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Cash and savingsrisk 1 of 5: cash-like, your money stays put

Term deposit

Rules, protection and tax below are for United Kingdom.

What it is

You hand a bank a lump sum and agree not to touch it for a fixed time: six months, a year, up to five years. In return the bank promises a fixed interest rate for the whole period, higher than an account you can dip into, because the bank knows it can rely on your money.

At the end of the term you get your money back plus the interest. During the term you usually cannot withdraw at all, or only by giving up some or all of the interest.

It is the simplest way to earn a known return: no prices to watch, nothing to sell. The trade-offs are that your money is locked, and if rates rise after you lock in, you are stuck with the old rate.

How it works

  1. You choose a term and a provider and pay in a lump sum; minimums range from a small sum to a few thousand depending on the provider.
  2. The rate is fixed on the day you open it and does not change for the whole term.
  3. Interest is paid at the end, or yearly or monthly into another account, depending on the product.
  4. At maturity the provider writes to you; if you do nothing, many roll the money into a new term or an easy-access account at whatever rate applies then.

The honest pros and cons

For

  • You know exactly what you will get back, to the penny.
  • Usually higher rates than easy-access savings, because you have given up access.
  • Protected by a deposit guarantee scheme in most countries, up to a limit per person per bank.
  • No fees, no prices to watch, nothing to sell.

Against

  • Your money is locked; an emergency means losing interest or being unable to withdraw at all.
  • If interest rates rise after you lock in, you keep the old, lower rate until maturity.
  • Inflation can quietly beat the rate, so the money buys less at the end than at the start.
  • Interest may be taxed as income, depending on where you live and how you hold it.

Getting it in United Kingdom

Fixed-rate savings bond available

The UK name for a term deposit, offered by banks and building societies for terms from six months to five years. Despite the name it is a savings account, not a bond you can trade, and once opened you normally cannot touch the money until the term ends.

  • Your protection: the FSCS protects up to 120,000 pounds per person per banking group since 1 December 2025 (source, checked 2026-09-10)
  • Tax here: interest counts as income in the year it is paid or made available; the Personal Savings Allowance covers the first 1,000 pounds for basic-rate taxpayers, 500 for higher-rate, nothing for additional-rate (source, checked 2026-09-10)

How to start

  1. Compare fixed-rate bonds for your term on MoneySavingExpert's savings guides, or use a savings platform that holds several banks' bonds under one login.
  2. Check the provider on fscs.org.uk and keep your total with any one banking group under 120,000 pounds.
  3. Open online with photo ID and a UK address, fund it from a UK current account within the window the provider gives, and note the maturity date.

Fixed-rate Cash ISA available

The same fixed-term product inside a Cash ISA, so the interest is tax free. Unlike an ordinary fixed-rate bond, ISA rules require providers to let you withdraw or transfer before the end of the term, usually for an interest penalty.

  • Account type: Cash ISA (interest earned inside is tax free and does not count toward your Personal Savings Allowance)
  • Your protection: FSCS protects up to 120,000 pounds per person per banking group (source, checked 2026-09-10)
  • Tax here: interest is tax free; uses part of the 20,000 pound yearly ISA allowance, of which only 12,000 may be cash from April 2027 for under-65s (source, checked 2026-09-10)

How to start

  1. Since April 2024 you can pay new money into more than one cash ISA in the same tax year, as long as the total stays inside your allowance; to move an old ISA, always use the new provider's transfer form, never withdraw and re-deposit.
  2. Compare fixed-rate cash ISAs by term on MoneySavingExpert, then open online with your National Insurance number to hand.

Wherever you are

  1. Decide how long you can go without the money; never lock away your emergency fund.
  2. Compare rates across providers for that term; the best rates are often from smaller banks you have never heard of, which is fine if they are covered by the deposit guarantee.
  3. Check the deposit guarantee covers the provider, and keep your total with any one banking group under the limit.
  4. Open the account online, pay in, and diarise the maturity date so the rollover is your decision, not the bank's.

Try it

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Getting it from another country

Via European Union (baseline) allowed

Open an account with an EU bank or broker that accepts UK residents. Since Brexit fewer do; for fixed-term deposits the usual door is a savings platform that places your money with EU banks, and for funds an EU broker that still onboards UK customers.

What you gain

  • Access to UCITS funds and ETF share classes that UK platforms do not list.
  • EU banks sometimes pay higher fixed-term rates than UK ones for the same term.
  • A deliberate holding in euros, if you want a second currency for its own sake.

What you give up

  • No ISA. Everything sits outside your tax-free allowance, so interest and gains are taxable from the first pound.
  • Currency risk: a pound that strengthens against the euro shrinks your return the day you convert back.
  • Protection is the bank's home-country scheme, not the FSCS; the limit is set in euros and the claim is made abroad.
  • Foreign interest and gains must be declared to HMRC; some countries take withholding tax first.
  • Providers can close accounts for UK residents at short notice; several did after Brexit.
  • Protection there: EU deposit guarantee schemes cover 100,000 euros per depositor per bank, run by the bank's home country (source, checked 2026-09-10)
  • Tax: foreign interest and gains are taxable in the UK; a double taxation agreement may let you offset tax already taken abroad (source, checked 2026-09-10)

Currency reality check

The same GBP 1,000 left for 10 years, at each country's savings rate:

Kept in GBP at about 2.1% a year

GBP 1,228

Sent to EUR at about 0.9% a year, the account would show

EUR 1,272 the tempting number

Brought back to GBP after the exchange rate moved -3%

GBP 1,062 what you can actually spend

Before tax, before fees, and before the risk that the exchange rate does something quite different next time. A higher rate abroad is only a higher return once it has survived the conversion back.

Go deeper

Also called

fixed-rate bond, fixed-term deposit, certificate of deposit (CD), guaranteed investment certificate (GIC), plazo fijo, CDB

Often confused with

  • Government bond: A loan to a government that pays interest and returns your money on a set date, called its maturity.
  • Savings account: Money kept at a bank that pays interest and can be withdrawn at any time.

Learn more, for free

Term deposit in United Kingdom · wealth-coop