Saving with a UK bank or building society

Most people keep their savings in a bank or building society and look at the account now and then. In its 2023 review of cash savings, the Financial Conduct Authority (FCA) found that longstanding customers on older accounts typically received lower rates than people opening new ones. The sections below cover how the interest is taxed, how ISAs work and how much of your money is protected.

Start with the rate you are on

The same FCA review found that half of people did not know the interest rate on their easy-access savings account. Knowing your own rate makes any other rate easier to judge.

Tax on savings interest

Most people can earn some interest without paying tax on it. Your Personal Savings Allowance depends on your Income Tax band. A basic rate taxpayer can earn £1,000 of interest a year tax-free. A higher rate taxpayer can earn £500. An additional rate taxpayer has no allowance.

If your other taxable income is less than £17,570, you may also get the starting rate for savings. It lets you earn up to £5,000 of interest tax-free, and it shrinks as your other income rises.

HM Treasury has set out a rise in the tax on savings income from April 2027. The basic rate goes from 20% to 22%. The higher rate goes from 40% to 42%, and the additional rate from 45% to 47%.

Cash ISAs

You pay no tax on interest on cash held in an ISA. In the 2026 to 2027 tax year, you can put up to £20,000 into ISAs, in one account or split across several. The tax year runs from 6 April to 5 April.

To move an ISA, you contact the provider you want to move to and fill in an ISA transfer form. If you take the money out yourself instead, you lose that part of your tax-free allowance.

The cash ISA limit changes on 6 April 2027. From then, anyone aged 64 or under at the end of the tax year can pay up to £12,000 a year into cash ISAs. The change is made by the Individual Savings Account (Amendment) (No. 2) Regulations 2026. HMRC's factsheet says the overall ISA limit stays at £20,000.

How much of your savings is protected

If a UK-authorised bank, building society or credit union fails, the Financial Services Compensation Scheme (FSCS) can pay compensation. Since 1 December 2025 it has protected up to £120,000 per person, per banking licence.

One banking licence can sit behind several brands. Brands that share a licence share one £120,000 limit. The FSCS suggests searching the FCA's Financial Services Register to see the other names your bank trades under. Its own protection checker groups brands that share a firm reference number.

A large sum for a short time

After selling a home, receiving an inheritance or being made redundant, you may have far more than usual in one account. The FSCS calls this a temporary high balance. It may protect up to £1.4 million of it for six months, if certain conditions are met. The six months start when the money becomes legally yours or is first paid in. You can move the money and keep the protection, and the six months carry on from where they were.

Dates in the savings year

Useful links

The FCA also points people to MoneyHelper, a free and impartial service backed by the government, for help with understanding financial products.