£75k protection in business account?

[JapanRed]

I know that personal accounts in UK banks have a £75k bailout agreement with the govt in case the bank goes bust, but does this apply to business accounts in the name of a ltd company?

For clarification, I am sole director of a ltd company, my fiancee is a shareholder. Do we have any protection, if so is it £75k or £150k (or other)?

Thanks in advance.

[bigandclever]

£75k. The company is a single entity (and assuming sales turnover of less than £6.5m; balance sheet total of not more than £3.26m; fewer than 50 employees).

[Big E 118]

My understanding and what my bank explained to me is, Yes you are covered as a business for the £75k. This is only per business per bank so if you have multiple accounts with the same bank you'll only be covered for £75k.

[JapanRed]

Thanks for the prompt reply. Your assumptions are correct.

So my next question; I will have £75k in the business in the next month or two (probably around christmas time).
Is there any obvious way of moving this or spreading it about to remain protected? Or is it a case of withdraw (and pay tax on dividends) or invest in pensions etc?

Thanks again

[bigandclever]

Just open another business bank account and transfer the funds, being careful that they operate under different licences (for example, HSBC and First Direct operate under a single licence, so you'd only be covered for £75k if the group went pop). I did one at Metro bank. No interest to speak of, but they're a separate enough entity from the rest and it was an easy set up, and free for the most part.

Here's the list of the big boys ... http://www.fsa.gov.uk/Pages/consumerinformation/uk...

ETA This is a more complete list, but not from the horse's mouth ... http://moneyfacts.co.uk/guides/savings/depositor-p...

Edited by bigandclever on Friday 28th October 10:51

[JapanRed]

Many thanks,

I wasnt aware that I could have multiple business accounts for the same company, seems obvious now youve pointed it out though.

[98elise]

While its good to be aware of the 75k limit, how likely do you think it is that your bank will go under?

The chances are tiny so if your not going that far over its not really worth the hassle IMO.

[JapanRed]

If you had said the same in 2007 I would have agreed with you. Many financial institutions went bust and no one thought it was possible. I appreciate they are in a stronger position now than they were, but many people lost a lifetime of savings and Im not willing to take that risk for the sake of an hour or two to open a new account.

I dont draw much money out of the business and so the funds that are in there will increase gradually by £50-100k per year. So a year from now it will be substantially over the threshold.

[ThunderGuts]

98elise said:

While its good to be aware of the 75k limit, how likely do you think it is that your bank will go under?

The chances are tiny so if your not going that far over its not really worth the hassle IMO.

Ring fencing isn't in place yet, people are fretting about DB.

The danger is that if anything went pop again, plans are drilled and in place about isolating / mitigating systemic risk, which is great, but could inconvenience you.

[Mandat]

How do companies deal with having say £250,000 in the bank?

Is it best to spread the money over different banks, to stay within the £75k protection limit?

[JapanRed]

Mandat said:

How do companies deal with having say £250,000 in the bank?

Is it best to spread the money over different banks, to stay within the £75k protection limit?

If I had £250k that's what I'd do.

[98elise]

JapanRed said:

If you had said the same in 2007 I would have agreed with you. Many financial institutions went bust and no one thought it was possible. I appreciate they are in a stronger position now than they were, but many people lost a lifetime of savings and Im not willing to take that risk for the sake of an hour or two to open a new account.

I dont draw much money out of the business and so the funds that are in there will increase gradually by £50-100k per year. So a year from now it will be substantially over the threshold.

In that case you probably should spread it over a couple of accounts. If it was fluctuating around 75k then IMO is wouldn't be worth the extra hassle.

[robsdesk]

JapanRed said:

Thanks for the prompt reply. Your assumptions are correct.

So my next question; I will have £75k in the business in the next month or two (probably around christmas time).
Is there any obvious way of moving this or spreading it about to remain protected? Or is it a case of withdraw (and pay tax on dividends) or invest in pensions etc?

Thanks again

You can make a payment on account for corporation tax if appropriate, you'll also earn a small amount of interest. I've been doing this for a couple of years for the same kind of reasons.

[JapanRed]

Mandat said:

How do companies deal with having say £250,000 in the bank?

Is it best to spread the money over different banks, to stay within the £75k protection limit?

If I had £250k that's what I'd do.