Business Bank Accounts for Dormant Companies

Hitting pause on trading without tripping over the rules

Putting a company on ice can be a smart move while you plan your next step. The catch is that the UK’s definition of a dormant company is stricter than many directors expect. Even a few pence of bank interest or a routine account fee can count as a significant accounting transaction. That can switch your company from dormant to active for tax, bringing extra reporting and potential penalties into play.

A truly dormant company has no significant accounting transactions for the whole financial year.

If you currently have a business bank account, it is vital to understand what “no activity” really means in practice. This guide explains the position in plain English so you can decide whether to keep, freeze or close an account while staying fully compliant.

Who should read this

If you are a UK director with a company that is not trading, or you are planning to pause operations, this is for you. It is especially relevant if you are holding a company name for future use and still have an open business bank account.

What counts as dormant in the UK

Dormant means no significant accounting transactions in the financial year. That typically excludes unavoidable filings like the Companies House confirmation statement fee, but it usually includes bank-related items. Standard business bank fees, paid debits, standing orders, card charges or even a few pence of credited interest are normally treated as significant movements. Once that happens, you cannot file dormant accounts for that period and HMRC may regard the company as active for Corporation Tax.

A company can legally have a bank account while dormant. The risk is practical: keeping an account open often results in tiny transactions that break dormancy. Professional advisers therefore commonly recommend closing business bank accounts during a dormant period, or leaving them unused with zero movements if closure is not possible.

Small bank fees can create big admin.

How to manage a bank account during dormancy

Start by deciding whether you actually need the account. If not, closing the account removes the most common cause of accidental reactivation. Where you must keep an account - for example to hold a deposit or asset - contact your bank to confirm there are no monthly charges, minimum balances, card fees or automatic interest. Remove payment cards, cancel standing orders and direct debits, and turn off any sweep or savings features that could generate movements.

Update your internal controls. Record in board minutes that the company is dormant, note the banking approach you will follow, and diarise Companies House deadlines. Monitor the account statements regularly to ensure no transactions appear. If any charge or credit hits the account, treat the company as active from that point for accounting and tax, and prepare to file full statutory accounts and a Company Tax Return. Keep your registered office and director details up to date so you do not miss official reminders.

Why this matters more than you think

Losing dormant status is easy and can be expensive. A single fee or interest entry can trigger the need to file full accounts instead of the simplified dormant set. Miss the deadline and Companies House penalties start at £150 and increase the longer you are late. HMRC may also expect a Company Tax Return if the company is active for Corporation Tax, even if no trading has occurred.

Remaining dormant does not remove your filing duties. You still need to file annual accounts and a confirmation statement on time. There is no time limit on how long you can stay dormant, provided you keep up with these obligations and avoid significant transactions. When you are ready to trade again, inform HMRC, resume banking activity and switch to full accounts and tax filings going forward.

Keep or close? The trade-offs at a glance

Red flags and common slip-ups

UK business bank accounts are subject to KYC and financial crime checks. Banks periodically review dormant or low-activity accounts and may ask for updated information or even close accounts if they cannot validate the purpose. Free banking offers often end after a set period, turning into monthly fees that post automatically. Even a tiny amount of credited interest can appear without warning on some accounts, especially if a balance is held.

Directors sometimes assume that being non-trading equals dormant. It does not. If your company receives investment income, bank interest or incurs bank charges, it is usually active for accounting and tax, not dormant. Also remember that director duties continue throughout dormancy. You must safeguard records, keep details current and file on time. If any movement hits the bank account, speak to an accountant promptly and adjust your filings to avoid escalating penalties.

Alternatives to consider

1. Close all business bank accounts and hold any necessary funds in a client or escrow arrangement outside the company until trading resumes.
2. Use a bank product that pays zero interest and charges zero fees, confirmed in writing, and keep the balance at £0 to avoid movements.
3. Transfer assets out of the dormant company if appropriate, then close the account to minimise ongoing risk and admin.
4. If you cannot avoid bank activity, accept non-dormant status and file full accounts with appropriate Corporation Tax submissions.
5. If the company will not be used, apply for voluntary strike-off after settling liabilities and closing bank accounts.

FAQs

Q: Can a dormant company legally have a bank account? A: Yes. Legally it can, but any bank charges or interest usually count as significant transactions, which can end dormancy for that period.

Q: What filings are still required while dormant? A: You must file annual accounts and a confirmation statement with Companies House on time. Deadlines and penalties mirror those for trading companies.

Q: What happens if a small fee hits the account? A: The company is likely no longer dormant for that financial year. You may need to file full statutory accounts and a Company Tax Return.

Q: How long can a company remain dormant? A: Indefinitely, provided there are no significant accounting transactions and you continue to meet Companies House filing duties.

Q: Will a bank keep a dormant company account open forever? A: Not guaranteed. Banks carry out KYC reviews and may close accounts if information is outdated or the account has no clear ongoing purpose.

How Switcha fits into your plan

Switcha helps you compare UK business banking options with clarity around fees, interest and account features that could affect dormant status. We will connect you with the best options for what you are looking for, so you can choose to close, freeze or change accounts with confidence. Next steps: outline your dormancy plan, confirm fee-free terms in writing, and set reminders for Companies House deadlines.

Important note

This guide provides general information for GB-registered companies only. It is not tax, legal or accounting advice. Always confirm your position with a qualified professional and check the latest Companies House, HMRC and bank-specific requirements before acting.