Update, 22 August 2026: NS&I’s five year is now beaten by shorter fixes elsewhere. The point this article makes about the shape of the curve, that the five year sits only three hundredths of a point above the one year, has a consequence worth stating plainly: a term premium that thin does not survive much competition. As at 20 August the market-leading two year fixed bond paid 4.91% AER, from Scottish Building Society, against NS&I’s five year at 4.85%. NS&I’s longest lock-up was therefore paying less than a fix of under half the length. That is an observation about how flat NS&I’s curve has become, not a recommendation of any particular account, and best buy rates move week to week. Source: Moneyfacts weekly savings roundup, 20 August 2026.
Earlier update: 19 August 2026
Update, 19 August 2026: NS&I raised all four British Savings Bonds terms again on 18 August, three weeks after the 31 July rise this article was written on. On the Growth option they now pay 4.82% (1 year), 4.81% (2 year), 4.83% (3 year) and 4.85% (5 year), gross and AER. The rates, the table and the worked example below have been updated. The shape moved too: the three year rose most, up fifteen hundredths of a point, which lifted it off the bottom, and the spread across the four terms narrowed from seven hundredths to four. What did not change is the five year still being the highest, and still only three hundredths above the one year. NS&I says the rise is “to ensure we reflect current market conditions and help to meet our Net Financing target”, which names the mechanism the Net Financing section below describes. Source: NS&I press release, 18 August 2026.
Educational, not advice. This article explains how NS&I British Savings Bonds work, what changed to the fixed-term rates on 31 July 2026, and the small print that matters. It is general information about a product, not a recommendation to buy it or to avoid it. Savvy Investor Guide is not authorised or regulated by the Financial Conduct Authority. What suits you depends on your own tax position and when you need the money back.
What this article covers: the difference between the Growth and Income options, the rates as they stand after the 18 August 2026 rise, why the five-year term moved so much further than the others on 31 July, how the interest is taxed and why the timing of that matters more than the rate for some people, what the HM Treasury backing actually means now the FSCS limit has changed, and the rules on access and maturity.
What it does not cover: whether these bonds beat any particular bank’s fixed-rate account this week, or whether they suit you. For the cash ISA comparison, including how a taxable bond stacks up against a tax-free wrapper, see our cash ISA rates companion. For NS&I’s other well-known product, see Premium Bonds.
In short
- NS&I raised all four terms on 18 August 2026, three weeks after a 31 July rise. On the Growth option: 4.82% (1 year), 4.81% (2 year), 4.83% (3 year) and 4.85% (5 year).
- The shape is the story, and it has moved twice. On 31 July the five year rose by twenty hundredths of a point while the shorter terms moved three, taking it from the worst-paying term to the best. On 18 August all four rose again, the three year moved most, and the spread across the four narrowed to four hundredths. The five year is still the highest.
- The tax rule most coverage skips: on the Growth option, all the interest counts as taxable income in the single tax year the bond matures, not in the years it built up.
- There is no early access at all. Not a penalty, not a reduced rate. You cannot withdraw before maturity.
- If you do nothing at maturity, NS&I reinvests you into a new bond of the same term at whatever rate is then on offer.
- The £85,000 figure people quote is out of date. The FSCS limit rose to £120,000 on 1 December 2025, and NS&I is not covered by it anyway: it is backed by HM Treasury for the whole balance.
What are NS&I British Savings Bonds?
“British Savings Bonds” is a brand name rather than a product. It covers NS&I’s fixed-term savings, and underneath it there are two genuinely different things that happen to pay the same headline AER.
- Guaranteed Growth Bonds, the Growth option. Interest is calculated daily and added to the bond on each anniversary, compounding inside it. You see none of it until the term ends, when you get the capital and all the interest together.
- Guaranteed Income Bonds, the Income option. Interest is calculated daily and paid out to your bank account monthly. The balance stays at what you put in.
