Savings

A savings account is a place to put money aside so it stays separate from everyday spending, earns interest or prizes, and stays within reach of the rules that protect deposits in the UK. The main things most people want to know are what types of account exist, how interest is taxed, and what happens if the provider fails. The short answers: there are easy access, notice, fixed term, regular savings and children's accounts, plus Premium Bonds and ISAs; most people can earn £1,000 of interest a year tax-free, and up to £5,000 more at 0% through the starting rate; and the Financial Services Compensation Scheme (FSCS) protects up to £120,000 per person, per banking licence, paying out within seven working days in most cases¹.

Savings accounts are offered by banks, building societies, credit unions and National Savings & Investments (NS&I). Credit unions, for example, offer savings accounts that either pay interest or a share of any profits². ISAs, a separate family of tax-free accounts, may be set up as a stocks and shares account, a cash account, an innovative finance account or a Lifetime ISA³. This guide explains each type, how the tax works, what protection applies and where it stops, and it links to the detailed pages across the savings section.

What a savings account is for

A savings account does one job: it holds money you do not need for day-to-day spending, and it pays you something for holding it. What it pays, and how quickly you can get the money back, are the two things that separate one account from another, and they usually work in opposite directions. Accounts that let you take money out at any moment tend to suit an emergency fund or short-term goals, while accounts that lock money away for a fixed period tend to reward you for giving up that access.

Savings accounts are not the same as current accounts, which are built for payments in and out. Nor are they the same as investments, where the value can fall as well as rise. Money in a savings account is a deposit: the provider owes it back to you, and deposits with authorised UK firms are protected by the FSCS up to £120,000 per person, per firm¹. That protection, explained in full later in this guide, is what makes a savings account fundamentally different from putting money into stocks and shares.

Who you can save with is broader than many people realise. Banks and building societies are the familiar names, but credit unions also offer savings accounts, paying either interest or a share of any profits², and NS&I, the government's savings provider, offers its own range including Premium Bonds⁷. Some providers are savings-only specialists, and cash savings platforms let you hold accounts with several banks through one service. The right fit depends on how much access you need, how long you can leave the money alone, and how the tax rules apply to you.

Types of savings account at a glance

Most savings accounts fall into a small number of families. The differences between them come down to access: how quickly you can withdraw, whether you must commit to a term, and whether there is a limit on how much you can pay in.

Easy access accounts are the most common starting point. NS&I's Income Bonds, for example, are an easy access savings account that pays interest monthly, direct to your bank, while its Direct Saver pays interest yearly to top up your savings⁸. Fixed rate bonds work differently: MoneyHelper describes cash savings bonds as accounts where you tie up money for a set period in return for a fixed rate, and notes that the FSCS savings protection limit is £120,000, or £240,000 for joint accounts, per authorised firm⁹.

ISAs come in four types: cash ISAs, stocks and shares ISAs, innovative finance ISAs and lifetime ISAs¹⁰. Premium Bonds, covered in detail below, are NS&I's prize-based product⁷. Cash savings platforms bring several of these together: Raisin UK's marketplace, for example, offers fixed rate bonds, notice accounts and easy access accounts³, and similar services let you choose between easy access, fixed term and notice accounts, or use all three⁴. The pages on types of savings account, easy access accounts, notice accounts and fixed-rate bonds cover each family in depth.

Easy access or fixed term: how each one behaves

The choice between easy access and fixed term is the first real decision a saver makes, and it is a trade-off between flexibility and certainty. An easy access account lets you withdraw whenever you like, but the rate is variable: the provider can change it, following the rules on rate changes. A fixed rate bond locks the rate for the term, so you know exactly what the money will earn, but you generally cannot get at it until the term ends.

Fixed term accounts have a defined end point, and what happens there matters as much as the rate itself. Gatehouse Bank's 12 month fixed term account, for instance, states that at the end of the term your money and any profit you earn will be transferred to an Easy Access account¹¹. That pattern, a fixed term ending in a transfer to a variable account, is common across the market, and it means the rate you signed up for does not last forever. The page on fixed-rate maturity covers what to do when it happens.

