TL;DR
- Fixed rate bonds lock savings for a set term - typically 1, 2, or 5 years - at a guaranteed rate.
- You cannot access funds during the term in most cases; early withdrawal incurs a penalty or is not permitted.
- FSCS protection covers up to 85,000 pounds per person per authorised institution.
- Interest is taxable above the Personal Savings Allowance (1,000 pounds basic rate, 500 pounds higher rate).
- Rates on 1-year fixed bonds have ranged 4.0%-5.0% AER in 2025-26.
Last reviewed: May 2026 | Sources: HMRC, FSCS, FCA, Bank of England
A fixed rate savings bond is a deposit account that pays a guaranteed interest rate for a set term. In exchange for committing funds for the full term, savers typically receive a higher rate than on an easy access savings account or easy access cash ISA.
How fixed rate bonds work
When you open a fixed rate bond, you deposit a lump sum with an authorised deposit taker for a defined term. The interest rate is fixed at the point of opening and does not change during the term regardless of movements in the Bank of England base rate. Most fixed rate bonds do not permit withdrawals during the term. Some providers permit early closure subject to an interest penalty - typically 60 to 180 days of interest lost.
Fixed rate bond rates in 2026
One-year fixed rate bonds in the UK have been offering rates in the range of 4.0%-5.0% AER in early 2026, broadly in line with the Bank of England base rate of 4.25% as of May 2026. Rates vary between providers. Digital-only banks and newer entrants have often offered rates at the higher end of the market.
RELATED GUIDES: Savings and Cash ISAs
Tax on fixed rate bond interest
Interest earned on a fixed rate bond is taxable. Basic rate taxpayers have a Personal Savings Allowance (PSA) of 1,000 pounds per year. Higher rate taxpayers have a PSA of 500 pounds. Additional rate taxpayers have no PSA. Holding a fixed rate bond inside a cash ISA eliminates the tax liability entirely.
FSCS protection on fixed rate bonds
Fixed rate bonds held at UK-authorised banks, building societies, and credit unions are covered by FSCS up to 85,000 pounds per person per authorised institution. The limit applies across all accounts at the same institution. The FSCS website allows savers to check which banking licence a provider uses.
Disclaimer: This article is for informational purposes only. It does not constitute financial advice. Savings rates change frequently. Always verify the current rate, FSCS protection status, and product terms with the provider before depositing. Tax treatment depends on individual circumstances.
Frequently asked questions
Can I lose money in a fixed rate bond?
Fixed rate bonds at FSCS-protected institutions do not carry investment risk - the capital and agreed interest are guaranteed by the provider. The risk is provider insolvency, which is covered by FSCS up to 85,000 pounds per institution.
What happens when a fixed rate bond matures?
At maturity, the provider releases the principal and accumulated interest. Most providers contact the customer before maturity to offer reinvestment options. If no instruction is given, funds are typically moved to an easy access account or rolled into a similar term.
Is a fixed rate bond the same as a fixed rate ISA?
No. A fixed rate bond is a taxable deposit. A fixed rate cash ISA wraps the same structure inside an ISA, making the interest tax-free. See the full ISA accounts guide for comparison. Fixed rate ISAs typically have slightly lower headline rates because the tax advantage has value for savers who would otherwise pay tax on savings income.
How does a fixed rate bond compare with Premium Bonds?
Premium Bonds are issued by NS&I, backed by HM Treasury. They pay tax-free prizes rather than guaranteed interest. Fixed rate bonds pay a guaranteed rate but interest is taxable above the PSA. Premium Bonds carry no risk of capital loss.
Can a fixed rate bond be held in a joint name?
Most providers offer fixed rate bonds in sole and joint names. FSCS protection for joint accounts is 170,000 pounds (85,000 pounds per person). Check the provider terms on joint accounts, as some bonds are available only to sole account holders.
How this guide was verified
This article draws on HMRC savings income guidance, FSCS deposit protection factsheets, FCA register information, Bank of England base rate data, and NS&I product documentation. No secondary aggregator sites were used.