Both come in one, two, three and five year terms, and both were raised on 31 July and again on 18 August. The quoted rates look different between the two, and that trips people up. The Income option’s five year is quoted at 4.75% gross but 4.85% AER, against the Growth option’s 4.85% gross and AER. Those are the same return described two ways. NS&I’s own definition explains it: AER shows what the rate would be if interest compounded each time it was paid, and “where interest is paid annually, the quoted rate and the AER are the same”. Monthly income does not compound inside the bond, so its gross rate sits lower to arrive at the same annual equivalent.
So the choice between them is not about which pays more. It is about whether you want the money as it arrives or at the end, and, as the tax section below explains, that choice has a consequence a rate table will not show you.
British Savings Bonds rates from 18 August 2026
| Term | Growth, gross and AER | Income, gross | Income, AER | Previous Growth rate (31 July) |
|---|---|---|---|---|
| 1 year | 4.82% | 4.72% | 4.82% | 4.72% |
| 2 year | 4.81% | 4.71% | 4.81% | 4.70% |
| 3 year | 4.83% | 4.73% | 4.83% | 4.68% |
| 5 year | 4.85% | 4.75% | 4.85% | 4.75% |
One thing to watch if you are comparing against a figure you noted earlier in the year. These rates have moved repeatedly in 2026. NS&I raised them on 23 June, from 4.50%, 4.48%, 4.45% and 4.40%, then again on 31 July, then again on 18 August. So a rate you wrote down in the spring is three steps behind, not one, and the “previous” column above is the 31 July issue rather than the June or May one.
The new issues are open to new money and to people whose existing bonds are maturing. NS&I’s 18 August release adds one detail worth knowing if your term is nearly up: customers with bonds maturing from 18 August automatically get the new rate.
Why did the five year move so much further on 31 July?
On 31 July, three of the four terms went up by three hundredths of a percentage point, which is barely a change at all. The five year went up by twenty, and in doing so it jumped from being the worst-paying term to the best. That is upside down: a savings ladder normally slopes the other way at the moment, because locking money up for longer when rates might fall is a risk the saver, not the provider, is taking on.
NS&I has not explained it. That is worth saying plainly, because you will find confident explanations elsewhere. The 31 July press release and the quote from NS&I’s retail director in it say nothing about the differential. The only reasoning offered is generic: the increases “reflect changes in the wider savings market and will help NS&I to meet its Net Financing target while continuing to balance the interests of savers, taxpayers and the broader financial services sector”.
One thing can be observed, though it is an observation rather than NS&I’s stated reason: the gilt market moved in the same direction over the same period. On 31 July the two year gilt yielded about 4.42%, the five year about 4.61%, and the ten year about 5.04%, and over the preceding month the five year had risen by roughly 0.32 percentage points against 0.27 for the ten year. The middle of the curve moved more than the ends. NS&I funds government borrowing, its rates are set by HM Treasury, and gilt prices are named in its own list of what it takes into account. A five year bond repricing hardest in a month when five year gilts repriced hardest is consistent with that. It is not proof, and NS&I never draws the link.
The honest reading for a saver is narrower than a forecast. A provider paying twenty basis points more to hold your money for five years, when it will only pay three more to hold it for one, is pricing that duration differently than it did in June. What you cannot get from it is a reliable view of where rates go next, and anyone presenting it as one is adding their own opinion to NS&I’s silence.
The 18 August rise partly undid that shape. All four terms went up, but not evenly: the three year moved fifteen hundredths of a point, the two year eleven, and the one and five year ten each. The effect was to lift the three year off the bottom, narrow the spread across the four terms from seven hundredths to four, and leave a curve that rises with term instead of sagging in the middle. What survived is the part July created. The five year is still the highest, and still only three hundredths above the one year. So the duration pricing has held while the odd dip at three years has gone, and NS&I again offered no term-by-term reasoning, only the same general line about market conditions and its Net Financing target.
The tax rule that catches people out
This is the section to read if you read nothing else, because the coverage of the rate rise barely mentions it.
Interest on these bonds is taxable. It is paid without tax deducted, and it counts against your Personal Savings Allowance: £1,000 for a basic rate taxpayer in 2026/27, £500 for a higher rate taxpayer, and nothing at all for an additional rate taxpayer. None of that is unusual.