Access rules have exceptions worth knowing. If an account holder dies, money in a fixed-term account that has not matured can still be closed immediately, with interest paid up to the date of death¹². That is a small mercy in a hard moment, but it is not the same as being able to withdraw freely: for everyone else, the term stands. Some savers split the difference by holding a fixed bond for money they will not need and an easy access account for money they might, a split explored in easy access vs fixed-rate savings.

Regular savers: a monthly allowance you cannot carry over

Regular savings accounts are built around a monthly habit rather than a lump sum. You pay in each month, up to a cap set by the account, and the account runs for a set period. They suit someone saving from income, and the discipline is partly enforced by the rules: miss a month and the allowance is gone.

That is the feature to understand before opening one. Gatehouse Bank's Regular Saver states that if you miss a month, or do not pay in the maximum allowed, you cannot carry over the unused amount and catch up in future months¹¹. The monthly allowance is use it or lose it. Savers who expect irregular income may find that frustrating, while savers with a steady wage may find it exactly the nudge they want. The comparison page on regular saver vs easy access sets out who each tends to suit.

The same no-carry-over principle applies to ISAs, from the other direction. NS&I states that you cannot carry over unused ISA allowance into the next tax year, and your allowance resets every 6 April¹³. So someone who pays only £5,000 into ISAs in one tax year does not get £35,000 the next: the unused portion is simply lost. Regular savers and ISAs both reward planning around their limits, and both punish leaving things to the last minute.

Premium Bonds: prizes instead of interest

Premium Bonds are NS&I's best-known product and the one that behaves least like a normal savings account. Unlike typical saving accounts, Premium Bonds do not pay interest. Instead, each £1 saved gets you an entry into a monthly prize draw¹⁴. The minimum investment is £25, and you can invest up to the maximum holding of £50,000¹⁵. Prizes range from £25 to £1 million each month and are tax-free⁷.

How the prize fund is worked out is set in legislation. The prize fund interest rate is defined as the rate of interest applicable to each bond unit eligible for entry into the prize draw for a given month, which, together with the number of bond units, determines the prize fund for that month¹⁶. NS&I states the annual prize fund rate is 4.35%, variable, from the July 2026 prize draw⁷. That rate funds the prizes; it is not a rate paid to each holder. NS&I splits prizes into three value bands, higher, medium and lower, and allocates a percentage share of the monthly prize fund to each band¹⁷.

The odds are published and they change. NS&I states the odds of winning are 23,000 to 1 for every £1 Bond in the monthly prize draw until the June 2026 draw, and 21,000 to 1 from the July 2026 draw, in both cases variable⁷. What that means in practice is that a holder can go months or years winning nothing, and the return is uncertain in a way interest is not. The trade-off is the chance of a large tax-free prize and the ability to withdraw your money when you want it. The comparisons are drawn out in Premium Bonds vs a savings account and how Premium Bonds prizes are drawn and paid.

Prizes can be paid directly to your bank account or reinvested into more Bonds¹⁸. NS&I also publishes a prize options form, PB 1425, for choosing how prizes are handled, and the form itself notes that it is not a purchase application form¹⁹.

Premium Bonds for children

Any adult can buy Premium Bonds for a child under 16²⁰. The mechanics differ depending on whose child it is. When buying for your own child, NS&I sets the parent or guardian up for its online and phone service as part of the application if not already registered, and the parent or guardian can view and manage the child's Premium Bonds account once it has been created¹⁴.

Buying for someone else's child adds steps. The child's parent or guardian must give you permission to share their information with NS&I, and NS&I will ask the parent or guardian to provide proof of their own and the child's identity, with documents sent by post if they are not already NS&I customers. The gift reaches the child only after all identity checks are completed, which NS&I states can take up to four weeks from when proof of identity is received¹⁴. The gift giver does not get access: only the parent or guardian can view the child's account¹⁴.

There is a holding limit to watch. NS&I states that a child must not hold more than £50,000 of Premium Bonds in total⁷, which matters where more than one parent or guardian, or several gift givers, are all buying Bonds for the same child. The narrow guide to buying Premium Bonds for a child and the wider page on children's savings accounts cover the options for children's money more generally.

