Amid the cost of living crisis, UK households are often looking for ways to make their money go further, and savings accounts can help improve your finances this year.
The Bank of England’s (BoE) decision this month to keep interest rates at 3.75% has brought little relief to mortgage holders but is good news for savers as it affects the rates banks and building societies set on their products.
However, UK inflation fell to 3% in January, boosting hopes of an early interest rate cut by the Bank of England. The slowdown was in line with forecasts by most City of London economists and hit the lowest level since March 2025.
Any reduction in the base rate would typically flow into savings accounts, cutting into savers’ returns.
However, many major accounts currently continue to offer interest rates well above inflation and current policy rates, allowing savers to earn positive real returns. For households looking to rebuild financial resilience, it may be prudent to lock in these deals ahead of a turn in the interest rate cycle.
Experts are urging savers to shop around for the best deals and review their accounts regularly, as many may still be holding onto products that do not protect against inflation.
Bestinvest personal finance expert Alice Haine said: “For savers, the consequences of easing inflation are mixed. While real returns may look more attractive in the short term, lower inflation also increases the likelihood of further interest rate cuts, which in turn will put downward pressure on savings rates.”
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“Those keen to retain the returns on their bank and building society savings should look for the best deals possible. With further interest rate cuts expected in 2026, savings rates are likely to fall. However, for many savers, the UK’s rising tax burden is even more corrosive.
“The UK has been hit by a series of tax changes in recent years that will significantly increase personal tax burdens and erode disposable income. Whether it’s a freeze on income tax thresholds, future increases in income tax on savings, static personal savings allowances, or cuts to the annual capital gains tax exemption and dividend allowance – savers and investors will see more of their returns eaten into tax over time. That’s why a tax-efficient savings strategy is imperative.
“The countdown to the end of the tax year is ongoing, with less than seven weeks until allowances reset at midnight on April 5. Savers can park up to £20,000 in a tax-free Individual Savings Account (ISA) for the financial year, or they can deposit the remaining cash directly into a pension, both options protecting tax returns.”
Lale Akoner, global market analyst at eToro, said: “Overall, this report strengthens the case for a possible rate cut by the Bank of England at its March meeting, especially after recent data showed weak wage growth and rising unemployment. However, policymakers remain divided, and sticky services inflation may keep the debate on a delicate balance. If inflation is mainly driven by energy and base effects, the Bank of England may cut interest rates cautiously rather than aggressively.”
“For retail investors, the impact is important. Expectations of rate cuts tend to support equity markets, especially rate-sensitive sectors such as housebuilders and consumer discretionary. Falling yields will also put pressure on the pound, which could help UK multinationals earn income overseas. On the other hand, savers could face lower returns if borrowing costs start to fall.”
Chancellor Rachel Reeves announced changes to the tax payable on savings income in November’s Autumn Budget. From 2027-28, the base savings rate will increase by two percentage points to 22%, the higher rate will increase by two percentage points to 42%, and the top rate will increase by two percentage points to 47%. This regulation will come into effect on April 6, 2027.
Until recently, savers could earn a market-leading 5% over three months, but now OakNorth’s best offer via the Prosper platform is 4.40%. Interest is paid on maturity and the minimum investment to open an account is £10,000.
AlRayan Bank pays a six-month interest rate of 4.35% through the same Prosper platform. Interest is payable on maturity and £10,000 is required to open an account.
DF Capital has a 4.25% deal for 12 months that requires £1,000 to open and you can invest up to £250,000.
Online banks often offer higher interest rates than traditional brick-and-mortar branches, which means better returns and a more efficient way for you to save and achieve your financial goals.
If you prefer to go with a familiar name, high street lenders are offering slightly lower prices but still above the rate of inflation.
Tesco (TSCO.L) Bank offers a one-year fixed-rate savings account with an annual interest rate of 4% and a minimum balance requirement of £2,000. However, you can invest up to £5 million.
NatWest (NWG.L) has a fixed savings account with an annual interest rate of 3.4%. The minimum deposit is just £1, with interest payable on the first working day of every month and on the maturity date.
Unlike easy-to-use products where interest rates can change, fixed-rate accounts earn a fixed rate for the term you choose, whether that’s six months or several years. These are the most common offers, but some offer terms as long as 10 years or more.
You must keep your initial deposit for a fixed period and no withdrawals are allowed. If you touch your money, you lose any interest.
Easy-to-access savings accounts let you withdraw funds without notification. Due to this easy access comes lower interest rates, but they are a good option for those who think they may need money urgently.
Note that the interest rates on these accounts are variable, meaning they can go up or down. You will be notified in advance of any changes.
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Chase (JPM) is offering 4.5% off for 12 months, so you can get it for just £1.
Mansfield BS has a 4.25% discount, you can open from just £1 and 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% discount and you can get it for just £1, up to an investment limit of £1,000,000. Interest is paid annually.
There are even easy-to-access accounts that pay higher, but they are not suitable for new customers. For example, Santander’s (BNC.L) Edge Saver offers a 6% interest rate, but it’s only available to current account holders.
Can’t decide if you want to put your money away and not touch it for a long time, or have it always accessible? Maybe you should consider opening a notice savings account.
Notification savings accounts require you to notify your savings provider before withdrawing funds.
These are ideal for people who know when they might need cash but don’t want to have to dip into it all the time.
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You need to give your bank or building society advance warning before you withdraw your money. Usually 30 to 120 days, but can be longer.
OakNorth Bank has a 4.5% deal via Prosper, which requires £10,000 to access. The notice period is 120 days and only applies to new customers.
The platform has an agreement with GB Bank to offer a 4.4% interest rate on 35-day notice accounts.
GB Bank also offers independent trading at 4.33% with 120 days notice and a minimum deposit of £10,000.
Interest rates on notice accounts are variable, meaning the interest rate 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 funds monthly and pay interest annually. It’s not uncommon for this offer to be offered to current customers only.
The principality offers an interest rate of 7.5% on a six-month term savings account. You open an account and pay up to £200 per month. Interest is calculated daily on the funds in the account and is paid six months after the account is opened.
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Zopa pays 7.1% interest on deposits of up to £300 per month. Account holders also receive 2% AER interest on all balances and 2% cashback on bill payments, with no minimum monthly deposit required.
The co-op’s regular savings account has an interest rate of 7% and allows deposits of up to £250 per month.
First Direct pays the same 7%, but you save £300 a month.
Every transaction mentioned here is protected by the Financial Services Compensation Scheme, so you’re protected up to £120,000, or double that if it’s a joint account.
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