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High interest savings accounts

How to find the best high interest savings account in the UK

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Written by  Ella Jukwey
5 min read
Updated: 17 Oct 2023

Seeking out high savings rates can be tricky. Here’s how to compare accounts and make the most of your money

What is a high interest savings account?

A high interest savings account is an account – usually with a bank or building society – that typically pays a higher rate of return than you’ll receive from a current account or easy access savings account. The catch is that a high interest account might come with certain conditions, such as a relatively high minimum deposit or having to give a notice period before withdrawing your money.

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How do high yield savings accounts work?

Here’s what to expect with a high yield savings account:

  • How they work: You deposit money into them and over time your money accrues interest and your balance grows. The idea behind these accounts, is that the longer you leave your money in them, the better returns you’ll achieve 

  • The interest rate: The interest rate is set by the account provider, which is why it’s recommended to shop around to find the best rate 

  • Withdrawals: When you need to make a withdrawal, you contact the provider and follow their instructions. However, you may face charges if you need to withdraw the money before your notice period is up

  • Minimum deposit: Depending on the provider, you might need to make a minimum initial deposit to get you underway

How to choose the best high yield savings account

The best high interest savings account for you will depend on how much you want to save, what you’re saving towards and whether you’ll need easy access to your money.

There are a range of things to consider when choosing an account:

  • Interest rate: How much you stand to earn in interest is one of the most important considerations 

  • Bonus rate: You might be able to take advantage of higher interest rates for an introductory period and then look to switch account when the rate drops 

  • Minimum or maximum deposits: Do you have enough money to open the account or pay in regular amounts? Conversely, if your savings exceed any maximum balance you may need to look elsewhere 

  • Notice period: How quickly might you need to withdraw your savings? If you might need them in an emergency, you could pay a penalty fee for early withdrawal  

  • Fees, charges and restrictions: Check whether there are any other fees or charges associated with the account and factor them in against the interest earned

How much can I deposit into a high yield savings account?

Most savings accounts will have a maximum amount you’re allowed to save to earn the advertised interest rate. But this limit can be high, with plenty of accounts accepting deposits of up to £1 million or more. For many savers, the bigger question is how much you can save before you start paying tax on the interest earned. This will depend on how you save and the personal savings allowance.

How much tax-free interest can I make on my savings?

The government considers interest on your savings as a kind of income, and it’s subject to tax. But UK taxpayers each get an annual personal savings allowance – that’s the amount of interest you can make on your savings without having to pay tax on it. The size of your allowance depends on your income:

Basic rate taxpayers earning £50,000 or less can earn £1,000 in interest on their savings before they start paying tax. 

Higher rate taxpayers earning more than £50,000 get their first £500 of interest tax-free. 

Additional rate taxpayers earning £150,000 or more don’t get any personal savings allowance.

To avoid paying any tax on your savings, you can use an ISA. All interest paid on cash ISA deposits is tax-free – and you can deposit up to £20,000 per tax year. Our savings calculator can also help you find out how much you’ll need to save every month to achieve your savings goals.

What are the pros and cons of a high yield savings account?

Here are the benefits and drawbacks of a high yield savings account:

Advantages:

  • Interest rate: One of the biggest benefits of a high yield savings account is that you typically earn more interest than you would with a standard savings account 

  • Less risk: Keeping your savings in a high interest savings account is less risky than investing it in a fund or stock-market tracker because investments can rise or fall 

  • Help achieve savings goals: With a high interest savings account, you can put your money away for a set period of time and benefit from a higher interest rate. That means you should get closer to achieving your savings goals, as your savings gradually build up

Disadvantages:

  • Withdrawal limits: You can’t usually make a withdrawal from a high-yield account until the notice period is over. This can be a disadvantage, if you’d need access to your money before  

  • Requirements: The qualification criteria for high interest savings accounts can be quite stringent and may include a relatively high minimum deposit to open the account. Depending on your finances, you may not be able to commit the amount of money required to open an account 

  • Inflation: Conditions in the wider economy may mean that inflation could erode your savings over time

Is my money safe in a high interest savings account?

When you put your money in a high interest savings account with an Financial Conduct Authority (FCA) regulated bank, building society or savings provider it will be protected by the Financial Services Compensation Scheme (FSCS) this means that if the bank or provider goes bust, the government will step in to make sure you get your money back.   

It’s important to remember that the FSCS only guarantees savings up to £85,000 per person – or £170,000 for joint accounts – per financial institution. When you compare savings accounts with MoneySuperMarket, we’ll only show you accounts that are fully backed by the FSCS.

Is a high interest savings account right for me?

Whether saving in a high interest savings account is worth it will depend on your financial situation and priorities. Savings rates are starting to rise, having been historically low for more than a decade, so better deals are starting to become available.  

To find better returns on your cash, it’s worth regularly checking savings rates and moving or transferring your cash to take advantage of competitive rates.  

You could consider taking more risk with your money and investing in an account linked to the stock market. For example, a stocks and shares ISA offers the potential to see your money grow faster as stock market performance rises. But be aware this comes with extra risk.

Cash invested in any stock market-linked account is at risk and can also fall in value – meaning you could end up with less in your account than you put in. This happens when the stock market falls.

Where can I find a high interest savings account?

High yield savings accounts can easily be found online through a comparison site, such as MoneySuperMarket where you can compare a range of accounts from different providers to find one that suits your needs.    

With interest rates on the rise in the UK, the rates available on high interest accounts are following suit, making them more appealing to savers. Depending on the type of account you choose, you have a choice of whether to opt for a fixed rate – locking in your return – or a variable rate where the provider might change the APR from time to time.

Other useful guides

We have a range of helpful guides to help you with your savings decision:

How to choose the best savings account 

How changing interest rates affect your savings 

Savings bonds explained

Compare savings accounts with MoneySuperMarket

MoneySuperMarket takes the hard work out of finding your next savings account by finding great deals from our panel of providers.  

If you've got a lump sum to save, you can enter your savings deposit amount to compare deals. You can then order the results by the interest rate they offer.

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