Savings bonus rates: calculate the return after the offer

A savings bonus rate can make an account look excellent on day one and ordinary a year later. The key is to separate the underlying rate from the temporary bonus, note exactly when the bonus ends and calculate what you will earn after that date.

A headline rate can contain a temporary component

An account might advertise 5.00% AER for 12 months made up of a 3.50% underlying rate plus a 1.50% bonus. When the bonus ends, the account does not necessarily close; it can simply fall to the lower ongoing rate. If market rates have also moved, the gap with better alternatives can become large.

Put the end date in your calendar when you open the account. Waiting for the first lower interest payment can cost several months of return, especially on a large balance.

Start with a dated baseline. Split the advertised rate into the underlying variable rate and the temporary bonus, then record the bonus end date, balance bands and withdrawal conditions. A headline rate is useful only if you know how long each component applies to your actual balance. Keep a screenshot, statement or provider message for the figures that matter.

For savings bonus rates: compare the return, cross-check the expected result against the actual result in 'A headline rate can contain a temporary component'.

Calculate pounds, not just percentages

Suppose £20,000 earns 5.00% for a year instead of 3.50%. Ignoring compounding and tax for a simple comparison, the difference is about £300 over 12 months. On £2,000, the same 1.5 percentage-point gap is about £30. The size of the balance determines how much attention the bonus deserves.

If the bonus lasts only six months, halve the rough annual difference before refining the calculation. This turns a marketing percentage into a decision about actual money.

Worked example: £20,000 earning 5% for a full year produces about £1,000 gross interest, while 3% produces about £600. A two-percentage-point drop is therefore roughly £400 a year on that balance before tax, enough to justify a diary reminder before the bonus expires.

For savings bonus rates: compare the return, cross-check the expected result against the actual result in 'Calculate pounds, not just percentages'.

Check whether withdrawals or balance bands affect the bonus

Some accounts pay a bonus only when you make few or no withdrawals, maintain a minimum balance or meet another condition. Others simply attach the bonus to the account for a fixed introductory period. The product summary should make the distinction clear.

If your emergency fund may need to be used at short notice, a slightly lower unconditional rate can be more practical than a higher rate you lose after the first withdrawal. The best rate is the one you can realistically keep under your normal cash-flow behaviour.

Use a fixed sequence. compare AER, access rules and the post-bonus rate across alternatives, then check whether moving the money causes loss of interest or breaches a notice condition. If the balance is large, also check whether it remains within the current £120,000 FSCS deposit limit per eligible person per authorised firm. After each step, note what changed and what did not.

AER helps comparison but does not freeze the rate

AER is designed to show the annualised return and make savings accounts easier to compare. On a variable-rate account, however, the underlying rate can change during the bonus period unless the terms say otherwise. A fixed bonus does not always mean the total rate is fixed.

When a provider changes the base rate, look at the new total rate and the remaining bonus period together. An account can remain competitive after a small cut, or become poor value even though the original bonus is still technically active.

Timing can change the practical outcome. set two reminders: one several weeks before the bonus ends so you can research replacements and one just after expiry to confirm the new rate actually applied. Do not wait for an annual statement if the account can fall to an uncompetitive rate mid-year. Build a buffer around any bill date, completion, trip or tax-year deadline.

Tax can matter when the balance is large

Outside an ISA, savings interest can count towards taxable savings income. Whether tax is actually due depends on your tax position and available allowances. A bonus that adds £300 of interest is worth £300 before tax, not necessarily after tax for every saver.

Do not let tax complexity push you into leaving cash at a weak rate without checking alternatives. Compare ordinary savings and Cash ISA options on the return you expect to keep, while respecting ISA subscription and transfer rules.

If the normal route fails, move from retrying to evidence. if the provider changes a variable component or a bonus is missing, save the account terms and the rate history shown when you opened it. Ask which rate applied to each date range and calculate the expected interest in pounds before raising a complaint about the difference.

On Savings bonus rates: calculate the return after the offer, the practical value of “Tax can matter when the balance is large” comes from knowing what would change your decision. Write down the current rule, your own relevant figure and the point at which you would wait, contact the bank or use another option for “Tax can matter when the balance is large” on Savings bonus rates: calculate the return after the offer. Recheck before a time-sensitive step.

Review the account twice: before and after the bonus

The first review should happen a few weeks before the bonus expiry so you have time to open a replacement and move money safely. The second should happen after the first interest payment under the new rate, confirming that the provider applied the terms you expected.

Keep the original account summary or a PDF of the offer. If the bonus disappears earlier than promised, that document and your opening date make the query much easier to resolve.

Use one closing decision rule. do not move money merely because another account has a higher headline number. Compare the expected pounds over the period you will hold the cash, after notice restrictions, lost bonuses, tax position and any need for immediate access. Recheck the live account terms or tariff on the day you act.

For savings bonus rates: compare the return, cross-check the expected result against the actual result in 'Review the account twice: before and after the bonus'.

Sources and verification

• MoneyHelper - how to find the right savings account
• MoneyHelper - instant-access savings accounts
• FSCS - current deposit protection limit

MyBankAnswers uses official provider and UK regulatory sources wherever practical. Information is general and does not constitute financial advice.