companies hold more than £120,000 at points in the year: the Corporation Tax reserve before the payment date, VAT collected before a return, or a cash buffer built up over several years. Options include:

• A second bank on a different licence. Keep the operating account where it is and move reserves to an instant or notice savings account elsewhere. Check the register so you do not pick a sister brand.
• Timing tax payments. Money set aside for tax only needs to be held until it is due. Our tax set-aside calculator shows roughly how much a business accumulates, and the guide to Monzo Business tax pots explains how that money is held in practice.
• Non-deposit options. Some businesses use government-backed or money market products for large reserves. These are not deposits, are not covered by the deposit limit, and are worth discussing with an accountant or adviser.

How to check any provider

1. Find the provider’s legal name and firm reference number in its website footer or terms.
2. Search the FCA’s Financial Services Register. A bank will show as authorised by the PRA and accepting deposits; an e-money firm will show as an electronic money institution.
3. Look for the FSCS Protected badge on the provider’s site. The FSCS says it is a quick way to confirm that a PRA-authorised bank, building society or credit union is covered.
4. Check the register’s trading names to see which brands share a licence.
5. For pots or savings inside an app, read the terms to see which firm actually holds the money.

When we compare accounts, we show whether each is a bank or an e-money account. The comparison of the best UK business bank accounts includes protection as a row, and the head-to-head pages such as Monzo Business vs Tide and Monzo Business vs Revolut Business cover it for each provider.