How Much Interest Do You Earn On £1 Million In The Bank?

How much interest could £1 million earn in the UK?

Short answer: multiply the rate that genuinely applies to the whole balance by £1,000,000. A rate of 3% produces about £30,000 a year before tax; 4% produces £40,000; and 5% produces £50,000. Those are illustrations, not rates available to every saver. The account’s balance limit, tiered pricing, bonus period, access rules, tax position and deposit protection can matter more than a headline percentage when the balance is this large.

This guide is UK general information, accessed and checked on 11 September 2026. It is not personal tax, investment or financial advice, and it does not recommend a provider. Savings rates and account terms can change or be withdrawn quickly. Before moving a large sum, read the provider’s current product summary and terms, confirm who actually holds the deposit, and use the official FSCS Bank & Savings Protection Checker and the FCA Firm Checker.

The calculations below assume that £1 million remains in cash for a full year and that the stated rate applies to every pound for that period. Real accounts often depart from those assumptions. A high rate may apply only to a small slice of money, be variable, include a time-limited bonus, require notice before withdrawal, or be payable monthly at a different gross rate from its Annual Equivalent Rate (AER).

Start with the gross-interest maths

For a simple one-year estimate, use:

Gross annual interest = balance × annual rate

So £1,000,000 at 4% is £1,000,000 × 0.04 = £40,000. If interest is retained and the quoted rate is an AER, the year-end balance would be approximately £1,040,000 before tax, assuming the rate and balance did not change. This is a useful planning estimate, but the provider’s own calculation method and payment dates determine the amount actually credited.

*Gross annual interest divided by 12 or 365. These are not promises of monthly or daily payments, and they do not reproduce a provider’s compounding convention, leap-year treatment or payment schedule.

The 3.75% row is included only as a useful benchmark: the Bank of England reported Bank Rate of 3.75% on 30 July 2026. Bank Rate influences, but does not set, the rate an individual savings account pays. A bank may pay less or more, and a variable account can change after it is opened.

A current, provider-specific reference point—not a best-buy claim

On the access date, National Savings & Investments (NS&I) displayed British Savings Bonds with its stated fixed rates and a maximum investment of £1 million in each Issue. Its one-year Guaranteed Growth Bond (British Savings Bond), Issue 92, was shown at 4.82% gross/AER; its income version was shown at 4.72% gross and 4.82% AER. The NS&I British Savings Bonds page is the primary source for the live issue, rate, availability and withdrawal terms. At 4.82%, the illustrative annual gross amount on a £1 million growth balance is £48,200 if the issue and full balance remain eligible for the whole year.

This one example is not evidence that it is the highest available rate, suitable for every objective, or likely to remain open. It does show why the distinction between gross rate and AER matters to someone who wants income. AER standardises the effect over a year, including compounding; the FCA describes it as the amount a savings product pays over a year taking account of compounding, bonuses and charges. See the FCA’s AER explanation in its cash-savings update. If interest is paid away each month rather than left to compound, compare the quoted gross payment rate, the payment frequency and the resulting cash amount—not AER alone.

Why a quoted rate may not apply to all £1 million

With a large balance, the key question is not simply “what is the rate?” It is “what rate applies to each pound, for how long, with what conditions?” A product advertised at 5% may pay that rate only up to a stated cap and a much lower rate above it. If it pays 5% on the first £50,000 and 2% on the remaining £950,000, the overall result is not £50,000.

The figures in this table are deliberately hypothetical. They demonstrate the calculation, not the terms of a particular bank. Divide total annual interest by total cash to find the effective or blended rate: £21,500 ÷ £1,000,000 = 2.15%.

Account features to check before comparing rates

• Maximum balance and tiers: Does the headline rate cover £1 million, a lower tier, or only new money? Is there a different rate over a stated threshold?
• Variable, tracker or fixed: A variable rate can move. A tracker may be linked to a published benchmark on specified terms. A fixed-rate bond normally fixes the rate for a stated term but can restrict access or charge for early closure.
• Introductory bonus: Identify the base rate, bonus amount and exact end date. Put the end date in a diary and check the replacement rate before it arrives.
• Access and notice: “Easy access” can still have rules. Notice accounts generally require advance notice; fixed terms may not allow access at all or may apply a penalty. Check whether a withdrawal reduces the rate.
• Payment frequency: Interest may be calculated daily but paid monthly, annually or at maturity. Cashflow and compounding differ.
• Eligibility and opening limits: Residency, age, existing-customer status, account-opening channel, source-of-funds checks and transfer limits can all affect whether a product is usable.
• Protection and legal holder: A brand, app or marketplace is not necessarily the bank that receives the deposit. Establish the authorised deposit taker and the relevant banking licence.