Unclaimed prizes and lost Bonds

Premium Bonds prizes do not always find their owner, and NS&I has a process for both lost Bonds and unclaimed prizes. If you have lost touch with NS&I, you can find your holder's number by logging in to its online service and checking your Premium Bonds account page, or by calling NS&I for a replacement Bond record. You can also log in to see and print off a list of all your Bond numbers, or contact NS&I and have a Bond record posted to you²¹.

To check for prizes, you need your holder's number, which has either 9 or 10 digits, or 8 digits followed by a letter¹⁷. NS&I also offers a prize checker skill for Amazon Alexa once enabled¹⁷. Large prizes work differently: if you win £25,000, £50,000 or £100,000, NS&I sends you a claim form, which you must complete and send back before the prize can be paid⁷. So a life-changing prize can sit unclaimed if the letter goes astray, which is why checking matters after a house move. The guides to unclaimed Premium Bond prizes, tracing lost NS&I savings and finding your holder's number walk through each step.

Personal Savings Allowance: up to £1,000 of interest tax-free

Most savers pay no tax at all on their interest, because of two allowances that stack. The Personal Savings Allowance lets Basic Rate taxpayers receive £1,000 of interest without paying tax⁵. On top of that, the starting rate for savings means some people can receive up to a further £5,000 interest tax free at a 0% rate, on top of their Personal Allowance⁵. A saver who qualifies for both could earn £6,000 of interest before paying anything, which at typical rates takes a substantial pot.

You pay tax on any interest over your allowance at your usual rate of Income Tax²². The allowance is not a form to fill in or a claim to make: it is applied automatically, which is why most people never see it working. Interest is paid gross, without tax deducted, and the allowances are set against it when HMRC works out what you owe.

Two details catch people out. First, Scotland sets its own Income Tax rates, but the Personal Savings Allowance is still based on the UK-wide rules¹⁵, so the allowance itself does not change, only the rate applied above it. The page on tax on savings interest for Scottish taxpayers explains the interaction. Second, joint accounts: any interest earned in a joint account will usually be split equally between each person, with tax only due if a share is above the annual allowance²³. That split can mean one holder pays tax and the other does not. The dedicated pages on the personal savings allowance, the starting rate and joint accounts go deeper.

How tax on savings interest is collected

For most people, tax on savings interest involves no forms at all. After the end of the tax year, your bank or building society tells HMRC how much interest you earned²². If you are employed or get a pension, HMRC will usually collect any tax due through your tax code²². HMRC adds an estimated amount in your tax code for the current tax year, based on the information your bank or building society gave for the previous tax year, and you can see the estimated amount in your Personal Tax Account²².

The timeline runs roughly two years behind. For interest earned in the 2025 to 2026 tax year, HMRC tells you about the tax due in a tax calculation sent during the 2026 to 2027 tax year, usually between June and the following March, and the tax due is usually collected through your tax code in 2027 to 2028²². One deadline matters: if you have tax to pay on your savings interest and do not get a letter by 31 March of the following tax year, you must contact HMRC²².

Self Assessment is the exception, not the rule. You need to tell HMRC how much interest you earned on a Self Assessment tax return if your savings interest is more than £10,000, and if your bank or building society tells HMRC you have more than £10,000 in savings interest, HMRC will send you a notice to file a return²². The pages on how tax on savings interest works, reclaiming tax paid on savings interest and certificates of interest cover the mechanics, including what to do if HMRC's estimate is wrong.

ISAs sit outside the Personal Savings Allowance

ISAs work on a completely different principle from the tax allowances above. An Individual Savings Account is a type of savings account that lets you deposit up to £20,000 each tax year without paying tax on the interest¹⁵. Interest earned in an ISA does not use up your Personal Savings Allowance at all: the two systems run in parallel, which is why higher earners who have used their allowance often turn to ISAs.

The allowance is annual and unforgiving. You cannot carry over unused ISA allowance into the next tax year, and the allowance resets every 6 April¹³. ISAs were introduced on 6 April 1999, replacing the earlier Personal Equity Plans and Tax-Exempt Special Savings Accounts²⁴, and there are four types available: cash, stocks and shares, innovative finance and lifetime ISAs¹⁰.

