How much interest on 20 million pounds can you earn?

We look at how to earn the maximum interest on £20 million in the UK and beat inflation, including by investing wisely and reducing tax liabilities.

How much interest can I earn on 20 million pounds?

How much interest you can earn on £20 million depends on the bank and account type you select. 

The top interest rates currently on offer from UK banks are as high as 4.8%. Banks determine how much to offer in terms of interest rates based on the Bank of England (BoE) base rate.

For many years, the BoE base rate was quite low, but it rose as high as 5.25% in August 2023, before recently falling back to 4%. This means that banks can now offer more generous interest rates to savers than they did 10 years ago.

The table below outlines the different amounts of interest paid on £20 million before tax from the lowest to the highest current available interest rates.

As you can see, at the top easy-access savings rate available currently, you would receive nearly a million pounds in interest every year from a savings pot of £20 million:

However, getting the most from a large savings pot isn’t as simple as opting for the highest rate.  Each bank and account type comes with terms and conditions that may impact your decision.

For example, regular savings accounts with higher rates only allow you to deposit a small amount every month, while other banks and building societies may cap the total amount you can save in an account.

And whether you choose a high street bank or a ‘challenger’ one, such as internet brands Atom or Monzo, you will only be protected up to a certain amount per banking group if your bank goes bust.

Only £85,000 of your money in an individual account and £170,000 in a joint account is protected under the Financial Services Compensation Scheme (FSCS).

That means it may be better to spread your money between different banks, especially when dealing with such a large sum.  

Learn more: Monzo vs Revolut: which is best for you?

Do you pay tax on savings interest?

You will have to pay tax on the savings interest for a sum as large as £20 million.

Your income tax band determines how much tax you pay on savings, too. Depending on your earnings, you may be eligible for the personal savings allowance (PSA) that allows you to earn some interest tax-free.

This is unlikely if you have a £20 million savings balance, but basic rate taxpayers can earn £1,000 in savings interest before paying tax and higher rate taxpayers can earn £500. Additional rate taxpayers, who earn more than £125,140, do not have a PSA.

You can also minimise the amount of tax you pay on savings by placing money into an individual savings account (ISA). These allow you to save up to £20,000 a year tax-free.

What is the best way to invest 20 million pounds to earn better returns? 

Moving your money to a savings account to earn interest is not your only option if you have a large savings balance. You could invest your money instead, especially if you know you will not need it for a long time.

Here’s an overview of some of the more popular investment options available to you:

The stock market

You can grow your money by buying shares and stocks via the stock exchange.

If the business performs well over time, your shares will increase in value. Since share trading is complex and risky, you may want to start with a fund, which allows you to spread your risk across many stocks.

Property

You can also grow your wealth by purchasing property. You could then generate a semi-passive income by renting it out.

Purchase wisely, and your property could appreciate in value over time, so you could resell it at a profit.

Commodities

You can invest in anything from precious metals to coffee by investing in commodities. 

This can yield great returns and offer a hedge against inflation.

Is it best to invest or save £20 million?

Whether it’s better to invest or save money is an age-old question, and both come with pros and cons.

The option you choose will depend on your preferences and personal circumstances. 

Consider the following:

• A high-interest savings account will likely yield less returns than a smart investment but is less risky, and your funds will be easy to access. And remember that you’ll still pay tax on any savings interest.

• Investing in shares, commodities, or properties presents you with a greater chance of increasing the value of 20 million pounds. But, there is potentially more risk involved, and your funds will be tied up in those investments for a long period of time. 

Whether you choose to save or invest, you should always aim to beat inflation.

Can you live off the interest from 20 million pounds?

Absolutely, yes. The Joseph Rowntree Foundation, a UK charity, calculates that single working-age adults need £30,500 a year as a minimum income standard, while working-age couples can survive on £43,000 between them. 

Fortunately, as shown in the table above, even a modest 1% interest on £20 million will yield £200,000 per year. This is clearly more than enough to cover the current cost of living in the UK.

However, that amount is before tax, and inflation will also eat away at the value of these returns over time.

It is easy to become reckless with such wealth, so it is vital to be cautious with your spending and investing. If you manage your wealth carefully, you could set up a comfortable way of life for your loved ones and for generations to come.

Get matched with a financial adviser 

The secret to managing your money wisely and earning maximum interest is to get guidance from a knowledgeable financial expert.

Let Unbiased match you with a financial adviser to help you manage your money, inheritance planning, and navigate taxes today.