MoneyHelper’s guide to finding a savings account describes the trade-off: instant/easy access keeps cash on hand, notice accounts commonly require 30 to 120 days’ notice, and fixed-term deposits usually guarantee a rate for a set period but restrict withdrawals. It also warns that the best rate can change frequently. For £1 million, that supports a process of comparing the actual eligible balance and terms, rather than chasing one headline number.

Account type changes the answer

The same £1 million can have very different interest, access and tax characteristics depending on the product. There is no universal “best” category. A house purchase due soon, an emergency reserve, a tax-year planning decision and a long investment horizon create different constraints.

Do not confuse a cash deposit with an investment fund, a money-market fund, an e-money balance or an app wallet. They can have different risks, legal structures and compensation arrangements. This article concerns cash held with a deposit taker or NS&I; it does not assume that every product described as “cash” has the same protection.

Easy access is useful, but its rate is not permanent income

An easy-access account can be appropriate for money that may be needed without delay. The compromise is rate uncertainty. A provider can change a variable rate in accordance with its terms, and an introductory bonus can expire. If you intend to fund spending from interest, avoid treating the first month’s payment as a stable annual income stream. Keep a record of the rate, bonus expiry, account issue number, balance cap and review date.

A large cash balance may also exceed online transfer limits or trigger additional checks. That is not a reason to bypass security. Plan transfers early, use independently verified contact details, and do not act on an unexpected instruction received by email, text or phone. The FCA explains that the Firm Checker helps establish whether a firm is authorised and has permission to provide the service; it does not itself guarantee that FSCS or Ombudsman protection will apply. Read the FCA’s explanation of what Firm Checker can and cannot confirm.

Fixed terms reduce rate uncertainty, not every risk

With a fixed-rate bond, the quoted return is clearer only if you can leave the money untouched for the full term and the full balance is accepted. The rate does not solve concentration risk, tax, inflation or a change in your personal plans. Read what happens at maturity. Some accounts mature into a lower-paying account unless you give instructions, while others return funds to a nominated account. If the money will be needed for tax, a property completion or care costs, match the maturity date to the need rather than accepting a longer term for a marginally higher rate.

Gross interest is not the amount you keep: UK tax basics

Most bank and building-society interest is paid gross, but it can still be taxable. The tax position depends on your total income in the tax year, not just the account balance. HMRC’s current tax-on-savings-interest guidance says the relevant tax year runs from 6 April to 5 April and identifies three possible tax-free amounts: any unused Personal Allowance, the starting rate for savings and the Personal Savings Allowance (PSA).

At a £1 million balance, it is easy to overstate the value of the PSA. It is an allowance for interest, not a 0% tax rate on the whole deposit. At 4%, £40,000 of interest arises before considering other income. For a taxpayer with ordinary employment, pension or rental income, only a small part of that interest may sit within an allowance; the balance can push total income into higher or additional-rate territory.

For 2026/27, the main UK income-tax page gives a £12,570 standard Personal Allowance and, for a taxpayer with that allowance, the usual England, Wales and Northern Ireland bands of 20% basic rate up to £50,270 total income, 40% higher rate to £125,140, and 45% additional rate above that. Check the live GOV.UK Income Tax rates and Personal Allowances page before relying on thresholds. Scottish taxpayers pay the same tax as the rest of the UK on savings interest, although Scottish rates apply to wages, pensions and most other taxable income, which can affect a full calculation; see GOV.UK’s Scottish Income Tax guidance.

The Personal Savings Allowance: a precise but limited benefit

HMRC determines the PSA by adding savings interest to other income to work out the tax band. A saver who would otherwise look like a basic-rate taxpayer can become a higher-rate taxpayer once a large interest amount is included, reducing the PSA to £500. An additional-rate taxpayer gets no PSA. The starting rate for savings is mainly relevant to people with low non-savings income; it is not an extra £5,000 available to anyone with cash in the bank.

For a jointly held account, HMRC says interest is normally split equally between account holders, unless it should be split differently. A joint account is therefore not an automatic tax-planning device. Legal ownership, beneficial entitlement, marital status and other income all matter. Do not add another person merely to obtain an allowance without understanding the legal and tax consequences; obtain tailored professional advice where the ownership is not straightforward.

