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UK Savings Accounts Explained: The Six Main Types and How They Work
📚 Savings Guide8 min read · 19 July 2026
UK Savings Accounts Explained: The Six Main Types and How They Work
There are six main types of savings account available to UK savers — each with different access rules, rate structures and tax treatment. This guide explains how each one works, what distinguishes them from each other, and where to go for a deeper explanation of any individual type.
What is a savings account?
A savings account is a bank or building society account that holds money separately from a current account and pays interest on the balance held. Unlike a current account, a savings account is not designed for day-to-day payments. The key variables across savings account types are: how you can access your money, whether the interest rate is fixed or variable, any tax treatment that applies, and whether there are restrictions on how much you can deposit or when.
The six main types of UK savings account
Easy access savings account
Pays a variable rate and normally allows withdrawals without a fixed notice period. No fixed term. Some accounts limit the number of withdrawals per year or include a temporary bonus rate that expires after a set period.
Rate: VariableAccess: Normally without noticeTerm: None
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Notice account
Pays a variable rate in exchange for giving advance notice before withdrawals — typically 30, 60, 90 or 120 days. Your money continues to earn interest throughout the notice period. There is no fixed term. The notice period is a wait, not a penalty.
Rate: VariableAccess: After notice periodTerm: None
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Fixed-rate bond — also called a fixed-term deposit
Pays a guaranteed fixed rate for a set term — typically one, two, three or five years. The rate cannot be changed by the provider during the term. Access is usually restricted until maturity.
Rate: Fixed for the termAccess: Usually restricted until maturityTerm: 1–5 years
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Regular saver account
Designed for regular monthly contributions up to a stated monthly cap — often £150–£500. Often carries a higher headline rate than other types, but that rate applies to each deposit only for the period it is held, not to total contributions. Most run for 12 months and require an existing current account with the same provider.
Rate: Fixed or variableAccess: Usually restrictedTerm: Usually 12 months
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Cash ISA — Individual Savings Account
A savings account where interest is permanently free of UK income tax. The annual ISA allowance for 2026/27 is £20,000 across all ISA types. Cash ISAs are available as easy access, notice or fixed-rate accounts — the tax-free wrapper is the defining feature. Note: the Cash ISA allowance is due to reduce to £12,000 from April 2027.
Rate: Variable or fixedTax: Interest permanently tax-freeAllowance: £20,000/yr (2026/27)
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Premium Bonds — NS&I, backed by HM Treasury
Not a conventional savings account — Premium Bonds pay no interest. Each £1 bond enters a monthly tax-free prize draw. The prize fund rate is not an interest rate and does not predict individual returns. Capital is backed by HM Treasury. Minimum £25, maximum £50,000 per person.
Return: Random prizes (not guaranteed)Tax: All prizes tax-freeBacking: HM Treasury
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Understanding AER — what the rate figures mean
AER stands for Annual Equivalent Rate. It is a standardised figure that shows what the interest rate would be if interest were paid and compounded once per year. All UK savings accounts are required to quote an AER, which makes it possible to compare accounts that pay interest at different frequencies on the same basis.
AER is a useful comparison tool but has limits. It does not account for bonus rates that expire, access restrictions or tax treatment. For regular saver accounts, the AER applies to each deposit for the period it is held — not to total annual contributions. A regular saver paying 8% AER on £200/month will generate approximately £100 in interest over 12 months, not 8% of £2,400. The explains why in full.
Tax on savings interest — the Personal Savings Allowance
Interest earned outside an ISA may be subject to UK income tax. The Personal Savings Allowance allows most taxpayers to earn some savings interest tax-free each year:
Tax band
Personal Savings Allowance
Basic rate (20%)
£1,000
Higher rate (40%)
£500
Additional rate (45%)
Nil
Cash ISA interest is permanently free of UK income tax and does not use any of the PSA. Premium Bond prizes are always tax-free. Tax treatment depends on individual circumstances. (Source: GOV.UK.)
FSCS protection
Deposits at UK-authorised banks and building societies are protected by the Financial Services Compensation Scheme (FSCS) up to £120,000 per eligible person per authorised firm — covering all eligible deposits you hold with a single authorised firm, not per account. Different banking brands sometimes share the same banking authorisation, which affects combined protection.
Premium Bonds are not FSCS protected but are backed by HM Treasury directly — a government obligation with no stated limit. (Source: FSCS; GOV.UK; NS&I, nsandi.com.)
How the six account types compare
Account type
Rate type
Access
Deposits
Tax on interest
Easy access
Variable
Normally without notice
Flexible
Taxable above PSA
Notice account
Variable
After notice period
Often flexible
Taxable above PSA
Fixed-rate bond
Fixed for term
Usually restricted
Lump sum at opening
Taxable above PSA
Regular saver
Fixed or variable
Usually restricted
Monthly up to cap
Taxable above PSA
Cash ISA
Variable or fixed
By account type
Up to annual allowance
Tax-free permanently
Premium Bonds
Prize fund (random)
No notice; 3–5 days
Up to £50,000
All prizes tax-free
🔍 Savings Finder — compare live rates across all UK savings account types side by sideExplore →
BritSavvy note: This article is for information only and does not constitute financial advice. Tax figures reference GOV.UK (2026/27 tax year). FSCS protection is subject to eligibility and applicable rules. Premium Bond figures sourced from NS&I, nsandi.com. Cash ISA allowance change subject to parliamentary approval.
What are the main types of UK savings account?
There are six main types: easy access (variable rate, normally withdraw without notice), notice accounts (variable rate, withdrawal after a notice period), fixed-rate bonds (guaranteed rate for a set term), regular savers (monthly contributions up to a cap, usually 12-month term), Cash ISAs (tax-free interest within the annual allowance) and Premium Bonds (monthly tax-free prize draw, no guaranteed return).
What does AER mean on a savings account?
AER stands for Annual Equivalent Rate. It is a standardised rate showing what the interest rate would be if compounded once per year. All UK savings accounts must quote an AER, making it possible to compare accounts that pay interest at different frequencies. AER does not account for bonus rates, access restrictions or tax treatment.
Do I pay tax on savings interest in the UK?
Interest earned outside an ISA may be subject to UK income tax above your Personal Savings Allowance — £1,000 for basic-rate taxpayers, £500 for higher-rate and nil for additional-rate. Cash ISA interest is permanently tax-free. Premium Bond prizes are always tax-free. Tax treatment depends on individual circumstances. Source: GOV.UK.
Are my savings protected if a bank fails?
Deposits at UK-authorised banks and building societies are protected by the FSCS up to £120,000 per eligible person per authorised firm. Different banking brands sometimes share the same banking authorisation, which affects combined protection. Premium Bonds are not FSCS protected but are backed by HM Treasury directly. Source: FSCS; GOV.UK.
What is the difference between a Cash ISA and a normal savings account?
A Cash ISA wraps a savings account in a tax-free shell — interest earned inside is permanently free of UK income tax. A standard savings account pays taxable interest above your Personal Savings Allowance. Both types are available as easy access, notice or fixed-rate accounts. The annual ISA allowance for 2026/27 is £20,000, shared across all ISA types. Source: GOV.UK.
What is the FSCS savings limit?
The FSCS protects eligible deposits up to £120,000 per eligible person per authorised firm — the total across all accounts with that firm, not per account. Check the FSCS website to see which banking brands share an authorisation. Source: FSCS.