From £85k to £120k: What the FCSC Increase Means for Your Business

If your business holds significant cash reserves, a major change is coming that could simplify your banking strategy and reduce risk.

The Financial Services Compensation Scheme (FSCS) is a UK government-backed scheme that protects deposits if a bank, building society, or credit union fails. Currently, the FSCS guarantees up to £85,000 per person, per authorised firm. This means if your bank goes under, you’ll get back up to £85,000 of your money.

From 1 December 2025, this limit will rise to £120,000. This is the first increase since 2017 and is designed to keep pace with inflation and maintain confidence in the banking system.

What Does This Mean for Businesses?

Although FSCS protection is often associated with personal savings, it also applies to eligible business accounts. Businesses holding up to £120,000 in a single UK-authorised bank will now have full coverage if that institution fails. Previously, firms with balances above £85,000 often spread funds across multiple banks to stay within FSCS limits. The higher threshold may reduce the need for complex multi-bank arrangements for smaller businesses. However, it is important to note that the limit applies per authorised firm, not per brand. For example, Lloyds, Halifax, and Bank of Scotland share a licence, so your combined balance across these brands is capped at £120,000.

Strategic Banking Decisions to Consider

Review your banking structure and check whether your accounts are with brands under the same licence. Use the FCA register to confirm. If your reserves exceed £120,000, you may still need to spread funds across different banking groups to maintain full protection.

Action Points

Audit your current banking arrangements against the new FSCS limits. Confirm group structures to avoid unintended exposure. Update internal policies before December to align with the new protection levels.

Why This Matters

Confidence in the banking system underpins business stability. The FSCS increase is a positive step, but it doesn’t eliminate the need for prudent cash management. Use this as an opportunity to review your banking strategy and ensure resilience.

For further advice, please contact your local B&B office https://www.burgisbullock.com/contact-us/