A £100,000 threshold can make the tax effect steeper

Adjusted net income includes taxable savings interest. HMRC says it is total taxable income before Personal Allowances, less certain reliefs; qualifying pension contributions and Gift Aid can be relevant in an individual calculation. Once adjusted net income exceeds £100,000, the Personal Allowance falls by £1 for each £2 over the threshold. The HMRC adjusted-net-income guide explains both the calculation and the reliefs that can enter it.

The practical lesson is not to make a pension contribution or donation solely from a generic web calculation. It is to include savings interest in the wider tax picture. A saver with £100,000 of other taxable income and £40,000 of interest does not simply pay a flat tax on £40,000; the interest can also cause the standard Personal Allowance to disappear. That is why a personalised calculation can be worthwhile before choosing how much taxable cash to hold.

Worked tax scenarios: £1 million at 4%

The following examples use a £40,000 full-year interest amount. They are deliberately simplified to show scale, not to calculate your tax return. They assume the 2026/27 tax year, England/Wales/Northern Ireland income-tax bands, an individual who is UK resident, a standard Personal Allowance where available, no ISA interest, no dividends, no student loan, no Marriage Allowance, no Gift Aid or pension adjustments, and no other reliefs. “Other taxable income” is wages, pension, rent or other taxable income before the bank interest. The tax column is the additional Income Tax created by the £40,000 savings interest compared with the stated other-income position.

Rounding is to the nearest pound. The first example is intentionally unusual for someone holding £1 million: it assumes no other taxable income. It shows why it is unsafe to apply a “40% taxpayer” or “20% taxpayer” label without looking at the whole year. The last row is also a reminder that an effective tax cost can be greater than simply 45% of the final slice of interest because of the Personal Allowance taper.

These examples do not cover every circumstance. A Scottish resident’s full calculation, someone with dividends, a taxpayer with a reduced Personal Allowance, a trust, a company, an estate, foreign interest, a non-domicile or non-resident position, and anyone whose money is held jointly may need different treatment. Use HMRC’s tool for checking tax on dividends and savings interest, then seek a qualified tax adviser if a material decision depends on the result.

How HMRC may collect the tax

Do not assume that because interest is paid gross there is nothing to do. GOV.UK says that a self-employed person who completes Self Assessment should report savings interest on the return. It also says that if income from savings and investments is over £10,000, registration for Self Assessment is required; employed people or pension recipients may instead have tax collected through a changed tax code based on HMRC’s estimate. If you exceed the allowance and have not received the expected calculation letter by 31 March after the tax year, HMRC says to contact it. These are general routes, not a substitute for checking the current rules and your notice of coding.

Keep annual interest certificates, statements, account-opening records and a schedule of payments received. The tax point can depend on when interest is accessible, not merely the account’s advertised annual rate. If multiple banks pay interest in different months, a simple spreadsheet can prevent an unpleasant surprise and make it easier to reconcile HMRC’s figures.

Cash ISAs: valuable, but not a £1 million shelter in one year

An Individual Savings Account (ISA) shelters interest from Income Tax. GOV.UK states that the overall ISA subscription limit for the 2026/27 tax year is £20,000. That is a contribution limit across ISAs, not £20,000 per provider. An adult ISA cannot be jointly held. See the GOV.UK ISA overview for eligibility and the live annual limit.

At a 4% illustrative rate, a newly subscribed £20,000 cash ISA could generate about £800 of tax-free interest over a full year, while the remaining £980,000 held outside an ISA would generate about £39,200 before tax at the same illustrative rate. The actual first-year ISA interest could be lower if money is added over time. The point is not that an ISA is unimportant; it is that it cannot turn all newly deposited £1 million into tax-free cash in the current tax year.

MoneyHelper explains that an ISA is a tax-efficient wrapper and that transfers should be completed by the provider rather than by withdrawing and reinvesting the money yourself, which can use allowance or lose tax-free status. Read its ISA and tax-efficient-savings guide, and check the destination provider accepts transfers before starting.

FSCS protection: the central risk question for £1 million of bank cash

Return is only one part of the decision. For an eligible person with a UK-authorised bank, building society or credit union that fails after 30 November 2025, FSCS says it automatically compensates eligible deposits up to £120,000 per person, per bank, building society or credit union. That is a limit per authorised firm, not per account or marketing brand. The FSCS summary is available at What FSCS covers.

So holding £1 million in one ordinarily protected single-name deposit account does not mean the full £1 million has ordinary FSCS deposit protection. Subject to eligibility and the details of the banking licence, the standard cap is £120,000. The fact that an account is branded differently from another account is not enough to create a separate cap if both brands share one authorised institution. FSCS says multiple accounts with brands in the same banking group can be treated as one where they share a banking licence.

