Savings Interest Calculator

The short answer

• On £20,000, a 2-year fix at 4.2% earns about £291 more than easy access at 3.5%, if the easy-access rate does not change.
• Basic-rate taxpayers can earn £1,000 of interest a year tax-free, higher-rate taxpayers £500.
• If a fixed account pays all its interest at the end, it is all taxed in that one year.
• Keep an emergency fund in easy access before fixing anything.

The main kinds of savings account

In between are notice accounts, where you give 30 to 120 days’ notice to withdraw, and regular savers, which pay high rates on a limited monthly deposit. Some easy-access accounts limit withdrawals to a few a year, or pay a bonus rate that drops after 12 months.

AER, gross and compounding

The AER (annual equivalent rate) shows what you would earn in a year if interest were added and left in the account, whether it is paid monthly or yearly. It is the fairest way to compare accounts, and it is what the calculator uses. The gross rate is the rate before tax; banks pay interest without taking tax off, so any tax due is collected by HMRC through your tax code or Self Assessment.

Worked examples

Tax on savings interest

Three allowances can make interest tax-free, applied in this order:

1. your Personal Allowance of £12,570, if your other income does not use it all;
2. the starting rate for savings: up to £5,000 of interest at 0%, reduced by £1 for every £1 of other income over £12,570;
3. the Personal Savings Allowance: £1,000 for basic-rate taxpayers, £500 for higher rate, nothing for additional rate.

Interest above these is taxed at 20%, 40% or 45% in 2026/27. A higher-rate taxpayer with £50,000 earning the same rates as above would pay £1,315.28 tax on the fixed interest and £1,024.50 on the easy-access interest. See the Personal Savings Allowance calculator for your own figures.

Interest paid at the end of a fix

Some fixed bonds pay all the interest when the bond ends. For tax, interest counts in the tax year it is paid or credited, so two or three years of interest can land in one year and blow through your allowance. In the £50,000 example, paying at maturity puts £4,288.20 of interest into one year and raises the tax from £457.64 to £657.64.

When fixing makes sense

• You are sure you will not need the money for the whole term.
• The fixed rate is clearly higher than the best easy-access rate.
• You expect rates to fall: a fix locks in today’s rate.
• You want certainty, for example saving for a known date such as a house purchase.

When easy access is better

• It is your emergency fund: three to six months of essential spending should always be reachable.
• The gap between the rates is small. On £10,000, a 0.3% gap is only £30 a year.
• You expect rates to rise, or you may need the money for a deposit soon.
• Your easy-access account pays a bonus that will end: compare the rate you will actually get.

The calculator’s table shows how the gain from fixing shrinks, or turns into a loss, as the easy-access rate changes.

Building a savings ladder

Instead of fixing everything for one term, you can split your savings across 1, 2 and 3-year fixes. Each year one bond matures, giving you access to part of your money and a chance to reinvest at the going rate. A ladder balances higher fixed rates with regular access, and spreads the interest across tax years.

Inflation and real returns

What matters is whether your savings grow faster than prices. With CPI inflation at 3.1% in August 2026, a 4.2% fixed rate grows your money by about 1.07% a year in real terms; an account paying less than inflation loses buying power. The inflation calculator shows how this adds up over time.

Cash ISAs

Interest in a cash ISA is tax-free and does not use your Personal Savings Allowance. You can save up to £20,000 a year across all your ISAs. Fixed-rate and easy-access cash ISAs both exist, and many easy-access ISAs are flexible, so you can take money out and put it back in the same tax year without using more allowance. If your interest is above your allowances, or soon will be, a cash ISA is usually the better home. Tick the ISA option in the calculator to compare.

Changes from April 2027

From 6 April 2027 tax on savings interest rises by 2 percentage points, to 22%, 42% and 47%, and under-65s will only be able to put £12,000 a year into cash ISAs, within the overall £20,000. If you are fixing now across April 2027, the higher rates will apply to interest paid after that date. The calculator has an option to use them.

Keeping your savings safe

Since 1 December 2025 the Financial Services Compensation Scheme protects up to £120,000 per person at each UK-authorised bank or building society group. Some brands share one licence, so check which group an account belongs to if you have more than the limit. Joint accounts are protected up to £240,000. Temporary high balances, such as house sale proceeds, are protected up to £1.4 million for 6 months.

Switching and maturity

When a fixed bond ends, many banks move the money into a low-rate account unless you tell them otherwise. Put the maturity date in your diary and compare rates a few weeks before. Easy-access rates also tend to drift down over time, so check yours every few months; moving is usually quick and free.

Notice accounts and regular savers

Notice accounts pay a variable rate, often higher than easy access, but you must give 30, 60, 90 or 120 days’ notice before taking money out. They suit money you might need within months but not days. Regular savers pay some of the highest rates, but only on a limited monthly deposit, often £200 to £500, for a year. Because the balance builds up gradually, you earn the headline rate on a much smaller average amount: roughly half the interest you might expect.

How big should an emergency fund be?

A common guide is three to six months of essential spending, kept in easy access. Self-employed people and single-income households often keep more. Once that is in place, money for goals a year or more away can go into fixed accounts, and money for long-term goals of five years or more may be better invested.

What if rates change?

If the Bank of England cuts interest rates, easy-access rates usually fall within weeks, while a fix keeps paying its rate. If rates rise, easy access can catch up and overtake a fix. Nobody knows which way rates will move, so splitting money between the two is a reasonable middle course. The calculator assumes the easy-access rate stays the same throughout.

A higher-rate example

For a higher-rate taxpayer, 40p of every pound of interest over £500 a year goes in tax, so a cash ISA or Premium Bonds can beat a taxable account with a noticeably higher rate.

Joint accounts and couples

Interest on a joint account is split equally between the account holders for tax, so each uses half of it against their own allowances. A couple where both are basic-rate taxpayers can earn £2,000 of interest a year between them before paying tax. If one partner pays a higher rate, holding more savings in the other partner’s sole name can cut the tax bill, as long as the money genuinely belongs to them. Each person also has their own £120,000 of FSCS protection at every bank group, and their own £20,000 ISA allowance.

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