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How much interest on 1 million pounds can you earn?

From understanding interest rates to identifying the best investment opportunities, we look at how you can generate maximum interest from 1 million pounds.


  • The state of the UK economy, interest rates and inflation impact how much interest you can earn on 1 million pounds.

  • You will have to pay tax on interest earned, but there are ways to reduce this.

  • There are many investment options for your £1 million pounds, including investing in the stock market, property, and more.

  • A financial adviser can guide you on how to invest 1 million pounds to earn maximum returns.

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How much interest can I earn on 1 million pounds?

The amount of interest that you can earn on 1 million pounds depends on many factors.

Among these, the state of the UK economy plays a major role. Countless factors influence the UK’s economic outlook, including gross domestic product (GDP), the unemployment rate, inflation, and the base rate.

According to KPMG's 2023 UK Economic Report, UK consumer spending is up 0.7%, and inflation has increased by 7.5%. These increases are calculated on the average percentage change in the previous calendar year. 

To simplify things, let’s focus only on the base rate. The base rate is set by the Bank of England (BoE) and influences the interest rates that individual banks offer you.

For the past decade up until late 2021, the BoE base rate, and interest rates in general, were very low. So, interest earned on investments was also minimal. 

Since December 2021, however, interest rates have been rapidly on the rise, with the BoE base rate currently standing at 5.25%.

This means that savings accounts and investments are offering more interest than before.

Unfortunately, this will not always be the case, with the BoE base rate expected to fall to 4% in 2024, according to data from private bank Berenberg. 

Since interest rates rarely remain stable for long, let’s look at the potential interest on a £1 million investment, according to Money Sprout, based on a range of different rates.

Interest paid on £1 million before tax

Interest rate

























£1 150.68



As interest rates vary, it is vital to shop around for the best rates and investments for your personal circumstances and future goals. 

In particular, since you’re looking for the most interest on 1 million pounds, you’ll want to find a bank that allows large deposits.

For some context, let’s look at one UK bank in particular – Metro Bank. It offers fixed-term savings accounts for anywhere between three months and three years.

On a one-year fixed-term savings account, Metro Bank offers a 5.8% interest rate. The great news is that the maximum deposit for such an account is £2 million.

If you were to invest 1 million pounds in a Metro Bank one-year fixed-term savings account, you would earn £58,000 per year in interest.  

It’s worth flagging that up to £85,000 of your money is protected under the Financial Services Compensation Scheme (FSCS), so it might be worth spreading your money across several banks.

Of course, we have not discussed compound interest, which is when you earn interest on interest. Compound interest is a complex topic best discussed with a financial adviser.

But, if you’re curious about how much compound interest you could earn on 1 million pounds, it’s worth using a compound interest calculator.

Do you pay tax on interest?

Yes, you do pay tax on savings interest.

The government will tax you on the interest you earn, especially on a sum as large as a million pounds.

How much tax you’d pay depends on many factors – most notably, your income tax band and personal savings allowance (PSA).

Can you avoid paying tax on savings interest? 

There are a number of ways to avoid paying tax on savings interest.

Firstly, the UK government allows most people to earn a certain amount of money before they have to pay tax on savings interest.

This is your personal savings allowance (PSA). The lower your tax band, the larger your PSA. Once you exceed your PSA, you pay tax according to your income band.

The interest-free earnings allowance by tax band are:

Basic rate

Up to £1,000

Higher income

Up to £500

Additional rate

No personal allowance

You can also reduce your tax on savings interest by placing your funds in tax-free accounts such as individual savings accounts (ISAs)

Just remember that you can only contribute £20,000 to your ISA each year.

With an amount as large as one million pounds, that won’t get you very far. So, it is vital to invest wisely to yield maximum returns on your investment.

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What is the best way to invest 1 million pounds to earn better returns? 

Knowing how to invest 1 million pounds is crucial if you want to enjoy good returns:

  • The stock market: This can be a good approach to investment. The more volatile the stocks you buy, the higher the potential returns. More volatile stocks also mean greater risk, so it is vital that you balance the potential risks and rewards. A happy medium can be to invest in low-cost index funds. 

  • Business investment: You could use £1 million to buy a business or invest in your own. This type of investment can yield great returns but requires extensive expertise and considerable time investment.

  • Property: Purchasing property is another great way to increase returns on a £1 million investment. In the short term, you can rent out your property to earn rental income. In the longer term, your property may increase in value.

Whatever option you choose, it’s wise to diversify your portfolio by investing in various areas. It is important to note that your investment returns should aim to beat inflation.

Is it best to invest or save £1 million?

There is no hard-and-fast rule when it comes to investing versus saving.

There are pros and cons to both options, including:

  • The benefit of opting for a high-interest savings account is that your funds may be easy to access. The downside is that these accounts tend to yield much lower returns than other investments do over the longer term.

  • Investing in a low-cost broad market index fund may yield greater returns over a decade or so, but your funds will remain tied up in that investment for a long time.

With this in mind, your choice between saving and investing depends on how soon you’ll need to access your funds, your financial goals and your risk strategy. 

Can you live off the interest from 1 million pounds?

With the current state of the economy, you’re unlikely to be able to live off the interest from 1 million pounds kept in a savings account, but this depends on different factors such as where you live. 

While interest rates are high for the moment, that won’t always be the case. At the same time, high inflation is bound to impact your cost of living.

Even if you turned over every penny, you’d likely eventually have to start digging into your £1 million principal amount.

If, however, you invest wisely in one or more of the opportunities listed above, the prospect of achieving future goals, such as early retirement, becomes a lot more realistic.

Get matched with a financial adviser 

Knowing how much interest you could earn on 1 million pounds is affected by the economy, interest rates, and inflation, as well as how much tax you’ll pay.

Earning the best possible returns from your £1 million depends on a number of interrelated factors. These are often complex and best navigated with a trusted financial adviser. 

Luckily, finding a financial adviser is easy with Unbiased.

All you need to do is answer a few questions, and we'll match you with a financial adviser regulated by the Financial Conduct Authority (FCA), who’ll be suited to your needs.

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About the author
Our team of writers, who have decades of experience writing about personal finance, including investing, retirement and pensions, are here to help you find out what you must know about life’s biggest financial decisions.