Savings Guide hub · 2026/27 tax year

Savings Explained

Understand UK savings options, interest rates, access rules and protection before making your own decisions.

BritSavvy provides financial education, information and illustrative calculators. We do not provide personalised financial advice or assess whether individual financial products or transactions are suitable for you. This hub explains how savings accounts work; it does not compare, rank or recommend savings providers or accounts.

Understanding savings accounts

Savings accounts differ mainly in how you can get to your money, whether the rate is fixed or variable, how the interest is taxed and how the money is protected. The main UK types are summarised below, with a guide for each where one is available.

Easy-access savings accounts

Money can usually be withdrawn without notice. The rate is variable, so the provider can change it. Some accounts limit the number of withdrawals a year or pay a bonus rate that drops after an introductory period.

Easy access guide

Notice savings accounts

Withdrawals need advance notice, for example 30, 60 or 120 days. Rates are usually variable. Some accounts allow earlier access with a loss of interest; others do not allow it at all.

Notice account guide

Fixed-rate savings accounts

The rate is fixed for a set term, often one to five years. Money usually can't be withdrawn before the term ends, or only with a penalty such as lost interest, and deposits are often only accepted during an opening window.

Fixed-rate bond guide

Regular savings accounts

Designed for monthly deposits up to a set limit, usually for 12 months. Interest is earned only on the money as it builds up, so the interest in pounds is far lower than the headline rate applied to the final balance. Some require a current account with the same provider or limit withdrawals.

Regular saver guide

Cash ISAs

Interest is free of UK income tax. Adults can pay in up to the £20,000 annual ISA allowance, shared across all their ISAs, and all of it can go into cash. Cash ISAs can be easy access, notice or fixed-rate. Moving money between providers through an ISA transfer keeps its tax-free status; withdrawing and paying back in may use up allowance unless the ISA is flexible.

Cash ISA guide

Junior Cash ISAs

A tax-free account for a child under 18, opened by a parent or guardian. Up to £9,000 a year can be paid in. The money belongs to the child and normally can't be withdrawn until they turn 18, when the account becomes an adult ISA; the child can manage it from 16. A child with a Child Trust Fund needs to transfer it before a Junior ISA can be opened.

Family finance hub

Lifetime ISAs

Can be opened between 18 and 39, with payments allowed until 50. Up to £4,000 a year (part of the £20,000 ISA allowance) earns a 25% government bonus. Money can be used for a first home costing up to £450,000, from age 60, or if terminally ill; other withdrawals carry a 25% charge, reduced to 20% for otherwise-qualifying first-home purchases above £450,000 since 29 October 2026. A Cash Lifetime ISA pays interest; a Stocks and Shares Lifetime ISA is invested, so its value can fall as well as rise. Budget 2026 announced a First Time Buyer ISA to replace it from April 2029; existing holders can keep using their accounts.

Lifetime ISA guide

Children's savings accounts

Ordinary savings accounts held in a child's name, often opened by a parent. Interest counts as the child's income, but if money given by a parent earns more than £100 of interest a year, all of that interest is taxed as the parent's income. Age limits, who can make withdrawals and rate types vary between accounts.

Family finance hub

NS&I savings products

National Savings and Investments is backed by HM Treasury, so 100% of the money held is protected with no upper limit. It is not an ordinary bank deposit and the FSCS does not apply. Products include Premium Bonds, which pay tax-free prizes from a monthly draw instead of interest (£25 to £50,000 per person), and easy-access and fixed-term accounts, whose interest is usually taxable.

Premium Bonds guide

At a glance

Account type	Rate	Access	Tax on interest	Protection
Easy access	Variable	Usually any time	Taxable above allowances	FSCS
Notice	Usually variable	After the notice period	Taxable above allowances	FSCS
Fixed-rate	Fixed for the term	Usually at maturity	Taxable above allowances	FSCS
Regular saver	Fixed or variable	Varies; some restrict	Taxable above allowances	FSCS
Cash ISA	Fixed or variable	Depends on the ISA type	Tax-free	FSCS
Junior Cash ISA	Fixed or variable	At 18	Tax-free	FSCS
Cash Lifetime ISA	Fixed or variable	First home, 60+, or with a charge	Tax-free, plus bonus	FSCS
NS&I	Varies by product	Varies by product	Premium Bond prizes tax-free	HM Treasury

Interest rates and inflation

AER and gross rates

The gross rate is the contractual interest rate before tax. The AER (Annual Equivalent Rate) shows what the rate would be if interest were paid and added to the balance once a year, so accounts that pay interest monthly and annually can be compared on the same basis. An account paying monthly usually has a gross rate a little below its AER.

