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Martin's Savings Masterclass
UK base rate cut expected on Thursday
Check and boost your interest NOW. You should be earning at least around 5%

The talk is last week's Budget will raise interest rates, yet that's not quite right. Yes, they'll likely be higher than was expected, but they will still fall, just likely more slowly. Nationwide's chief economist told me that over the next 12mths it expected them to drop 1% rather than the previously predicted 1.25%.

A cut at this Thu's Bank of England meeting is still very much on the cards... the markets imply an 80% probability (it was 95% pre-Budget) it'll drop from 5% to 4.75%. All this of course means the interest rates available to savers are set to continue to decrease. So it should serve as a reminder to everyone with savings to...

'Check your interest. Millions are on pants rates, and can easily & simply move the money to where it pays more. And if you're on a fix, diarise to act before it ends.'

OK, so now the team and I will take you through the practicals. All savings listed here have the full UK £85,000 per person savings safety protection. Got more? Spread it over multiple institutions to keep it all protected.

Easy-access savings are the bog-standard, simplest form of savings, where you can put money in and take it out when you want. So the top payers here are the basic start point. Then run through the rest of the option to see if you can take it up a gear.

Yet easy-access rates are variable, so they can and do move, often with Bank of England base rates, but also for banks' own competitive reasons. As rates change rapidly, do check our regularly updated top easy-access savings guide to see if things change.

Q. What happens to easy-access rates if UK base rates drop? Most providers will likely follow suit within a few days. A few may hold on to the existing rate to get a short-term competitive advantage. So in a couple of weeks it's likely 4.7% to 4.9% will be the benchmark, so if you're near that you're good. Yet the key is to regularly monitor your rates compared to the top available as ditching & switching easy access is easy.

With fixed-rate savings, the interest rate is guaranteed for a set time, but in return your money is locked away without access. So the benefit is certainty, especially useful when interest rates are dropping, the cost is lack of flexibility (I believe MC Hammer wrote his hit song U Can't Touch This about fixed-rate savings).

At the moment, due to the expectation that interest rates will drop, you get a better rate for fixing for one year rather than longer.

Top 1-year fixes: Union Bank of India UK 4.8% (min £5k), SmartSave 4.76% (min £10k), Atom Bank 4.7% (min £50), or Isbank 4.85% via savings marketplace Raisin (min £1k).
Top 2-year fixes: Market Harborough BS 4.65% (min £10k), United Trust Bank 4.62% (min £5k), Atom Bank 4.6% (min £50).

All longer fixes pay less, though you can still fix above 4%, though if interest rates drop substantially, grabbing a long fix now may look good with hindsight. See top longer fixes.

Q. What happens to fixed rates if the Bank of England drops UK interest rates? Existing fixes are, well, fixed, so nowt. Yet the rate you can get a new fix at is impacted. However, fixed rates are set more on the market's future rate predictions, so the fixes available now have likely somewhat factored in this week's predicted 0.25% drop, so while they may shave a little off, it probably won't be too much (in fact, the Budget may mean they hold as things are predicted to drop less quickly).

Q. How does tax work on fixed rates? The interest crystalises for tax the moment you can access it (whether you do or not). For many it's irrelevant, but some near a tax bracket should go for monthly interest to spread it out over tax years, rather than risk a one-off payment pushing you up. Or if, say, you're retiring and may be a lower taxpayer in future, go for interest at maturity to delay it until then. For more, see our fixing: a taxing question help.

Regular savings accounts offer higher rates on smaller amounts. They're designed for those who are putting away cash each month out of income. Most usually last one year (then you can just open one again) and some lock the money away.

You can have multiple regular savers in different places, so you could save a combined £1,000+/mth in them (those with lump sums can play this by moving money out of normal savings each month into these, to earn more).

Bizarrely, easy-access cash ISAs currently outpay normal savings (see above). Yet there are also fixed-rate cash ISAs that pay less than their equivalents, but are worth considering.

Each tax year, every UK adult gets a £20,000 allowance (in last week's Budget, we learnt this'll be frozen at this level until 2030) where you can put money away as savings (in a cash ISA) or investments (in a stocks & shares ISA) to protect it from tax.