Plan to the authorised firm, including accrued interest

£1,000,000 divided by the £120,000 standard limit is 8.33, so nine separate authorised firms are the theoretical minimum to hold the principal under the cap at one instant. In practice, do not fill each firm to exactly £120,000 and forget it. Interest credited to the account can increase the protected deposit above the cap. A tax payment or a rate change may also alter the amount you intended to leave in each place.

The FSCS checker’s guidance says its results use FCA Register information, are for information only and should be confirmed with the provider and FCA Register. It also notes that e-money and payment-services firms are not covered by the deposit-protection scheme in the same way. This is especially important when an attractive app interface sits between you and the bank that receives your cash.

Joint accounts and temporary high balances are not shortcuts to assume

For a joint account, the standard limit is per eligible person. FSCS states that a joint account can be eligible up to £120,000 for each account holder, but individual and joint holdings within the same banking group must still be considered together. This can increase capacity for a genuinely jointly owned balance, but it is not a reason to alter ownership casually. It also does not change the tax and estate implications.

FSCS has a separate temporary-high-balance regime. It says qualifying balances arising from events such as a main-home sale, inheritance, divorce, redundancy, retirement benefits or certain compensation may be protected up to £1.4 million for six months; personal injury, disability or incapacity claims can have unlimited protection. Protection begins when money becomes legally transferable or is first credited, and the six-month clock does not restart simply because funds are moved. The FSCS temporary-high-balances guidance gives the current qualifying-event list and evidence examples.

That regime can be very relevant to someone who has just sold a main residence, but it is time-limited and conditional. It should not be treated as a general long-term solution for keeping £1 million in one ordinary account. Preserve paperwork such as completion statements, probate documents or settlement records. FSCS cannot confirm a claim in advance and considers evidence if a firm fails.

NS&I is structurally different from an FSCS-limited bank deposit

NS&I says that its savings are 100% secure and backed by HM Treasury. Its British Savings Bonds page says investments can be £500 to £1 million in each Issue. That is a different backing arrangement from ordinary FSCS deposit compensation. It does not remove the need to examine term, tax, return, access and product limits, and it is not a blanket reason to assume every NS&I product suits a particular goal. But it is an important distinction when comparing cash-security arrangements for a seven-figure sum. Check the live NS&I official site and the exact product pages, rather than relying on an old rate table or a third-party summary.

Tax, protection and access should be considered together

A common error is to optimise one variable in isolation. The account with the highest rate may have a cap that makes it irrelevant for most of the money. A rate fixed for five years may be inappropriate if a tax bill, property completion or family commitment is due next year. A collection of brands may appear diversified but still share the same banking licence. A tax-free account may pay a lower rate, yet still leave more after tax. The right comparison is an after-tax, after-conditions and after-risk comparison.

A useful comparison framework

1. Define the cash purpose and deadline. Separate money needed within days, within a year and for longer. Do not lock the first category away merely to improve a displayed rate.
2. Calculate the gross result on the eligible balance. Use the account’s tier table, not the headline rate. Write down bonuses, caps, payment date and maturity date.
3. Estimate the likely tax cost. Combine projected interest with other expected taxable income. Consider ISA space and whether a £100,000 adjusted-net-income threshold may be crossed.
4. Map deposit protection. Identify the authorised firm behind every balance, including a platform or app, and allow for interest when choosing amounts.
5. Test access. Ask how much can be withdrawn immediately, after notice, and only at maturity. Include the operational time needed to move large sums.
6. Review the plan at each rate or life-event change. A variable-rate notification, bond maturity, tax-year end, inheritance or property sale can change the answer.

For example, a taxpayer expecting to pay higher-rate tax may compare a 4.00% taxable account with a lower-rate cash ISA. A rough first comparison of £100 outside an ISA is 4.00% gross less tax on interest above allowances; a tax-free 3.50% ISA can therefore be competitive in some circumstances. But the calculation must use the available ISA amount, actual rates, eligibility, timing and total income. It is not valid to apply that comparison to the whole £1 million when only £20,000 of new subscriptions are available in 2026/27.

Interest income is not the same as a guaranteed spending budget

It is tempting to call £40,000 of gross interest “a £40,000 salary.” It is not. Savings rates can fall, an account’s bonus can end, access can be constrained, and tax can reduce the cash available. Inflation also affects what the remaining money can buy. A cash account can be appropriate for capital that must be stable and accessible, but the nominal interest rate alone does not reveal the purchasing-power outcome.