Fixed and variable rates

A fixed rate stays the same for the term, whatever happens to the Bank of England base rate. A variable rate can be changed by the provider, usually with notice, and often moves with the base rate. Introductory bonuses on variable accounts typically end after a set period.

Compounding

When interest is added to the balance, the next interest payment is worked out on the larger amount. As a hypothetical example, £10,000 earning 4.00% AER with interest added each year grows to about £10,400 after one year and about £12,167 after five years, with nothing else paid in. Real rates change, so actual outcomes differ.

Inflation

Inflation reduces what money can buy. If savings earn 4% while prices rise 3%, the balance grows in pounds but its spending power grows by only around 1%. If the interest rate is below inflation, the spending power of the savings falls even though the balance rises.

Tax on savings interest

Interest outside an ISA can be taxed. The Personal Savings Allowance lets basic-rate taxpayers earn £1,000 of interest a year tax-free, higher-rate taxpayers £500 and additional-rate taxpayers nothing; people with low other income may also have up to £5,000 of interest covered by the starting rate for savings. Interest in a Cash ISA is tax-free. Budget 2026 announced higher tax rates on savings income from 6 April 2027 — see Budget 2026: what changed.

Hypothetical example. £10,000 earning 4.00% for a year pays £400 of interest. For a basic-rate taxpayer whose Personal Savings Allowance is already used by other interest, 20% tax leaves £320. With inflation at 3%, the £10,000 would need to grow by £300 just to keep its spending power. The figures are illustrative and do not describe any particular account.

Savings protection

Deposits with UK-authorised banks, building societies and credit unions are protected by the Financial Services Compensation Scheme (FSCS) up to £120,000 per eligible person, per authorised firm. Joint accounts are covered up to £120,000 for each holder.

Shared banking licences: some brands share one banking authorisation, so money held with them counts towards a single £120,000 limit. The FCA register shows which firm holds the licence.
Temporary high balances: money from events such as a house sale, inheritance or divorce can be protected up to £1.4 million for six months.
NS&I: backed by HM Treasury rather than the FSCS, with 100% of the money held protected and no upper limit.
Not deposits: e-money and payment accounts are not FSCS-protected deposits; customers' money is safeguarded instead. Investments, including Stocks and Shares ISAs, have separate FSCS protection if a firm fails, which does not cover falls in value.

More detail: What is the FSCS and how does it protect your savings?

Factors people commonly consider

People weigh up different things when choosing where to keep savings, and the right balance depends on their own circumstances. Factors commonly considered include:

Access: how quickly the money might be needed, and whether notice periods, fixed terms or withdrawal limits would matter.
Purpose and timeframe: for example an emergency fund, a planned purchase or a longer-term goal.
Rate structure: fixed or variable, and whether a headline rate includes a temporary bonus.
Eligibility and conditions: age limits, minimum or maximum deposits, app-only management or a linked current account.
Tax: whether interest is likely to exceed the Personal Savings Allowance, and use of the ISA allowance.
Protection: FSCS limits per authorised firm, shared licences, and NS&I's HM Treasury backing.

This hub does not select a product for you. Free, impartial guidance is available from MoneyHelper (moneyhelper.org.uk), and regulated financial advisers can give personalised advice.

Calculators for exploring scenarios

These calculators use the figures you enter, or clearly labelled example figures, to illustrate outcomes. They do not use any provider's rates.

Savings GrowthCompound interest over time

Savings GoalMonthly amount for a target

Emergency FundSize a cash cushion

Cost of WaitingStarting sooner vs later

Inflation ImpactSpending power over time

Budget PlannerIncome, spending and saving

ISA Allowance TrackerThis year's ISA allowance

Savings guides

Frequently asked questions

What is the difference between AER and the gross rate?

The gross rate is the contractual interest rate before tax. AER (Annual Equivalent Rate) shows what the rate would be if interest were paid and added once a year, so accounts that pay interest monthly, quarterly or yearly can be compared on the same basis.

How much of my savings is protected?

Deposits with UK-authorised banks, building societies and credit unions are protected by the FSCS up to £120,000 per eligible person per authorised firm. Brands that share a banking licence count as one firm. Temporary high balances, for example from a house sale, can be protected up to £1.4 million for six months.

Are NS&I savings covered by the FSCS?

No. NS&I is backed by HM Treasury rather than the FSCS, so 100% of the money held with NS&I is protected, with no upper limit.

Does BritSavvy recommend savings accounts?

No. BritSavvy explains how UK savings accounts work and provides illustrative calculators. It does not compare, rank or recommend savings providers or individual accounts, or assess whether a product is suitable for you.

BritSavvy note: This page is general information about how UK savings products work, based on GOV.UK, HMRC, FSCS and NS&I rules for the 2026/27 tax year. It is not financial advice or a personal recommendation. Rules and allowances can change; check the provider's terms and GOV.UK before acting.