UK households are often looking for ways to make their money go further amid the cost of living crisis, and savings accounts can help you improve your finances this year.
The Bank of England’s (BoE) decision to keep interest rates at 3.75% this month brought no relief to mortgage holders but was good news for savers as it influences the rates banks and building societies set for their products.
However, UK inflation fell to 3% in January, giving a boost to hopes of an early interest rate cut by the BoE. The slowdown was in line with the forecasts of most City economists and marks the lowest level since March 2025.
Any cut in the base rate would typically trickle down to savings accounts, reducing returns for depositors.
For now, however, many top accounts continue to offer rates comfortably above inflation and the current policy rate, allowing savers to secure positive real returns. For households looking to rebuild their financial resilience, locking in these deals may prove prudent before the interest rate cycle turns.
Experts are urging savers to look for the best deals and review their accounts regularly, as many may still have products that are failing to beat inflation.
Alice Haine, personal finance expert at Bestinvest, said: “For savers, lower inflation has mixed consequences. While real yields may look more attractive in the short term, lower inflation also increases the likelihood of further interest rate cuts, which in turn would put downward pressure on saving rates.”
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“Those keen to keep the yield on bank and building society savings should hunt down the best deal they can find while they can. With further rate cuts expected in 2026, savings rates are likely to fall. However, for many savers, the UK’s growing tax burden is proving even more corrosive.
“Britain has been hit by a series of tax changes in recent years which will significantly increase personal tax burdens and erode disposable incomes. Whether it’s frozen income tax thresholds, a future rise in savings income tax, a static personal savings allowance or cuts to annual capital gains tax relief and reduced dividend allowances by savers and the dividend allowance – they will cut more savings and dividends This is why a tax efficient savings strategy is imperative.
“The countdown to the end of the tax year is underway, with less than seven weeks until allowances reset at midnight on April 5.pl,lp Savers can shelter up to £20,000 in a tax-free Individual Savings Account (ISA) this financial year or direct the excess cash into a pension, both options sheltering income from tax.”
Lale Akoner, global market analyst at eToro, said: “Overall, the print strengthens the case for a potential rate cut by the Bank of England at its March meeting, particularly after recent data showed weaker wage growth and rising unemployment. However, policy makers remain divided and sticky services inflation could keep the debate finely balanced.
“For retail investors, the implications matter. Expectations of a rate cut tend to support equities, particularly rate-sensitive sectors such as housebuilders and consumer discretionary. Lower yields may also weigh on sterling, which could benefit British multinationals that earn overseas income. On the other hand, savers could face falling yields if borrowing costs start to fall.”
In her Autumn Budget in November, Chancellor Rachel Reeves announced changes to the tax payable on savings income. From 2027-28, the savings base rate will rise by two percentage points to 22%, the higher rate will rise by two percentage points to 42% and the top-up rate will rise by two percentage points to 47%. It 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 on maturity and a minimum investment of £10,000 is required to open the account.
AlRayan Bank through the same Prosper platform pays 4.35% over a six-month term. Interest is paid on maturity and £10,000 is required to open the account.
DF Capital is offering 4.25% for 12 months with £1,000 to open and you can invest up to £250,000.
Online banks typically offer higher rates than traditional brick-and-mortar branches, which translates into better returns, giving you a more efficient way to save and reach your financial goals.
If you prefer to go with a familiar name, high street lenders have slightly lower offers but are still above inflation.
Tesco (TSCO.L) Bank offers a one-year fixed rate savings account that pays 4% per annum, with a minimum balance requirement of £2,000. However, you can invest up to £5 million.
NatWest (NWG.L) has a fixed term savings account offering 3.4% for one year. The minimum deposit is just £1 and interest will be paid on the first working day of each month and on the due date.
Unlike easy access products, where interest rates can vary, fixed interest accounts earn a fixed rate of interest for the period you choose, be it six months or several years. These are the most common deals, but some deals go up to 10 years or more.
You must leave the initial deposit for a specified period without making withdrawals. If you touch your money, you lose any interest.
Easy access savings accounts allow you to withdraw your money without notice. With this ease of access comes lower interest rates, but they’re a good option for those who think they might need their money in a hurry.
Note that the 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) has an offer of 4.5% for 12 months that you can access for £1.
Mansfield BS has a 4.25% offer that you can open from £1 and save up to £400,000. If you were to put £1,000 into this account, your balance after 12 months would be £1,042.50.
Manchester BS has a 4.15% offer that you can access for just £1 and invest up to £1,000,000. Interest is paid annually.
There are also higher paid Easy Access accounts, but they are not for new customers. Santander’s ( BNC.L ) Edge Saver, for example, offers 6% but is 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 keep it accessible at all times? Perhaps you should consider a notified savings account.
Notice savings accounts require you to notify your savings provider before you can withdraw your funds.
These are ideal for those who know when they might need their money, but don’t want to be tempted to dip into it at any time.
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You must give the bank or building society a set advance warning before you can withdraw your money. It usually takes between 30 and 120 days, although it can be longer.
OakNorth Bank through Prosper has a 4.5% offer which requires £10,000 to access. The notice period is 120 days and is only available to new customers.
The same platform has a deal with GB Bank that offers 4.4% on a 35-day notice account.
GB Bank also offers a standalone offer of 4.33% on a 120-day notice period, with the minimum deposit set at £10,000.
Interest rates with notice accounts are variable, meaning they could go up or down 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 put money aside each month, with interest paid annually. It is not unusual for the offer to be available only to existing customers.
The principality offers 7.5% on a regular savings account for six months. Open an account and pay up to £200 every month. Interest is calculated on the money in the account every day and is paid six months after opening.
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Zopa pays 7.1% on monthly deposits of up to £300. Account holders also get 2% AER interest on all balances and 2% cashback on bill payments, and there’s no minimum monthly deposit.
The Co-op offers 7% on its regular savings account, allowing deposits of up to £250 per month.
First Direct pays the same 7% but you can save £300 every month.
Every transaction mentioned here is covered by the Financial Services Compensation Scheme, so you’re protected up to £120,000, or double if it’s a joint account.
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