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Fixed rate bonds explained
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What is a fixed rate bond?

A Fixed rate bond is a type of saving accounts or investment where your money is locked away for a set period and earns interest. Unlike variable-rate accounts, the interest rate on a fixed rate bond won’t change — providing certainty and stability in your savings.

If you’ve got a bit of money set aside and don’t need to touch it for a while, a fixed rate bond could be a straightforward way to help it grow. 

Quick savings jargon

  • Savings bondA savings bond is a type of account where you lock away your money for a set time. In return, you earn interest.
  • Fixed termThe fixed term is how long your money stays in an account for.
  • Fixed interest rateThis means the interest rate stays the same the whole time your money’s locked away.
  • MaturityIs simply another way of saying the end of the fixed term. It’s when your bond finishes and you can collect your savings
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How do fixed rate bonds work?

Steps What happens What you need to know
1. Pick your bond Compare interest rates and fixed term lengths Choose a bond that suits your savings goals and how long you can afford to lock away your money without needing access
2. Deposit your money You will pay in your savings to open the account You'll need to meet the minimum deposit requirement to open a fixed rate bond
3. See your savings grow Your money earns interest Your interest rate is fixed from the start, so you'll know what you'll get back
4. Collect your money back Withdraw your savings and interest When your fixed term ends you'll get your original deposit, plus the interest earned

 

How long can you lock away your money?

Fixed rate bonds let you lock in a guaranteed rate for a period of time, the longer you save, the more you could earn. Typically, the common fixed term duration you can save in fixed rate bonds are:

How to make the most of your fixed rate bond

A fixed rate bond can be a great way to grow your savings. But like any savings option, it works best when you’ve got a clear plan. Here’s how to manage yours in a way that works for you.

  • Start by choosing the right bond

    Not all fixed rate bonds are the same.
    • Compare interest rates, 
    • how long your money will be locked away
    • and what the minimum deposit is.

  • Pick a fixed term that suits your goals

    Fixed rate bonds tie up your savings for a set amount of time. So, it’s worth thinking about how long you’re comfortable going without needing access to that money. Ask yourself:
    • What are your financial goals in the short and long term?
    • Could you need this money in an emergency?
    • What are interest rates doing now and where might they be heading?

  • Spread your savings if it makes sense for you

    That way, parts of your money become available at different times. You could also hold some of your savings in an easy access account so you’re covered if something unexpected crops up.

When is interest paid on fixed rate bonds?

Interest on fixed rate bonds is typically paid in one of three ways: 

  • Monthly
  • Annually 
  • Or at maturity.

The payment schedule depends on the bond provider and the specific product terms. Many providers allow savers to choose a payment frequency that suits their financial goals.

How much interest can I earn with a fixed rate bond? 

A fixed rate bond gives you something that’s hard to come by - certainty. You’ll know exactly what you’re getting from day one, and how much you’ll earn by the end. But how much interest you’ll earn depends on a few things:

Fixed term

  • In general, but not always, the longer the term, the higher the rate. A 5-year fixed bond will usually offer more than a 1 year fixed bond - because you’re giving up access to your money for longer.

Fixed interest rate 

  • Once you choose a fixed rate bond, that interest rate is locked in for the whole term. It won't go up or down, no matter what happens to interest rates elsewhere. So you'll know from the start exactly how much interest you'll earn - no surprises, good or bad.

This table projection is based on a £1,000 deposit for a 1, 3 and 5 year fixed rate bond, and shows the total interest earned at the end of the fixed term period. 

Term (years) 3% interest 5% interest
Initial deposit £1,000 £1,000
1 year £1,030 £1,050
2 year £1,092.73 £1,157.62
3 year £1,159.27 £1,276.28


This projection is for illustrative purposes only and is based on the following assumptions: 

  • Interest being paid straight into your account.
  • No withdrawals or further deposits during the fixed rate period.

How many fixed rate bonds can I have?

There’s no limit to how many fixed rate bonds you can open – as long as you meet the rules for each one. (Please speak to your provider beforehand to understand their rules and regulations on their fixed rate saving accounts). But just because you can, doesn’t always mean you should. Here’s what to think about first.

