At current UK savings rates in 2025, £1 million pounds in a competitive easy-access savings account earning 4-5% generates significant annual interest income. The exact amount depends on the account type, interest rate, and whether interest is compounded. Here is a complete breakdown.
Annual interest on £1 million at various rates
| Interest Rate | Annual Interest | Monthly Interest |
|---|---|---|
| 1% | £10,000 | £833 |
| 2% | £20,000 | £1,666 |
| 3% | £30,000 | £2,500 |
| 4% | £40,000 | £3,333 |
| 5% | £50,000 | £4,166 |
| 6% | £60,000 | £5,000 |
Where to get the best rate on £1 million in the UK
In 2025, competitive savings rates in the UK range from 4.5-5.5% for easy-access accounts at challenger banks and building societies, and 5-5.5% for fixed-rate bonds (1-2 year terms). Cash ISAs offer similar rates with the added benefit of tax-free interest — particularly valuable for higher-rate taxpayers whose personal savings allowance is only £500/year.
Tax on interest income
Basic-rate taxpayers have a personal savings allowance of £1,000/year — interest below this is tax-free. Higher-rate taxpayers have a £500 allowance. Additional-rate taxpayers (over £125,140) have no personal savings allowance. On £1 million at 4%, the annual interest of £40,000 will exceed the allowance for most taxpayers, making a Cash ISA or other tax-wrapper an important consideration.
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Find an IFA Near YouInvesting vs saving — the long-term comparison
Cash savings provide security and predictability but returns are eroded by inflation over time. A diversified investment portfolio historically returns 6-8% annually over the long term, though with greater short-term variability. For larger sums — particularly at this level — independent financial advice on the optimal split between cash, fixed income, and equities is typically worth the advisory fee many times over.
How much interest does £1 million earn per month?
At 4.5%, £1 million earns approximately £3,750/month. At 5%, it earns £4,166/month.
Is the interest on £1 million taxable?
Interest above your personal savings allowance (£1,000 for basic-rate taxpayers, £500 for higher-rate) is taxable. At 4%+, the interest on this sum will likely exceed the allowance, making a Cash ISA or other tax wrapper worth considering.
This article is for informational purposes only and does not constitute financial advice. Tax figures are based on 2025/26 rates and may change. Always verify with official HMRC sources.