Who uses ISAs has shifted over time. The greatest number of ISA holders is in the 65 and over group, but a large portion of that group, 67.6%, were not active savers in 2021 to 2022²⁵, meaning they held accounts without paying in during the year. That pattern matters when deciding whether an ISA is worth it: someone whose interest already falls within their allowances gets no extra tax benefit from the wrapper, while someone paying tax on interest does. The comparison page cash ISA vs ordinary savings works through the decision, and the ISA section covers the full range.

What happens when a fixed term or bond matures

Every fixed term account ends, and what happens next is set by the provider's terms. The common pattern is a transfer into an easy access or maturity account at a variable rate. Gatehouse Bank's 12 month fixed term account states that at the end of the term, your money and any profit you earn will be transferred to an Easy Access account¹¹. Providers typically write to customers before the conversion: Ecology Building Society, for example, states that accounts converting automatically to its Easy Access account on 2 January 2030 will see customers contacted beforehand.

The dates are fixed and worth diarising. Examples from providers' own terms include Leeds Building Society's Online Access Saver (Issue 23), whose fixed term ends at midnight on 1 November 2027 with funds transferred to an instant access maturity account the next day, and its 3 Year Fixed Rate Bond (Issue 717), whose term ends at midnight on 31 October 2029. Newcastle Building Society's Single Access ISA (Issue 2) matures on 30 November 2027 into an easy access account with a variable rate, and Harrogate Building Society's Fixed Rate Cash ISA matures on 31 December 2028 and automatically becomes an Easy Access Cash ISA or nearest equivalent.

The practical point is that the rate you chose does not follow the money. Once a bond matures, the balance usually sits in a variable account whose rate the provider can change, so the weeks around maturity are when a decision is worth making. The page on what happens when a fixed-rate savings account matures covers the options, including switching accounts and whether you can withdraw early, which fixed bond early withdrawal addresses. One exception to the term: if the account holder has died, a fixed-term account that has not matured can still be closed immediately, with interest paid up to the date of death¹².

FSCS protection: up to £120,000 per person, per banking licence

The Financial Services Compensation Scheme is the safety net under UK savings. FSCS protects eligible deposits from the first pound up to £120,000 per person, per authorised firm²⁶, and describes the limit the same way: up to £120,000 per eligible person, per bank, building society or credit union²⁷, or per person or company, per authorised firm²⁸. The protection is across all accounts held within the bank or banking group, not per account⁴, so three accounts with one firm share one £120,000 limit, not three.

Joint accounts are covered per person. FSCS protects each account holder, whatever the number of holders, up to £120,000 in total across all the accounts they hold in their own name and their share of joint accounts⁴. Joint accounts are eligible for FSCS protection up to the same limit of £120,000 per eligible person¹, which is why a two-holder joint account is often described as having up to £240,000 of cover with one firm⁹.

The unit of protection is the banking licence, not the brand. Money held in multiple accounts with multiple banks that are part of the same banking group and share a banking licence is treated as one bank, and the accounts share protection limits rather than getting separate limits for each bank²⁷. The Bank of England gives the example that HSBC operates under brands including HSBC Private Banking and first direct²⁹. So two accounts with two familiar names can count together towards one limit, and the FSCS protection checker exists precisely to let you check your money is protected firm by firm²⁷. NS&I, for its part, states that money in its regulated accounts is normally protected up to £120,000 per person, and if your bank goes bust you automatically get your money back³⁰.

If a bank fails, the process is designed to be invisible to the saver. FSCS will automatically pay back customers' money within seven working days in most cases⁴, and states that compensation is paid within seven working days of a bank, building society or credit union failing, with more complex cases, including temporary high balance claims, taking longer¹. You do not need to fill in a form: you will get your money within seven working days of the firm failing²⁷. FSCS is free to use and is funded by the financial services industry³¹, through a levy on the authorised firms whose customers it protects²⁹. It covers only firms authorised by the Financial Conduct Authority or the Prudential Regulation Authority to do business in the UK³¹, and it covers seven types of business in all, of which deposits are one³¹. Credit union savers get the same deal: FSCS protects up to £120,000 in total across all accounts you hold with the credit union³².