  • Each bond locks your money away
    A fixed rate bond means your money is tied up for a set time – usually between one and five years. During that time with us, you can’t take it out. That can be hard if something unexpected happens and you need quick access to your cash.
    Whilst we don’t allow access during the term, other providers may allow early access, (but this may incur an interest penalty).

  • You need enough money to open each one
    Every bond has a minimum deposit. Some start from £500, others might need £1,000 or more. That money also needs to be spare – not money you’ll need for everyday expenditures – e.g. bills, food and rent.

  • You might get different interest rates
    Each bond comes with its own rate. That rate stays the same until the bond ends – which is good if rates drop, but not so great if they rise as you will not be able to withdraw your money until your fixed term ends.

  • It can be a way to save in steps
    However having more than one bond can help you spread that risk a bit.

Is it worth saving in multiple fixed rate bonds?

Some savers like to open bonds that end at different times – like one that ends in a year, another in two, and so on. That way, not all your money is tied up at once. It’s sometimes referred to as ‘fixed rate bond ladder strategy’.

The image below illustrates multiple savings bond approach to manage your money using a fixed term saving approach. By opening multiple fixed rate bonds with staggered maturity dates, you could create a consistent flow of saving investments. This approach allows savers to take advantage of potential higher interest rates while still maintaining regular access to their cash.




How it works:

  • Year 1: You open three saving bonds — one for 1 year, one for 2 years, and one for 3 years (Bond 1, 2, and 3). This sets the foundation for your ladder.
  • Year 2: Bond 1 ends (matures). You reinvest the savings from bond 1 into a new 3 year fixed rate bond (Bond 4).
  • Year 3: Bond 2 ends (matures) and is reinvested into another 3 year fixed rate bond (Bond 5).
  • Year 4: Bond 3 ends (matures) and you repeat the process with another long-term fixed term saving option, opening a 3 year fixed rate bond. (Bond 6).

From year 4 onwards, one fixed rate bond matures each year, giving you the opportunity to reinvest at potentially better rates or access to your funds if needed.

Benefits of holding multiple fixed rate bonds:

  • Consistent access to cash: One savings bond ends each year, giving you funds without sacrificing long-term interest gains.
  • Maximise returns: Longer-term fixed rate bonds potentially offer higher interest rates than short-term options.
  • Diversified risk: By staggering your investments across several fixed term saving products, you potentially reduce the risk of reinvesting everything when rates might be low.

This approach is ideal for anyone looking to grow their savings steadily, with the discipline of long-term investing and the flexibility of yearly access. Whether you’re new to saving bonds or looking to make the most on your returns, building a ‘savings bond ladder’ using fixed rate bonds can be a useful part of your financial plan.

What happens when my fixed term bond period ends?

You’ve come to the end of your fixed rate bond. So, what next? Here’s what usually happens.

You’ll get your original savings back

  • When your bond matures, you will receive the total money you’ve put in, plus interest.

Your money might move to a default account

  • At Nottingham Building Society, shortly before your fixed term ends, we will send you details on how you can reinvest your savings with us or take out some, or all of your money.
  • If you don’t tell us what you’d like to do next, your savings will be moved into one of our easy access accounts. Your savings will be held in this account until we hear from you.

You’ve got options

You don’t have to stick with the default account. You could:

  • Reinvest your savings into a new fixed rate bond.
  • Move your money to a different type of savings account.
  • Withdraw some or all of it.

Just make sure you check the new interest rates and terms carefully, so they suit your goals.

Are fixed rate bonds a good investment?

If you want a safe, steady way to grow your savings, fixed rate bonds can be a smart choice. Fixed rate bonds offer certainty - but they’re not for everyone. Here's a quick look at the main advantages and disadvantages.