To estimate a real return after a year, use:

Real return ≈ (1 + after-tax nominal return) ÷ (1 + inflation rate) − 1

For illustration only, if the after-tax return were 2.4% and inflation were 3%, the real return would be approximately (1.024 ÷ 1.03) − 1 = −0.58%. This does not forecast inflation or interest rates. It explains why someone with a long horizon should distinguish a cash-management decision from an investment decision. Investments can fall in value and are not a substitute for an emergency reserve; if a future plan is material, consider regulated advice rather than choosing solely from a savings-rate table.

When professional help may be proportionate

General guidance may be enough to compare two straightforward savings accounts. A qualified, appropriately authorised professional can be more useful where £1 million comes from a business sale, inheritance, divorce, pension withdrawal, main-home sale or a trust; where more than one family member may own the money; where tax bands and reliefs are uncertain; or where the cash may be needed over several time horizons. Verify authorisation and the services a firm is permitted to provide. The FCA says use of an authorised firm with the appropriate permissions reduces risk but does not remove all risk.

If a stranger, website or caller pressures you to move a large balance to a “guaranteed” high-rate account, slow down. Independently find the provider’s real contact details, check the FCA’s register and current scam warnings, and do not rely on an FSCS badge in an email or advert. Clone firms imitate legitimate names and branding. A legitimate provider will not object to careful verification.

A practical checklist before moving £1 million

• Write the target gross interest at the actual eligible balance, not merely £1 million times a promotional percentage.
• Record whether the rate is gross, AER, variable, fixed, tiered, bonus-enhanced or payable only at maturity.
• Read the product summary, terms, funding deadline, maximum deposit, withdrawal rules, early-access penalty and maturity instructions.
• Estimate savings interest for the 6 April–5 April tax year alongside wages, pensions, rent, dividends and other taxable income.
• Check your expected Personal Savings Allowance and whether adjusted net income may exceed £100,000. For anything consequential, obtain personalised tax advice.
• Use available ISA allowance deliberately, and initiate ISA transfers through the provider rather than withdrawing and re-depositing on an assumption.
• Identify the authorised firm and Firm Reference Number for every bank deposit; use the FSCS checker to spot shared licences.
• Leave room for accrued interest if the aim is to stay under the standard £120,000 FSCS protection limit at each authorised firm.
• Confirm whether a balance is a qualifying temporary high balance, retain evidence and note the six-month window if that regime could apply.
• Use a secure, independently verified transfer process. Be sceptical of changed bank details, urgency and unsolicited calls.
• Keep a dated register of account numbers, balances, rate review dates, protection mapping, tax documents and nominated-account details.

The bottom line

£1 million can generate a substantial cash return: every 1 percentage point of rate is worth about £10,000 a year before tax if it applies to the whole balance for the entire year. At illustrative rates of 3%, 4% and 5%, that means £30,000, £40,000 and £50,000 gross respectively. What you actually keep could be materially less once savings-interest tax is considered, and what is protected may be far less than £1 million if all cash sits with one ordinary authorised bank.

For a large UK cash balance, calculate the rate on the actual eligible amount, compare gross and AER correctly, model tax using total income, and map each deposit to its authorised firm before moving money. Rates are changeable; protection limits and tax rules have conditions. The careful approach is more valuable than a one-line headline figure.

Sources and further reading

• Bank of England: latest Bank Rate decision and explanation of how rates affect savings (accessed 11 September 2026).
• Financial Conduct Authority: cash-savings market update and AER definition.
• MoneyHelper: how to find and compare a savings account (accessed 11 September 2026).
• GOV.UK: tax on savings interest, including Personal Savings Allowance and reporting routes (accessed 11 September 2026).
• GOV.UK: 2026/27 Income Tax rates and Personal Allowances (accessed 11 September 2026).
• HMRC: adjusted net income and reduction of the Personal Allowance.
• GOV.UK: Scottish Income Tax, including the treatment of savings interest (accessed 11 September 2026).
• GOV.UK: Individual Savings Accounts and the 2026/27 £20,000 subscription limit (accessed 11 September 2026).
• MoneyHelper: ISAs, transfers and tax-efficient saving.
• Financial Services Compensation Scheme: deposit protection limits and eligibility (accessed 11 September 2026).
• FSCS: Bank & Savings Protection Checker and shared-licence guidance.
• FSCS: temporary-high-balance protection rules (page reviewed 11 May 2026).
• Financial Conduct Authority: Firm Checker for authorisation and permissions.
• NS&I: British Savings Bonds live issues, rates, terms and limits (accessed 11 September 2026; check current terms).
• GOV.UK: check tax on dividends and savings interest.