Have you saved up, inherited, or won £1 million? And you are trying to do the sensible thing by investing them and raking in the passive interest rate income?
This article explains just how much interest on 1 million pounds is offered by various saving institutions in the UK.
Let’s get to it!
Interest rates impact everything from the monthly payments paid on a house loan to the passive income generated by various investments.
While borrowers should seek out the lowest available interest rates, so they owe less and meet their financial goals faster, lenders would make more money at higher rates. To put that into context, the average interest rate for credit cards was at 20.65% in 2020.
Therefore, if you are investing £1 million, look for a financial institution that offers high-interest rates, so the income you receive helps you set up a steady revenue source for your future.
Currently, the standard interest rates offered by UK banks vary between 0.25% and 0.5%, meaning the weekly interest on £1m varies between £48.1 and £96.1.
However, since certain savings institutions may offer much better interest rates, we go through the daily, weekly, and yearly calculations of different rates in the table below:
So, what kind of interest rates should you be looking for to live off your investment? Well, the average UK salary is around £500 to £600 per week—enough for a regular lifestyle. Therefore, if you open a savings account at a 2.5% rate, you would hypothetically ‘live off the interest’.
However, since UK banks do not offer great interest rates, look into other types of investments to see high-yield profits. For instance, property management and/or stocks and shares can prove a valuable investment with a high return. It’s also worth considering the risk involved into these investments and consider low risk ones when you’re starting.
Now that you have the big picture, it’s time to start making the proper investments, so you ensure a comfortable and financially stable future. However, once you find the best interest rates for 1 million pounds, remember to calculate the UK interest tax as well, which varies between 20% to 40%, to determine your actual income.
The interest you accrue on £1 million depends on the rates you were able to obtain and the tax rates you have to pay. If you open a savings account at a 0.5% interest rate and pay 20% tax, you would earn around £4,000 every year.
Since most UK banks are working with an interest rate of 0.25%, you could earn around £2,500 per year, or £192.32 per month, if you open an account with them.
If you wonder just how much interest on 1 million pounds you can earn daily in the UK, again, it depends on the rates you obtained. At the standard 0.25% interest, for instance, you earn around £8.86 per day.
My name is Marija, and I'm a financial writer at DontDisappointMe. Although finance might not be everyone's cup of tea, my 10+ years of working in one of the biggest banks in my country, and my interest in extensive research on everything finance/investment-related, have made me somewhat of an expert in the field (if I do say so myself). No longer having the passion to work in a corporate setting, I decided that I couldn't let all of this knowledge go to waste so I started writing. And, here I am! Today I try to share my knowledge with my audience in the hopes of making this topic as simple and interesting as possible. In my leisure time, I like spending time with my family and travelling to new locations.