Starling Bank buys accounting startup to offer tax tools to SMEs

Starling Bank has acquired British accounting-software startup Ember to offer tax and bookkeeping tools to its small business customers.

The lender did not disclose the size of the deal. The transaction was worth less than £10 million ($13.5 million), according to people familiar with the matter, who asked not to be named to discuss private details of the sale. 

“It’s a natural complement to start offering invoicing, accounting software, tax software, alongside traditional banking products, like credit related loans and facilities,” Declan Ferguson, Starling Bank’s chief financial officer, said in an interview. 

The deal comes ahead of rule changes next year that will require an estimated 780,000 sole traders and landlords to report their income and expenses to HM Revenue & Customs every three months, rather than annually. Starling has about 500,000 SME customers, having expanded rapidly by offering government-backed business loans during the pandemic. 

Ember, founded in 2019, last year raised £5 million led by investors Valar Ventures and Shapers. The Starling deal means its partnerships with lenders including HSBC Holdings Plc, Revolut, Barclays Plc and Lloyds Banking Group Plc will terminate in 2026. 

Ember’s accounting advisory services will be discontinued following the takeover, with around 30 employees being offered other roles at Starling. Co-founders Daniel Hogan and Aaron Shaw will join the bank and lead the platform’s integration that’s expected to complete by the end of this year.

The announcement comes during a challenging time for the bank, after it was fined £29 million in October for what regulators described as “shockingly lax” controls around risky customers between September 2021 and November 2023. The firm remains subject to a so-called voluntary requirement with the Financial Conduct Authority, preventing it from adding certain customers while it addresses its sanctions and controls processes.     

The London-headquartered lender is also looking to buy a nationally chartered bank in the U.S. and has been in talks to hire U.S. bankers this summer to begin the acquisition process, Bloomberg reported in June. “There is a solid opportunity to pursue a regulated business model in the U.S.,” Ferguson said.