Financial Services Compensation Scheme Protection Limit Increased to £120,000
Good news for UK businesses – the Financial Services Compensation Scheme (FSCS) deposit protection limit has increased from £85,000 to £120,000 per eligible person or business, per authorised financial institution.
The change came into effect on 01 December 2025 and provides greater financial protection for businesses holding cash deposits with UK banks, building societies and credit unions.
For many businesses, especially small and medium-sized businesses (SMEs) and sole traders, this increase offers additional reassurance that company funds remain protected if a financial institution fails.
What Is the FSCS?
The Financial Services Compensation Scheme is the UK’s statutory compensation scheme for customers of authorised financial services firms.
The scheme protects customers when regulated financial firms fail and cannot return money owed to them. It covers a range of financial products, including:
- Business bank accounts
- Savings accounts
- Current accounts
- Certain investments
- Insurance policies and advice
The FSCS is funded by the financial services industry and operates independently.
You can find full details on the official FSCS website.
What Has Changed?
Before December 2025, eligible deposits were protected up to £85,000 per person or business, per authorised institution.
The new limit increases this protection to £120,000, giving businesses an additional £35,000 of coverage.
This means if an authorised bank or financial provider collapses, eligible businesses may be able to recover up to £120,000 of their deposits through the FSCS.
Which Businesses Are Covered?
Most SMEs are eligible for FSCS protection, including:
- Sole traders
- Partnerships
- Limited companies
- Small charities and associations
However, some larger businesses and financial institutions themselves may not qualify for protection.
Eligibility depends on factors such as company size and the type of organisation involved.
Two Important Things Businesses Should Know
1. The Limit Applies Per Institution
The £120,000 limit applies per authorised financial institution – not per account.
For example, if a business holds £70,000 in a savings account and £60,000 in a current account with the same bank, the total balance would be £130,000. In this situation, only £120,000 would be protected under the FSCS.
Businesses with larger cash balances may wish to spread funds across different authorised institutions to maximise protection.
2. Temporary High Balances May Also Apply
In certain situations, temporary high balances may receive additional protection for a limited period. This can apply after events such as:
- Selling a property
- Receiving insurance payouts
- Business restructuring transactions
Specific conditions apply, so businesses should review the FSCS guidance carefully.
Why This Matters for Businesses
Cash flow protection is essential for every business. Whether it’s payroll, tax reserves, supplier payments or emergency savings. Businesses often hold significant amounts in bank accounts.
The increase to £120,000 reflects rising savings balances and aims to strengthen confidence in the UK banking system.
For many businesses, it provides greater peace of mind and reduces financial risk if a banking provider fails unexpectedly.
Businesses should still regularly review where they hold company funds and ensure they understand which institutions are covered under the FSCS rules.
For more information, visit the official FSCS “What We Cover” page.
Need Advice on Protecting Business Funds?
For many businesses, the increase in FSCS protection will provide additional peace of mind. However, businesses with larger balances may still benefit from reviewing where company funds are held.
If you would like guidance on managing business finances more effectively, the Greenstones team is here to help. Call us on 01733 371180.