Some current accounts pay interest on money you keep in them (known as in-credit interest). The rates can look high next to typical savings rates, but they usually come with conditions that limit how much interest you can actually earn.

How savings rates have moved in 2026

Bank of England data shows the average quoted rate on 1-year fixed-rate bonds fell to 3.51% in March 2026, then rose to 4.04% by August 2026 (it peaked at 4.12% in June). Over the same period, the average instant-access rate edged down from 2.13% to 2.07%.

On 5 November 2026, the Bank of England raised the Bank Rate to 4%.

Source: Bank of England, quoted household interest rates (series IUMWTFA and IUMB6VJ), monthly data to August 2026.

How interest-paying current accounts work

Current accounts that pay interest tend to use one or both of these structures:

• Capped or tiered rates: the headline rate applies only up to a set balance, with a lower rate (or no interest) above it. Some accounts also charge a monthly fee, require a minimum amount to be paid in each month, or require a set number of Direct Debits.

• Introductory rates: a higher rate fixed for a set period (for example, 12 months) on a capped balance, which then reverts to a lower ongoing rate. These may be limited to people who haven't held that account before.

As a snapshot: on 5 October 2026 we checked in-credit rates on three providers' own pages. Rates ranged from 2.10% AER variable to 5% AER. The 5% rate was introductory, fixed for 12 months on balances up to £1,500, with £1,500 to be paid in each month. Balance caps ranged from £1,500 to £500,000. This was a small sample and doesn't cover the whole market. Rates and conditions can change at short notice, so check the provider's own page before opening an account.

Some providers also offer cash incentives for switching your current account to them, separate from any interest rate. These offers can change or end at short notice. Check the provider's terms before switching.

Money in a UK-authorised bank or building society is protected by the Financial Services Compensation Scheme (FSCS) up to £120,000 per person, per authorised firm (£240,000 for a joint account). Brands that share a banking licence share one limit.

For more on current account types, switching and features, see our current accounts guide.

Current accounts and savings accounts compared

A current account's headline rate can be higher than the average easy-access savings rate, but it usually applies only to a small balance. For example, 5% AER on a balance capped at £1,500 earns at most about £75 in a year. A savings account with a lower rate but no low cap can pay more interest in total on larger balances.

Comparing the interest you'd actually earn on your own balance, alongside the headline rate, gives a fuller picture. Also look at any fees, pay-in requirements and what happens when an introductory rate ends.

For an overview of savings account types and current market rates, see our savings accounts guide.

Tax on savings interest

In the 2026/27 tax year, the Personal Savings Allowance is £1,000 for basic-rate taxpayers and £500 for higher-rate taxpayers. Additional-rate taxpayers don't get one. If your other income is below £17,570, you may also be able to use the starting rate for savings, which lets you earn up to £5,000 of interest tax-free. Interest from current accounts counts towards these limits.

For example, £10,000 in a savings account paying 5% AER with no balance cap would earn £500 of interest in a year, which is the whole allowance for a higher-rate taxpayer.

The government has confirmed that from April 2027 the tax rates on savings income above these allowances will rise by 2 percentage points, to 22% (basic), 42% (higher) and 47% (additional).

This article describes how interest-paying current accounts generally work and doesn't cover every account available. Rates and conditions can change, so check providers' own pages. Tax treatment depends on your individual circumstances and may change in future. This article is for information only and isn't tax advice.