Temporary high balances: up to £1.4 million for six months

The £120,000 limit has one important exception: money that is only briefly in an account because of a major life event. FSCS can protect temporary high balances in your bank, building society or credit union account of up to £1.4 million for six months²⁷. It states that certain qualifying temporary high balances up to £1.4 million are covered for six months, such as money from the sale of a house⁹, and that protection runs for six months from when the amount was first deposited¹. The Bank of England describes the same rule: temporary protection up to £1.4 million in most cases, for up to six months above the £120,000 limit²⁹.

The qualifying events are the ones that put a large sum in an account for a short, defined period: a house sale, an inheritance, a redundancy payment. The protection is not a general top-up for anyone with a big balance, and the clock starts when the money lands. MoneyHelper gives the same figure for current accounts: the FSCS can compensate you for up to £1.4 million if the account was credited in the last six months³³.

The FSCS's own documents are not consistent on the figure, and it is worth knowing both numbers. One FSCS claims page states: "If it's temporary, we cover up to £1m for up to six months"³⁴, while its deposit limit page and other guidance give £1.4 million⁶. Anyone relying on this protection for a specific sum should check with FSCS directly, and the narrow guide to temporary high balance protection works through the qualifying events. For money that will stay above the limit long term, the page on what happens to money above the FSCS limit sets out the options, including spreading deposits across separate licences.

Scams that pose as compensation schemes

Protection schemes are themselves impersonated by fraudsters, and savers should know the pattern. FSCS warns that it is possible for a scammer to use a fake caller ID to make it look as though they are calling from FSCS, and that it has seen a rise in this sort of scam³⁵. FSCS also states that it is free to customers and will never ask you to send it money³¹. A call or message that combines the FSCS name with a request for payment or personal details is a warning sign whatever the caller ID says.

The same impersonation pattern appears across financial services. The Pensions Regulator urges vigilance after a rise in impersonation fraud against pension savers, identifying tactics that include identity theft and account takeover, fraudulent duplicate accounts, weak credential exploitation and fraudulent death claims³⁶. Research for Parliament on pension scams lists common features that include attempts to gather information for future scams, false or unrealistic promises, and acting without the consent of the saver³⁷. The lesson for anyone holding savings is the same: a genuine body, whether FSCS, a provider or a regulator, does not need you to move money to a "safe account" or to pay a fee to release compensation.

NS&I makes the same point about its own products: it is normally up to the value of £120,000 per person that is protected, and if your bank goes bust you automatically get your money back, with no action needed from you³⁰. Anyone who contacts you claiming otherwise, and asking for account details or payments to make it happen, is not from the scheme. The scams and fraud guide and the page on savings and fake bond scams cover the current tactics and what to do after money has been sent.

Who provides savings accounts in the UK

Savings accounts in the UK come from four kinds of provider, and the differences between them are smaller than they once were: all authorised deposit takers are covered by the same FSCS rules.

Banks range from the familiar high street names to savings-only specialists that take deposits but run no branch network. The Bank of England notes that some banking groups operate several brands under one firm, giving HSBC's HSBC Private Banking and first direct as examples²⁹, which matters for how protection is counted rather than for the accounts themselves. The directory of banks and building societies lists the firms, and savings-only and specialist banks covers the model.

Building societies are mutual, owned by their members rather than shareholders, and the page on how building societies work explains what that means in practice. Their deposits carry the same FSCS protection as banks'²⁸.

Credit unions serve their members, often around a workplace, locality or shared interest, and offer savings accounts that either pay interest or a share of any profits². FSCS protects up to £120,000 in total across all accounts held with the credit union³², and the comparison credit unions vs bank savings accounts sets out the differences.

NS&I is the government's savings provider, offering Premium Bonds⁷, Income Bonds and Direct Saver⁸, and ISAs¹³, with products backed by the Treasury, as the NS&I guide explains. Alongside these sit cash savings platforms: Raisin UK's marketplace, for example, offers fixed rate bonds, notice accounts and easy access accounts³, and other services let you choose between easy access, fixed term and notice accounts⁴. Platforms do not change the protection rules; they just make it easier to hold accounts with several firms, which can help savers with large balances stay within limits. The page on cash savings platforms explains how they work.