Last week, the Bank of England’s Monetary Policy Committee increased the base rate by 0.75 points to a 14-year high of 3% and, while interest rates are significantly below inflation, banks or building societies remain a safe place to keep your accessible cash requirement in the short term.
10th November 2022
Gavin Jones See profile
Looking at rates at the time of writing (on Wednesday 9 November) an indicative sample of the rates you can get at present are as follows:
Source: Moneyfacts.co.uk 09.11.22
With interest rates rising rapidly, we typically see mortgage rates increase almost immediately but savings rates can take a little time to catch up. We had notification at the end of October that the interest rates on various National Savings and Investments (NS&I) accounts, for instance the Direct Saver increased from 1.2% to 1.8%.
We have not included institutions in the table above as rates change quickly. If you wish to review the interest rates you are currently getting, please do speak to your financial planner.
The Personal Savings Allowance (PSA) is a tax-free allowance that lets you earn interest on your savings without paying tax on that interest. The allowance you get depends on what rate of income tax you pay:
• Basic-rate (20%) taxpayers can earn £1,000 in savings interest per year with no tax
• Higher-rate (40%) taxpayers can earn £500 in savings interest per year with no tax
• Additional-rate (45%) taxpayers do not get an allowance.
Over the past 10 or 15 years you’d have to have had very high balances to earn more than £1,000 of interest, as rates were so modest. But now, some one-year fixed rates are offering more than 4% gross interest, so in theory you only need to have £25,000 or thereabouts to get to that sum.
As tax is not deducted it is important to declare this on your tax return or to advise HMRC if you don’t currently complete a tax return. But it is also worth remembering that interest from ISAs (Individual Savings Accounts) and Premium Bonds are not included in the PSA, so it may be worth reviewing your savings and considering your own position.