What are savings rates? Your guide to UK savings accounts and interest rates

Saving money is one of the smartest financial decisions you can make, but knowing where to put it can feel like a maze. With so many options available in the UK, from easy access accounts to fixed rate bonds and ISAs, it's difficult to decide where the right home is for your money. Understanding the mechanics of savings accounts and how interest is calculated is the first step to becoming a more confident saver.

Learn how easy it is to manage your money and savings in one place and open a savings account.

Understanding savings accounts

Before you start comparing rates and features, you need to know the basic rules that control how your savings grow and how they're protected in the UK.

What's a savings account and what are savings rates?

Simply put, a savings account is a place to store money that you don't need for your everyday spending. When you put money into a savings account, the bank pays you interest. This money helps your principal amount grow over time. This interest is often expressed as an Annual Equivalent Rate (AER). This is the real rate you earn, taking into account the effect of compounding.

The basic premise is that the money you deposit is used by the financial institution, and they compensate you for this by paying you a percentage of your balance. The higher the percentage, the faster your money grows.

The different savings rate types

When looking at rates, you'll encounter a few key types. The rate first advertised is often the nominal rate, the basic percentage applied before compounding.

However, the most important figure is the AER, which reflects the total money earned over a year, including the effects of compounding.

Beyond the calculation method, rates are categorised by stability — a fixed rate is guaranteed not to change for the term of the account, while a variable rate can be altered by the provider, usually in response to the Bank of England base rate. Knowing these differences is vital for accurately comparing providers.

How is your money protected?

A fundamental concern for any saver is security. In the UK, the Financial Services Compensation Scheme (FSCS) offers an important layer of protection. This scheme is an independent body that protects customers if a financial services firm fails. Here's how it works:

• Protection limit: the FSCS currently protects up to £120,000 of your eligible deposits per authorised financial institution
• Safety net: this means that if the bank or building society where you hold your savings accounts goes out of business, the FSCS will ensure you get your money back, up to the protected limit

When researching any account, you should always check that the provider is authorised by the Prudential Regulation Authority (PRA) and regulated by the Financial Conduct Authority (FCA) and the PRA. We encourage you to check the latest protection limits and eligibility criteria on the FSCS website to make sure you're fully informed.

With us, you can save your money with peace of mind. Your savings are protected through the Financial Services Compensation Scheme (FSCS) via ClearBank Limited. Eligibility criteria apply. Check the FSCS website for more information.

Do I pay tax on savings interest?

The short answer is: possibly, but not always. This is thanks to the Personal Savings Allowance (PSA), which allows most individuals to earn a certain amount of interest tax-free each tax year.

The amount of your PSA depends on your income tax band:

• Basic rate (20%) taxpayers: you can earn up to £1,000 in savings interest tax-free each year
• Higher rate (40%) taxpayers: you can earn up to £500 in savings interest tax-free each year
• Additional rate (45%) taxpayers: you have no PSA, meaning all your savings interest is potentially taxable

For most UK customers, the PSA covers the total interest earned across all their savings accounts.

Choosing the right savings account for your goals

The best choice depends on your specific financial goals, time scale, and need for access. Matching the account type to your objectives is the most important decision.

Easy access with instant access savings

Easy access savings accounts are the best option for money you need to keep liquid. This is usually your emergency fund, which should cover 3–6 months of living costs. It can also be money set aside for a purchase in the near future, like a holiday or a car.

• The benefit: total flexibility. You can add money, withdraw money, and manage the account at any time without penalty.
• The trade-off: the interest rate is typically lower than fixed options because the provider can't guarantee how long it'll hold your money. However, flexibility might be more important to you than a slightly higher rate.

With us, you can enjoy competitive interest rates on your Instant Access Savings account.

Lock money away for higher fixed rates

If you have a clear, long-term goal such as a house deposit or retirement savings, and you're certain you won't need the money for a specific period, you should consider a fixed rate bond (also known as a fixed-term account).

• The benefit: usually higher interest rates. The rate you agree to on the day you open the account is the rate you'll receive for the entire term (e.g. one, 2, or 5 years), regardless of what happens to the Bank of England Base Rate.
• The trade-off: zero access. If you need the money before the term is up, you'll face a significant penalty, usually in the form of lost interest.