Advantages:

  • Your rate won’t change for the fixed term of the bond, even if market interest rates go down 
  • Save a one off lump some of money
  • Your money will be returned with interest 
  • Great if you want to save for a specific medium to long term future goal
  • If rates go down, yours won’t follow and you may benefit

Disadvantages:

  • You can’t usually access your money before the term ends, if you can, then you will more than likely face a penalty charge.
  • Can not make regular deposits
  • If rates go up, yours won’t follow and you may miss out
  • You might need a minimum deposit amount to open one. 

Do you pay tax on fixed rate bonds?

Yes – interest from fixed rate bonds is classed as income, so you might pay tax on it. But here's the good news: you get a personal savings allowance that could mean you pay no tax at all.

Your personal savings allowance

Most people can earn some interest from their savings without paying tax. The UK income tax band breakdown:

  • Basic rate taxpayers (20%): £1,000 interest earned is tax free.
  • Higher rate taxpayers (40%): £500 interest earned is tax free.
  • Additional rate taxpayers (45%): £0 interest earned is tax free.

What this means for your bond

If your total interest from all your savings (including your bond) stays within your allowance, you won't pay any tax. Go over it, and you'll pay tax on the extra bit at your usual rate of income tax.

If you're a basic rate taxpayer and your bond pays £800 interest a year, you won’t pay tax on this. But if it pays £1,200, you'd pay 20% tax on the extra £200.

Interest on joint accounts

If you have a joint fixed rate bond account, interest will be split equally between the account holders.

If you’re not sure how this affects you, our friendly branch staff can help guide you or you can get further information from our Personal Saving Allowance guide.

You can also find out more about tax on savings interest via the GOV.UK website

Compare our best fixed rate bonds 

Take a look and compare our best fixed rate bonds to see what suits your saving needs. We have short, medium and long fixed term options that might be tailored for your saving goals.

6 Month Fixed Rate Bond
Fixed until 14th January 2026
Interest rate gross/tax-free p.a./AER* 4.47%
Type of account
  • Fixed rate bond
  • Fixed term
Withdrawals No withdrawals until 15/01/2026
Open with £500
Open and manage
  • Online
More details
1 Year Fixed Rate Bond
Fixed until 30th September 2026
Interest rate gross/tax-free p.a./AER* 4.25%
Type of account
  • Fixed rate bond
  • Fixed term
Withdrawals No withdrawals until 01/10/2026
Open with £500
Open and manage
  • Branch
  • or
  • Online
More details
2 Year Fixed Rate Bond
Fixed until 31st August 2027
Interest rate gross/tax-free p.a./AER* 4.25%
Type of account
  • Fixed rate bond
  • Fixed term
Withdrawals No withdrawals until 01/09/2027
Open with £500
Open and manage
  • Branch
  • or
  • Online
More details
3 Year Fixed Rate Bond
Fixed until 30th August 2028
Interest rate gross/tax-free p.a./AER* 4.25%
Type of account
  • Fixed rate bond
  • Fixed term
Withdrawals No withdrawals until 31/08/2028
Open with £500
Open and manage
  • Branch
  • or
  • Online
More details
5 Year Fixed Rate Bond
Fixed until 31st July 2030
Interest rate gross/tax-free p.a./AER* 4.20%
Type of account
  • Fixed rate bond
  • Fixed term
Withdrawals No withdrawals until 01/08/2030
Open with £500
Open and manage
  • Branch
  • or
  • Online
More details
Account Name Interest rate
gross/tax-free p.a./AER*		 Type of account Withdrawals Open with Open and manage
6 Month Fixed Rate Bond
Fixed until 14th January 2026 		4.47%
  • Fixed rate bond
  • Fixed term
 No withdrawals until 15/01/2026 £500
  • Online
 More details
1 Year Fixed Rate Bond
Fixed until 30th September 2026 		4.25%
  • Fixed rate bond
  • Fixed term
 No withdrawals until 01/10/2026 £500
  • Branch
  • or
  • Online
 More details
2 Year Fixed Rate Bond
Fixed until 31st August 2027 		4.25%
  • Fixed rate bond
  • Fixed term
 No withdrawals until 01/09/2027 £500
  • Branch
  • or
  • Online
 More details
3 Year Fixed Rate Bond
Fixed until 30th August 2028 		4.25%
  • Fixed rate bond
  • Fixed term
 No withdrawals until 31/08/2028 £500
  • Branch
  • or
  • Online
 More details
5 Year Fixed Rate Bond
Fixed until 31st July 2030 		4.20%
  • Fixed rate bond
  • Fixed term
 No withdrawals until 01/08/2030 £500
  • Branch
  • or
  • Online
 More details

Frequently asked questions

Are fixed rate bonds safe?

