Savings accounts are types of accounts with a bank or building society where you put money away to earn a return through interest. While the interest you earn on many savings accounts can be relatively modest, they still provide a safe and reliable place to keep your money.

They’re especially useful if you’re looking to build an emergency fund, or for short-term savings goals like buying a car or paying for a holiday.

A savings account allows you to store your money with a bank, building society, or online provider while earning interest on your balance.

While the core concept is simple, accounts vary based on:

• Interest rates: These can be fixed (guaranteed for a set term) or variable (can go up and down based on the market).

• Access rules: Some accounts offer easy access, while others lock your money away for months or years in exchange for a higher rate.

• Requirements: Always check for minimum deposit amounts or monthly fee requirements before applying.

Most UK savers benefit from the Personal Savings Allowance (PSA), which allows you to earn interest tax-free:

• Basic-rate taxpayers: Up to £1,000 per year

• Higher-rate taxpayers: Up to £500 per year

While the starting rate for the PSA will remain unchanged, income tax for savings income is set to increase by 2% for 2027 onwards - taking it to 22% for the savings basic rate, 42% for the savings higher rate and 47% for the savings additional rate.

If you expect to exceed these limits, a cash ISA is a powerful alternative - allowing you to save up to £20,000 per year entirely tax-free.

Savings rates are still relatively strong, but they can change quickly. As of May 2026, the Bank of England base rate sits at 3.75%. This rate continues to shape what banks offer savers.

What’s happening with savings rates

Interest rates rose quickly over the past couple of years, largely down to global events that influence inflation and financial decision making.

More recently, rates have started to level off - but offers available on the market remain competitive. That means it's important to shop around and look out for any rates that are available as providers adjust their offers to changing circumstances.

What this means for your savings

With an everchanging outlook, it's sensible to save in a way that feels comfortable and aligns with your goals:

• Fixed rates give you certainty if you want to lock in today’s best deals

• Variable rates may improve if interest rates rise again, but they can also fall

• Easy access accounts offer flexibility - but often pay slightly less interest

What you should consider doing

If you want a guaranteed return it might be a good idea to lock in a fixed rate. If you're happy to stay flexible, you may benefit if the interest rates rise again - but that's not guaranteed.

Whatever you choose to do, it's a good idea to review your savings regularly so you don’t miss better deals

In the UK, you can have multiple savings accounts which allows you to have separate accounts for different savings goals. This could include an easy access account for an emergency fund and then a lifetime ISA if you're a first-time homebuyer saving for a house deposit. You could also have a fixed rate bond for a large sum of money that you don't need to spend for a few years.

Opening more than one savings account also means you could maximise the interest rates that are in the market. Do your research beforehand and find out whether splitting your money could increase returns.

Plus, the Financial Services Compensation Scheme (FSCS) offers protection on up to £120,000 per bank. If you have more than that in one account, you can spread it across different providers to make sure all your money is safe, up to the protection limit.

Opening a savings account is simple and usually only takes a few minutes. Here's how it works.

1. Choose your savings account

Pick the account that suits your goals - compare interest rates, how and when you can access your money, and if there any limits on withdrawals.

2. Check how you can apply

Most providers let you apply online, by phone or in branch.

3. Check if you’re eligible

Most savings accounts have basic eligibility rules - though they may differ depending on the provider. That said, you usually need to be at least 18 and a UK resident.

4. Prepare your details

Have your ID ready - such as a passport or driving licence. You will also need proof of address like a utility bill or bank statement.

5. Make your application

Fill in your details and complete any checks the provider asks for. This is usually quick and done online.

6. Add your first deposit

Some accounts need an opening deposit. This can be as little as £1, depending on the provider.

Once your account is open, you can start saving straight away.

Savings account FAQs