stack of coins

What is a Savings Account?

Savings accounts allow you to save money with a regulated financial institution and earn some interest. There are several types of savings accounts, but they mostly revolve around three themes - easy access, notice and fixed savings. Easy access accounts allow you to withdraw your money whenever you want. Notice accounts require you to give your provider a few days' notice before making a withdrawal. Fixed accounts allow you to save your money for a fixed period at a guaranteed interest rate. This rate is usually slightly higher than notice or easy access accounts.

Your money is protected up to £85,000:
When you save money in an authorised financial institution, your savings are protected by the Financial Services Compensation Scheme (FSCS). This means if the financial institution goes bust, you can claim your money back up to £85,000 per financial institution (£170,000 for joint accounts). So, if you have a lot of money to save, it might be wise to spread it across different financial institutions. We recommend you save at most £83,000 in one institution, leaving some room for interest.

Some of these financial institutions have a shared licence, which means they share their licence with another institution. If you put your money in two institutions that share a licence and both go bust, you'll only be entitled to a maximum of £85,000 from the FSCS. Examples of financial institutions that share a licence are Halifax, Bank of Scotland and BM Savings (all three share the same licence).

Most people won't pay taxes on savings' income:
Depending on your income tax band, you may not have to pay tax on interest earned on savings. For example, basic-rate taxpayers can earn up to £1,000 in interest tax-free every year. Higher-rate taxpayers can earn up to £500. Additional-rate taxpayers have no tax-free allowance. If you are interested in tax-free accounts, have a look at ISAs.

Below, you'll find the easy access, notice and fixed-rate savings accounts which pay the highest interest at the moment. These are not recommendations. They are simply the savings accounts with highest interest rates. All financial institutions we list are regulated by the FCA, and their savings accounts are protected by the FSCS up to £85,000.

Savings accounts are almost tax free
stack of coins

Top One-year Fixed Savings Accounts

  • If interest rates increase, you won't benefit

Cons:

  • You'll know exactly how much you'll get back at the end of the term
  • If interest rates reduce, you’d be better off

One-year fixed-rate saving accounts (or 'bonds') allow you to save your money for a fixed period of one year at a guaranteed interest rate. Since the interest is guaranteed, it will not be changed. You won't normally be able to withdraw your money before the end of the fixed term (also called 'maturity'). However, if you must withdraw your money before maturity, some providers will charge you an early withdrawal penalty. Usually, the penalty is a loss of interest; for instance, you could lose 90 days' interest.

Pros:

stack of coins

Top Two-year Fixed Savings Accounts

  • If interest rates increase, you won't benefit

Cons:

  • You'll know exactly how much you'll get back at the end of the term
  • If interest rates reduce, you’d be better off

Two-year fixed-rate saving accounts (or 'bonds') allow you to save your money for a fixed period of two years at a guaranteed interest rate. Since the interest is guaranteed, it will not be changed. You won't normally be able to withdraw your money before the end of the fixed term (also called 'maturity'). However, if you must withdraw your money before maturity, some providers will charge you an early withdrawal penalty. Usually, the penalty is a loss of interest; for instance, you could lose 90 days' interest.

Pros:

stack of coins

Top Three-year Fixed Savings Accounts

  • If interest rates increase, you won't benefit

Cons:

  • You'll know exactly how much you'll get back at the end of the term
  • If interest rates reduce, you’d be better off

Three-year fixed-rate saving accounts (or 'bonds') allow you to save your money for a fixed period of three years at a guaranteed interest rate. Since the interest is guaranteed, it will not be changed. You won't normally be able to withdraw your money before the end of the fixed term (also called 'maturity'). However, if you must withdraw your money before maturity, some providers will charge you an early withdrawal penalty. Usually, the penalty is a loss of interest; for instance, you could lose 90 days' interest.

Pros:

stack of coins

Top Five-year Fixed Savings Accounts

  • If interest rates increase, you won't benefit

Cons:

  • You'll know exactly how much you'll get back at the end of the term
  • If interest rates reduce, you’d be better off

Five-year fixed-rate saving accounts (or 'bonds') allow you to save your money for a fixed period of five years at a guaranteed interest rate. Since the interest is guaranteed, it will not be changed. You won't normally be able to withdraw your money before the end of the fixed term (also called 'maturity'). However, if you must withdraw your money before maturity, some providers will charge you an early withdrawal penalty. Usually, the penalty is a loss of interest; for instance, you could lose 90 days' interest.

Pros:

A white exclamation mark

One more thing...

Quick Tip 💁
The FSCS protects your savings up to a maximum of £85,000 per person, per financial institution.

You might also like 🤓
Top Cash ISAs
Top Regular Savings Accounts
ISA 101: The Basics

Auto-Saving Apps

Koody Man with Laptop

Subscribe to Our Newsletter

Every month, we send out a newsletter that curates the best personal finance content in the UK. We share the most popular community questions, real-life stories, how-to guides, top personal finance news and tips to help you stay on top of your finances.

Thank you! Your submission has been received!
Error: This email cannot be added because it may already be on our list. Please enter a different email address.

Read a Sample

chevron