UK households are often looking for ways to make their money go further cost of living crisisand savings accounts can help you improve your financial situation this year.
The Bank of England’s (BoE) decision this month to keep interest rates at 3.75 per cent did not bring relief to mortgage holders, but it was good news for savers as it affected the rates banks and building societies set for their products.
However, inflation in the UK fell to 3% in January, strengthening hopes that the BoE would cut interest rates early. The slowdown was in line with forecasts by the majority of City economists and marks the lowest level since March 2025.
Any decrease in the base interest rate will generally be reflected in savings accounts, reducing depositors’ returns.
But for now, many leading accounts continue to offer rates that are comfortably above inflation and the current policy rate, enabling savers to earn positive real returns. For households looking to rebuild financial resilience, it may be prudent to lock in these deals before the interest rate cycle changes.
Experts are urging savers to shop for the best deals and review their accounts regularly; because many of them may still be sitting on products that cannot beat inflation.
Bestinvest personal finance expert Alice Haine said: “Lowering inflation for savers has mixed results. While real yields may look more attractive in the short term, lower inflation also increases the likelihood of further interest rate cuts, which will put downward pressure on savings rates.”
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“Those who want to protect the return on their bank and building industry savings should look for the best deal they can find. Savings rates are likely to fall further with further interest rate cuts expected in 2026. But for many savers, the UK’s rising tax burden is proving to be even more taxing.
“The UK has faced a number of tax changes in recent years that will significantly increase personal tax burdens and erode disposable incomes. Whether it is frozen income tax thresholds, a future increase in savings income tax, a static Personal Savings Allowance or cuts to the annual Capital Gains Tax exemption and dividend allowance – savers and investors will see most of their returns swallowed up by tax over time. That’s why a tax-efficient savings strategy is essential.”
“The countdown to the end of the tax year continues, with less than seven weeks until allowances reset at midnight on April 5. Pl, lp Savers can house up to £20,000 in a tax-free Individual Savings Account (ISA) this financial year or direct the excess money into retirement, both options protecting returns from tax.”
Lale Akoner, global market analyst at eToro, said: “Overall, the pressures are strengthening the prospect of a potential rate cut at the Bank of England’s March meeting, especially after recent data showed softer wage growth and rising unemployment. But policymakers are divided and sticky services inflation could keep the debate delicately balanced. If inflation falls mainly due to energy and base effects, the Bank of England could cut cautiously rather than aggressively.”
“The implications for retail investors are significant. Rate cut expectations tend to support stocks, particularly interest rate-sensitive sectors such as housebuilders and consumer discretionary. Lower yields could also weigh on sterling, which could benefit UK multinationals to raise revenue overseas. On the other hand, savers could face diminishing returns if borrowing costs start to fall.”
Chancellor Rachel Reeves announced changes to the tax payable on savings income in her autumn budget in November. From 2027-28, the basic rate on savings will be increased by two percentage points to 22%, the higher rate will be increased by two percentage points to 42% and the additional rate will be increased by two percentage points to 47%. This will come into force from 6 April 2027.
Until recently, savers could earn a market-leading 5% for three months, but the best offer is now 4.40% from OakNorth via the Prosper platform. Interest is paid at maturity and a minimum investment of £10,000 is required to open the account.
AlRayan Bank pays 4.35% on a six-month maturity through the same Prosper platform. Interest is paid at maturity and £10,000 is required to open the account.
DF Capital has a 4.25% 12 month deal, which requires £1,000 to open and you can invest up to £250,000.
Online banks often offer higher rates than traditional brick-and-mortar branches; This means better returns and gives you a more effective way to save money and achieve financial goals.
If you prefer to go with a familiar name, offers from high street lenders are slightly lower, but still above inflation.
Tesco (TSCO.L) Bank offers: one year fixed interest savings account It pays 4% per annum, with a minimum balance required of £2,000. However, you can invest up to £5 million.
NatWest (NWG.L) is a fixed term savings account offers 3.4% for one year. The minimum deposit is just £1 and interest is payable on the first business day of each month and on the due date.
Unlike easy-to-access products where interest rates can change, fixed-rate accounts earn a set interest rate for the period you choose, whether that’s six months or several years. These are the most common deals, but some offers extend to 10 years and longer.
You must leave your initial deposit for a certain period of time without making a withdrawal. If you touch your money, you lose all interest.
Easily accessible savings accounts allow you to withdraw your money without notice. With this ease of access comes lower interest rates, but they are a good option for those who think they may need money urgently.
Keep in mind that rates on these accounts are variable, meaning they can go up and down. Any changes will be notified to you in advance.
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Chase (JPM) has a 4.5% offer for 12 months that you can access for £1.
Mansfield BS has a 4.25% offer from £1 where you can save up to £400,000. If you deposited £1,000 into this account, your balance after 12 months would be £1,042.50.
Manchester BS has a 4.15% deal that you can access from just £1 and invest up to £1,000,000. Interest is paid annually.
There are also higher paying, easy to access accounts, but these are not for new customers. For example, Santander’s (BNC.L) Edge Saver offers 6% but is only available to existing account holders.
Can’t decide whether you want to put your money aside and not touch it for a long time or keep it accessible at all times? Maybe you should consider a notice savings account.
Notification savings accounts require you to notify your savings provider before you can withdraw your money.
These are ideal for those who know when they might need money but don’t want to face the temptation of dipping into it at any given time.
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Before you can withdraw your money, you must give a warning to the bank or construction company in advance. It is usually between 30 and 120 days, but it can be longer.
OakNorth Bank via Prosper has a 4.5% deal requiring £10,000 to access. The notice period is 120 days and applies to new customers only.
The same platform has a deal with GB Bank offering 4.4% on the account with 35 days notice.
GB Bank also offers a standalone deal of 4.33% with a 120-day notice period and the minimum deposit is set at £10,000.
Interest rates on notice accounts are variable, meaning they may increase or decrease over time.
For those looking to make the most of their cash savings, regular savings accounts can offer returns of up to 7.5%.
Most regular savings accounts require you to deposit money each month, with interest paid annually. It is not uncommon for the offer to be available only to existing customers.
The principality offers 7.5% on a six-month regular savings account. You open an account and pay up to £200 each month. Interest is calculated every day on the money in the account and is paid six months after opening.
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Zopa pays 7.1% on monthly deposits up to £300. Account holders also receive 2% AER interest on all balances and 2% cashback on bill payments, and there is no minimum monthly deposit.
The Co-op offers 7% on its regular savings account, allowing deposits of up to £250 a month.
First Direct pays the same 7% but you could save £300 each month.
Every agreement mentioned herein is covered by the Financial Services Compensation Scheme; so you’re protected up to £120,000, or twice that figure in the case of a joint account.
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