Businesses and individuals should make surplus cash work harder

Businesses and people with surplus cash should make sure they’re making the most of that money, as it can be working quietly in the background raising additional funds if it is deposited in the right accounts.

Just 28% of small and medium enterprises (SMEs) actively manage their surplus cash, according to research from Cebr and Flagstone Investment Management, and 64% of SMEs are leaving their surplus cash in accounts that earn low or no interest. The result is each passive SME is losing as much as £18,000 of potential income from interest.

If you can tie up some cash for a period of time, you can often get a higher return than in an instant access account. But either way, you would be getting better returns on your cash by moving it out of your current account, when most don’t pay any interest.

Before moving money, make sure it is genuinely surplus to requirements. Businesses should retain enough accessible cash to meet tax, payroll, supplier and other short-term commitments, while individuals should maintain an appropriate emergency fund. 

What options are there for businesses?

There are various types of accounts that businesses can access to get their surplus cash working harder. For example, at the time of publication, some limited-access business savings accounts were paying around 3.90% AER. Rates, eligibility requirements and withdrawal restrictions can change, so the latest terms should always be checked directly with the provider.

The same Cebr and Flagstone research found that the average small SME holds around £225,000 in surplus cash. At an interest rate of 3.90% AER, this could generate approximately £8,775 in gross interest over a year, assuming the balance and rate remained unchanged. Interest received by a company will normally be included in its taxable profits.

However, you may be able to earn more if you are prepared to tie up your money for a longer period. For instance, at the time of publication, Union Bank of India (UK) Ltd was paying 4.76% gross per annum on its one-year business fixed-rate deposit, on deposits between £1,000 and £1 million. Early closure is not permitted. A deposit of £225,000 could generate £10,710 in gross interest before tax, assuming the account is held for the full year and the stated rate applies when it is opened.

Before depositing a large balance, check the provider’s FSCS status and whether it shares a banking licence with any institution where you already hold money. FSCS protection is generally limited to £120,000 per eligible person or company, per UK-authorised banking group. Therefore, a deposit of £225,000 with one banking group may not be fully protected.

This additional income could support the business with recruitment, investment or other operating costs, although the amount available to spend will depend on tax and the business’s wider financial position. 

What about individuals?

Individuals can also be slow to maximise the return on their savings, which can also become costly. Spring Savings found there are more than one million current accounts holding £50,000 or more which are earning no interest in the UK. The total amount held in these accounts was worth around £116 billion collectively at the end of March 2026 when the research was done.

However, this doesn’t include those accounts holding below £50,000, which would make the amount considerably higher. In total, the research showed that 91.2m current accounts across the UK were in credit when the research was done, and no interest was being paid on 87% of them.

Derek Sprawling, Head of Money at Spring, said: “Many savers may not realise just how much they could be missing out on by leaving larger sums in a current account that pays no interest. Often, it comes down to convenience or habit, but with balances of £50,000 or more, the missed returns can be significant.

“This is a reminder to check where your money is held and whether it could be working harder in a competitive savings account. There’s no need to compromise on access to receive a fair rate of return.” 

What rates can individuals get?

The rates individuals can get will again depend on whether they’re happy to tie their money up for a period, or they want to be able to access their money instantly. For instant access, the Lemfi Instant Access Savings Account is paying 5% AER, but this includes a bonus for six months, and reverts to 3.04% AER after that. This rate, including the bonus, is paid on amounts between £1 and £250,000. You would be able to make withdrawals from this account without restriction, according to Moneyfacts.

If you are happy to wait before accessing your money, the Afin Bank 3-Year Fixed Term Account (Issue 4) was paying 4.86% AER at the time of publication on balances between £1,000 and £200,000. The money must be left in the account for 36 months, so you should only commit funds that you are confident you will not need during that period.

Remember to keep some money readily accessible for emergencies. Rather than basing this on salary, consider retaining enough to cover several months of essential household expenditure. The appropriate amount will depend on your personal circumstances, income security and regular commitments.
Interest earned outside an ISA may be taxable. The amount payable will depend on your other income and whether you are entitled to a Personal Savings Allowance.

Important: This article is for general information only and does not constitute financial, investment, legal, tax, regulatory or insurance advice, or a recommendation of any product, provider or course of action. The information, figures, fees, interest rates, tax rules, allowances, legal requirements, products and account terms referred to were believed to be correct at the time of writing but may have changed since publication. Do not rely on this article as a statement of the current position. Always check the latest information with the relevant government department, regulator or provider and obtain appropriately qualified professional advice before taking or refraining from action.

Contact us

If you would like help reviewing how much cash your business needs to retain for tax, working capital and future commitments, please contact us. For advice on selecting a particular savings or investment product, you should speak to an appropriately authorised financial adviser.