The unusual part is when the interest counts. On the Growth option, NS&I’s documents say it twice, in the same words:
Interest is taxable in the tax year that your Bond matures.
NS&I, Guaranteed Growth Bonds Key Features and Customer Agreement
the interest is taxable so it will count towards your Personal Savings Allowance in the tax year that your Bond matures.
NS&I, Guaranteed Growth Bonds summary box, correct at 31 July 2026
So the interest compounds annually inside the bond, but for tax purposes five years of it arrives in one go, in one tax year. Put £50,000 into the five year Growth bond at 4.85% and roughly £13,400 of interest lands in your income in the year it matures. Against a £1,000 allowance, most of that is taxable, and a large enough lump can push someone across a tax band threshold in a single year even though the money was earned steadily across five.
The Income option’s wording is different, and the difference is the whole point. Its summary box says only that the interest is taxable and counts towards the allowance. The words “in the tax year that your Bond matures” are absent, which fits a product that pays out monthly: the interest arises, and is taxed, in each year it is actually paid, spread across the term.
That is a genuine structural difference between two products advertised at the same AER, and it can matter more than a rate. Someone with a large balance, or close to the top of a band, or expecting their income to change, is choosing between five small tax events and one large one. Which of those is better depends entirely on the individual; that is why this article states the mechanic and stops there. If the sums are meaningful, this is a question for an accountant rather than a rate table.
On whether HMRC is told automatically: the general rule is that banks and building societies report the interest they pay, and gov.uk’s guidance on interest returns names NS&I among the institutions caught by that regime. Worth being precise about the sourcing, though. NS&I’s own literature does not say “we report your interest to HMRC”. It says the interest is taxable income and that you may need to declare it. Do not assume a bond falling inside your allowance needs nothing from you if the rest of your savings income is close to the limit.
Is your money safe with NS&I?
A great many articles, including some still live today, tell you that UK savings are protected up to £85,000. That figure is out of date. The FSCS deposit protection limit rose to £120,000 on 1 December 2025.
For NS&I the limit is beside the point anyway, because NS&I is not a bank covered by a compensation scheme. It is a government department and an executive agency of the Chancellor, and money placed with it is effectively lent to HM Treasury. NS&I puts the comparison in its own words:
Most banks only guarantee your savings up to £120,000. We’re the only provider that secures 100% of your savings above this amount.
NS&I
That is the real distinction, and it is a narrow one. Below £120,000 with an authorised bank you are already fully protected, so the Treasury backing buys you nothing extra. Above it, at a single institution, it does. For most savers this is not the reason to look at these bonds; for someone holding several hundred thousand pounds in cash it is close to the only reason.
The rules that actually bite
- No early access, at all. This is stricter than most fixed-rate bonds, which usually offer withdrawal with a penalty. NS&I’s wording is that a bond “has to be held for the full term. This means that you won’t be able to reinvest or withdraw your money until it matures.” There is no penalty option because there is no exit.
- You can cancel within 30 days of getting confirmation. That is a cooling-off right, not mid-term access.
- Minimum £500 per bond, maximum £1 million per person, per issue, per term. On a joint holding, half the investment counts towards each person’s limit. Reinvestment at maturity is not capped.
- Your rate is fixed for the whole term. NS&I can change what it offers new money whenever it likes, and can pull an issue from sale without notice, but an existing holding does not move.
- Maturity has a default, and the default is to roll over. NS&I contacts you at least 30 days before, and if you give no instructions it reinvests you in a new bond of the same term at the rate then on offer. That is a fresh lock-up you did not actively choose, so a diary note 30 days before maturity is worth more than it sounds.
- Aged 16 or over to buy, no upper limit, held by up to two people jointly or in trust. Funded by debit card or cheque from a UK personal account in your own name.
- On death the money forms part of the estate and the bond carries on earning interest.
Why NS&I rates behave the way they do
NS&I is not trying to top the best-buy tables, and understanding why makes its rate moves much easier to read.
Every year HM Treasury sets NS&I a Net Financing target: how much new money, net of withdrawals and interest paid out, it should raise for government financing. For 2026/27 that target is £15 billion, with a tolerance of plus or minus £4 billion.
