What is a fixed rate bond? | Guide to fixed rate bonds | YBS
How do fixed rate bonds work?
Fixed rate bonds are accounts that are fixed for a period of time. Bonds with a fixed term can mean a higher rate of interest.
The interest rate will remain the same from when you open the account to the end of the agreed period. This makes fixed rate bonds an option for people who don’t need to access to their money for a while. The interest can either paid monthly or annually.
How much can I pay into a fixed rate bond?
- For most fixed rate bonds, there is a minimum amount of money you will need to pay in to open it.
- The top limit you can pay into a bond is usually high, up to a few million (our top limit is £2m).
- The first £85,000 placed into the account will be protected by the FSCS.
How much you need to open a bond or the top amount you can pay in will depend on the provider and account you choose.
Do you pay tax on fixed rate bonds?
How much tax you need to pay will depend on:
- How much interest you earn.
- How much interest you earn from other accounts.
- When you close the account.
Whether you pay tax on your interest will depend on how much you earn and what your personal savings allowance is.
Can you close a fixed rate bond early?
It is highly unlikely that you will be able to close your fixed rate bond account without a penalty.
Some providers may allow you to exit but may charge you interest. You will be able to find the specific terms and conditions of the account from your provider.
In the case of exceptional circumstances, you may be allowed early closure for reasons such as:
- Critical illness
- Terminal illness
- Death of an account holder
- Court order.
Pros and cons of fixed rate bonds
Here are some that may help you to decide on whether a fixed rate bond is right for you:
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