More than 33,000 individuals in the UK held at least £1 million in savings accounts last year, according to recent data. This figure is estimated at 33,700 savers who maintained £1 million or more in cash deposits in 2025. This estimation is derived from the number of individuals declaring over £50,000 annually in interest to HM Revenue & Customs, a sum roughly equivalent to the interest earned on £1 million at a 5% annual rate.
Several factors contribute to individuals holding substantial cash reserves, including accumulated lifetime savings, inheritances, or proceeds from property or business sales. The Labour party, under former chancellor Rachel Reeves, has prioritized encouraging savers to invest more in British stocks and shares, aiming to strengthen businesses and stimulate economic growth. However, analysis of HMRC and MSCI World Index data suggests that persuading Britons to move money from savings into investments may prove challenging.
Investing in equities, or stocks and shares, offers the potential for higher long-term returns compared to cash savings. However, investment values can fluctuate, and there is a risk of losing capital, unlike with cash savings accounts. Financial guidance generally recommends maintaining an emergency fund covering at least three months of living expenses in cash before considering investments, and avoiding investing funds needed within a five-year timeframe.
Data indicates that the average annual return on equity investments was 12.9% for the decade ending May 29, 2026. This contrasts with an average annual return of 2.18% on cash Isas. While cash Isa rates have improved significantly in the last five years, with top accounts now exceeding 4.5%, inflation remains a concern. Inflation currently stands at 2.6%, meaning savings earning less than this rate are losing purchasing power.
In an effort to incentivize equity investment, the UK government plans to reduce the amount most savers can contribute to tax-free cash Isas. From April 2027, the annual cash Isa allowance will decrease from £20,000 to £12,000, though the allowance for individuals aged 65 and over will remain at £20,000.
Mark Incledon, chief executive of financial planner Bowmore, noted that the increase in seven-figure cash holdings suggests many investors prioritize safety over growth, a strategy that carries a "hidden cost – negative real returns after inflation." He attributed this hesitancy partly to a focus on short-term market volatility. As of early April 2024, top one-year fixed cash Isas offered around 5% interest, with a leading deal from Tandem Bank at 4.67% by mid-July 2026.
Tax regulations differ for cash savings and investments. Most individuals can earn a certain amount of interest tax-free. Basic rate taxpayers can earn up to £1,000 in interest from standard cash savings accounts without tax liability, while higher rate taxpayers can earn up to £500. Additional rate taxpayers are subject to tax on all interest earned. All taxpayers have an annual Isa allowance of £20,000, with interest generated within Isas being tax-free. Premium Bonds, issued by NS&I, offer tax-free prize winnings instead of interest.
Investors in equities are subject to capital gains tax on profits realized when selling assets. The rates for stocks and shares gains are 18% for basic rate taxpayers and 24% for higher rate taxpayers, increased from 10% and 20% respectively in the Autumn 2024 Budget. Dividend income is also taxed, with a tax-free allowance of £500, reduced from £1,000 in the previous tax year. Dividend tax rates rose on April 6, 2026, to 10.75% for basic rate taxpayers and 35.75% for higher rate taxpayers, remaining at 39.35% for additional rate taxpayers.
Recent HMRC data from January 2026 showed capital gains tax receipts for 2025 were £13.65 billion, a decrease from £14.9 billion in 2024. Reports suggest Labour may consider higher capital gains tax rates.