That band is wide. NS&I can take in anywhere between £11 billion and £19 billion and still be on target. It also explains the behaviour savers find frustrating. If NS&I priced to win, it would blow through the top of the range and pull deposits out of banks and building societies, which is why its own statements talk about balancing the interests of savers, taxpayers and the wider financial services sector. Rates go up enough to stay inside the corridor and no further. NS&I follows the market; it does not lead it.
Read the 31 July rise through that lens and it is less dramatic than the five year headline suggests. A twenty basis point move on one term is a steering correction, not a bid for the top of the tables. The 18 August rise makes that mechanism explicit rather than inferred. Announcing it, NS&I Retail Director Andrew Westhead said the increases were “to ensure we reflect current market conditions and help to meet our Net Financing target”, which is the corridor described above being steered towards in NS&I’s own words.
FAQ
What are the current British Savings Bonds rates?
As at 18 August 2026, on the Growth option: 4.82% for one year, 4.81% for two, 4.83% for three and 4.85% for five, all gross and AER. The Income option pays the same AER, quoted as lower gross rates of 4.72%, 4.71%, 4.73% and 4.75% because it pays monthly rather than compounding annually. Rates change without much notice, so check nsandi.com before acting on any figure, including this one.
Can I take my money out early?
No. Unlike many fixed-rate bonds from banks, there is no early-withdrawal option even with a penalty. NS&I’s terms say the bond has to be held for the full term. The only exit is the 30 day cooling-off period after you receive confirmation.
Is the interest taxed?
Yes. It is paid without tax deducted and counts against your Personal Savings Allowance, which is £1,000 for basic rate taxpayers in 2026/27, £500 for higher rate and nil for additional rate. On the Growth option the timing is the catch: NS&I states that the interest is taxable in the tax year the bond matures, so several years of interest land in one year’s income rather than being spread.
Is my money protected if something goes wrong?
NS&I is backed by HM Treasury, so the whole balance is secured rather than being covered up to a compensation limit. The FSCS limit that applies to banks and building societies is £120,000 per person per institution, raised from £85,000 on 1 December 2025. If you see £85,000 quoted anywhere, that source has not been updated.
What happens when my bond matures?
NS&I contacts you at least 30 days beforehand with your options: reinvest for the same term, reinvest for a different term, or take the money. If you do nothing, it reinvests you in the same term at whatever rate is on offer then, which may be very different from the rate you originally had.
Are these better than a cash ISA?
They are a different thing rather than a better or worse one. A cash ISA pays interest free of tax within your ISA allowance; these bonds pay taxable interest that uses up your Personal Savings Allowance. A higher headline rate on a taxable bond can leave you with less than a lower rate inside an ISA, depending on your tax band and how much savings income you already have. Our cash ISA rates companion sets the two side by side.
Key sources
- NS&I, Boost for Premium Bonds plus improved interest rates for four other NS&I savings products (PR260818), 18 August 2026, for the current rate table on both options, the maturity mechanic and the Westhead quote.
- NS&I, NS&I raises interest rates on fixed-term British Savings Bonds, 31 July 2026, for the previous rates on both options and the 2026/27 Net Financing target.
- NS&I, Guaranteed Growth Bonds, for the current Growth rates and issue numbers.
- NS&I, Guaranteed Income Bonds, for the Income option’s gross and AER rates.
- NS&I, Guaranteed Growth Bonds Key Features and Customer Agreement (PDF), for the maturity-year tax wording, the access rules and how NS&I sets rates.
- NS&I, Guaranteed returns, for the HM Treasury backing and the comparison against the £120,000 limit.
- FSCS, What we cover, for the £120,000 deposit protection limit effective 1 December 2025.
- GOV.UK, Tax on savings interest, for the 2026/27 Personal Savings Allowance figures.
Information, not advice. Rates and rules are as at 19 August 2026 and change without much warning. Savvy Investor Guide is not authorised or regulated by the Financial Conduct Authority and nothing here is a personal recommendation. Check the current terms on nsandi.com before you act, and take regulated advice if the sums or the tax position are significant.