Once it's in an ISA, it stays tax-free year after year, so some who have maxed it every year now have £100,000s in ISAs. As for what ISAs are, I've used the same analogy since 2000. It works, so here it is again...

Who pays tax on savings (which ISAs can protect you from)? With normal savings, while interest is paid tax-free, it is taxable as income, yet each year you get a personal savings allowance, which means:

- Basic 20% rate taxpayers don't pay tax on the first £1,000/yr of interest.
- Higher 40% rate taxpayers don't pay tax on the first £500/yr of interest.
- Top 45% rate taxpayers pay tax on all interest.

As interest rates have risen in recent years, you earn over the threshold with less savings, so more people's interest is taxed, meaning that cash ISAs, even if the rates are lower, are a better bet.

Top fixed-rate ISAs have a second special power. As well as never being taxable, unlike normal fixed savings, they can't lock you in - they must allow you to withdraw money, though can charge an interest penalty (say 90 or 180 days' interest) for doing so. So it's very useful if it's unlikely you need access, but want the option in an emergency.

Premium Bonds are savings, where the 'interest' each person earns is decided by a lottery. For a full explanation, see our Are Premium Bonds worth it? guide, but I'll explain super-briefly...

The prize-fund rate is dropping to 4.15% (from 4.4%) for its December 2024 draw and beyond. That means £4.15 is paid out for every £100 in there, but that doesn't mean you'd get £4.15 if you had £100 in, as the smallest possible win is £25, so most with this amount get nothing.

In fact, even with £1,000 in, someone with typical luck (defined as median average winnings) would win nothing. To get closer to the published amount with typical luck, you need to have more in. And even if you have the full £50,000 in, with typical luck you'll win less than 4.15% (as for each £1m winner, many must win nowt).

Even then, the 4.15% is substantially less than top normal savings and cash ISAs. However, as the payout is always tax-free, like ISAs, if you earn enough or have enough saved to pay tax on savings, and have a decent whack in, that's when it's likely a winner. Our Premium Bonds Prize Predictor Calculator shows what you're likely to earn for each amount.

Of course that's done on unemotional logic, yet many enjoy the idea they may just win the £1m. But do understand that for most people with typical luck, without the tax advantages, you'd be worse off than normal savings.

If you are on Universal Credit or Tax Credits, you may qualify for an unbeatable 50% Help to Save bonus - to help you build financial resilience. Here you save up to £50/mth, then after two years, you get 50% on top of the HIGHEST amount you had in.

So imagine you saved £50 each month for a year, so you've £600, but then you take an amount out for an emergency, and put nowt in for the rest of the period - you still get a £300 bonus after two years.

A second 50% bonus is paid after four years, calculated on the difference between the highest balance in years three and four, and the highest balance from the first two years. Currently, you need to take home £793+ a month to get it, but in last week's Budget, it was announced that from next April, eligibility will be expanded to anyone on Universal Credit earning £1+. Full details and how to apply in our Help to Save guide.

There are a few specialist savings options some can take which pay more. So here's my checklist of other things to look at...

1. Are you a wannabe FIRST-TIME BUYER aged 18 to 39? There's a whopping 25% bonus possible via top Lifetime ISAs if you're buying a first home up to £450,000 (so ensure that's the max price). You can get a £1,000/yr boost if you max it.

2. Got expensive DEBT? Paying it off is often more lucrative than saving. See Should I pay debt with savings?, our Should I overpay my mortgage? guide, and use our Mortgage Overpayment Calculator.

3. Autosave apps can help you get in the savings habit. Autosaving apps use clever tech to work out what you can afford to save, then automatically move money from your bank account to their savings account, so you can easily build up savings without noticing. Yet rates often aren't high, so best use them, then when you build up savings, once every few months sweep the money into a top normal account. See our Automatic savings apps guide.

4. Prefer to INVEST? With investing, you aim for higher returns, but accept the risk you could lose some or all of your initial investment. I don't talk about it much, not because we're against it, just because it's not my, nor MSE's, area of expertise.

Yet over the longer run, investing is often very much the right call (I do it personally as well as save). For an introduction, see Stocks & shares ISAs, but you'll need websites other than ours for help on what to invest in.

PS: The focus today is on adult savings, but some may also want to look at our Top children's savings, Top junior ISAs and Child Trust Funds accounts.