Yes - fixed rate savings accounts, like bonds, are generally considered low risk. As long as your money is with a UK-regulated bank or building society, it’s protected by the Financial Services Compensation Scheme (FSCS).

Some banks and building societies might look completely different but actually belong to the same brand. If that's the case, you'll only covered for a specific amount across all your accounts with them. Find out how much you'll be covered for here.

What’s the difference between fixed rate bonds and fixed rate ISAs ?

While both fixed rate bonds and fixed rate ISAs offer the benefit of a guaranteed interest rate for a fixed term, there are key differences you should understand between the two.

Interest rates

The most significant difference lies in how the interest is taxed.

  • Fixed rate bonds: The interest you earn may be subject to tax, depending on whether it exceeds your Personal Savings Allowance.
    If you save into a fixed rate bond, the interest you earn may be subject to tax. Every UK saver has a Personal Savings Allowance, which lets you earn a certain amount of interest tax-free each tax year:
    • £1,000 for basic rate taxpayers
    • £500 for higher rate taxpayers
    • £0 for additional rate taxpayers.

If your total interest across all your accounts stays within your allowance, you won’t pay tax. If you exceed it, you may need to declare the interest and pay income tax through self-assessment or HMRC’s PAYE system.

  • Fixed rate ISAs: With a fixed rate ISA, any interest you earn is completely tax-free, no matter how much it is or what your tax band is. That’s because ISAs are government-backed savings accounts designed to help people save more efficiently. You don’t need to worry about using up your Personal Savings Allowance, because the interest earned in an ISA doesn’t count towards it.

ISA allowance

  • A fixed rate bond doesn’t require you to use your ISA allowance. You can invest as much as the provider allows.
  • A fixed rate ISA, on the other hand, does use part of your annual ISA limit, which is £20,000 for the current tax year.

How much you can save

  • Fixed rate bonds typically don’t have a limit on how much you can deposit, though providers may set maximum deposit thresholds.
  • Fixed rate ISAs are capped at your ISA allowance - £20,000 per year across all your ISAs.

Access to your money

Both options are designed for locked-in savings.

  • They're ideal for savers who can commit their funds for a set period (e.g. 1, 2 or 5 years).
  • With either product, early access is not permitted, however fixed rate ISAs do allow transfers under HMRC regulations. 

ISA transfers

  • You can transfer all or part of your savings to another provider whenever you like - same type of ISA or different, it's up to you. Just check if your current provider charges an interest penalty first.

Financial safety

Both fixed rate bonds and fixed rate ISAs offered by UK-regulated providers are protected under the Financial Services Compensation Scheme (FSCS). This means your savings are protected in case the provider fails.

Can I deposit more money in my fixed rate bond after I have opened the account?

You have at least 14 calendar days from account opening to make deposits into your fixed rate bond with Nottingham Building Society.

Some providers will only let you deposit funds into the fixed rate bond once, when you have opened the account.

Can fixed rate bonds be in joint names? 

Yes, usually you can open fixed rate bonds as a joint account. Joint ownership is a common option offered by most providers for their fixed rate savings bonds.

At Nottingham Building Society you can open a joint fixed rate bond in one of our branches only.

With joint fixed rate bonds, each person named on the account gets their own FSCS protection. So if you and your partner have a joint fixed rate bond, you'd be protected for twice as much as a single account.

Open a fixed rate bond

Our fixed rate bonds are available to open either online or in any one of our branches, depending on the account.

If you'd like to open an online account, tap the link below and start the application before managing your account from our app.

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