What about a cash ISA?

A cash Individual Savings Account (ISA) isn't a specific type of savings account but a tax-efficient wrapper that holds other types of savings accounts (easy access, notice, or fixed).

• The benefit: all interest earned within the cash ISA wrapper is tax-free, regardless of your tax status or the size of your PSA
• The limit: there's an annual limit to how much you can put away across all ISA types

Regular savings: returns on smaller amounts

If you're new to saving or want to establish a strong monthly habit, a regular savings account can be a great stepping stone.

• The structure: these accounts typically require you to save a fixed, modest amount each month (e.g. £50–500)
• The advantage: they often offer competitive savings interest rates that are higher than standard savings accounts offer — this rewards the consistent saving behaviour
• The caveat: the high rate only applies to the relatively small amount you deposit each month

Savings account interest rates: maximise your returns

Choosing the right account is only half the battle. To truly get the most out of your money, you must understand common features and maintain an active relationship with your savings.

What's a good interest rate?

Defining a good interest rate isn't about hitting one specific number — it's about finding a rate that's competitive within its specific category while matching your needs for access and stability.

To determine if a rate is truly good, you should:

• Compare against the market: check the top-rated tables for the specific features you want (e.g. easy access savings or a 1-year fixed-rate bond). A good rate should be among the highest rates available from reputable providers at that moment.
• Look at the base rate: the Bank of England base rate dictates the general movement of all savings rates. A good rate will usually sit comfortably above the current base rate.
• Prioritise AER: always compare the Annual Equivalent Rate (AER), as this is the true measure of your yearly return after compounding is factored in.

If a rate is a top-5 market offering for an account that gives you the flexibility you need, then it's a good rate for you.

What's the difference between a bonus rate and the standard savings rate?

Some providers advertise a highly competitive rate, which is often a temporary bonus rate combined with a lower, standard rate.

• The bonus: this is a high rate that is added on top of the standard rate, but only for a limited time (e.g. the first 12 months)
• The standard: this is the underlying rate that your savings will revert to once the bonus period ends

When comparing, always check the rate that'll apply after the bonus period is over. Many customers who forget to switch accounts when their bonus expires see a significant drop in their savings account interest earnings.

Saving rates simplified: the Revolut way

We built our Revolut Instant Access Savings account with the modern saver in mind, focusing on removing the complexity and restrictions that traditional banks impose. We believe managing your money and growing your savings should be a single, seamless experience.

Instant access and easy management

Our savings account is designed to fit your life, not restrict it. We offer an account that gives you a competitive AER alongside the flexibility and freedom of instant access.

• Zero notice: you never have to wait or give notice to withdraw your money. If you need it, it's instantly available in your personal account.
• In-app clarity: you can track your interest earnings in real-time, see exactly how your balance is growing, and manage all your deposits and withdrawals in-app.
• Seamless integration: managing your everyday spending and your long-term savings in a single platform makes saving automatic and simple — there's no need to jump between multiple apps or platforms.

This balance between competitive returns and total flexibility makes our Savings account a leading choice for UK customers who value control and simplicity.

How to start saving with Revolut

Start managing your money and savings in minutes, all in-app. Here's how to get started:

1. Sign up for Revolut by downloading the app and following the steps to open your personal account — it only takes a few minutes
2. Below your balance, tap Accounts
3. Tap Add new, then Savings
4. Follow the prompts to set up your account

Ready to get the most out of your money? See how easy it is to manage your money and savings in one place with a Revolut Instant Acess Savings account.

The information provided is accurate as of 4 December 2025.

The information regarding current UK bank offers in this article is based on general market patterns and typical terms observed in the UK financial market. You should always check the official website of the financial provider for the most accurate and up-to-date offers, terms, and conditions before initiating any bank switch.

The Annual Equivalent Rate (AER) shows the interest you can earn over one year. AER is compounded, so you’ll earn interest on interest already earned. Rates depend on your plan type and savings' currency, from up to 3% AER (variable) on our Standard plan to up to 4% AER (variable) on our Ultra plan. Paid plan subscription fees and T&Cs apply. Interest offered is subject to change and any interest earned is liable to the applicable taxes. Instant Access Savings T&Cs apply.