Surplus cash can give a business valuable breathing room. A current account offers convenience, but many accounts pay little or no interest. Therefore, spare cash may earn more elsewhere.
You need to balance three things:
- Return
- Access
- Security
You should never chase a higher rate without considering when you need the money.
Why Surplus Cash Deserves Attention
Recent analysis highlights that only 28% of SMEs actively manage their surplus cash. Meanwhile, 64% keep it in current accounts, which often offer low returns or no interest.
The research found active businesses achieved average returns of 3.4%. Passive businesses achieved only 2.3%. This gap could cost a passive SME up to £18,000 each year. Over several years, the missed income can grow significantly.
For small businesses, this matters because the cash already exists.
Saving Options to Consider
Business savings accounts usually fall into three main groups. Each option offers a different balance between access and potential return.
Instant or Easy Access Accounts
These accounts usually let you withdraw money quickly, so suits funds that may support short-term cashflow. Rates can still beat many business current accounts. However, providers can change variable rates at short notice.
Notice Accounts
These accounts require advance notice before withdrawals. In return, providers may offer a stronger rate than instant access accounts. These accounts can suit planned future costs. However, they work poorly for money that could cover an unexpected bill.
Fixed-Term Accounts
These accounts lock your money away for an agreed period, offering attractive rates but reduced flexibility. The percentage gross means the interest rate before tax. Meanwhile, AER shows how interest could grow over a year.
Deposit Protection
Interest rates matter but so does protection. The Financial Services Compensation Scheme protects eligible deposits with UK-authorised firms.
Since December 2025, the standard deposit protection limit has stood at £120,000. The limit applies per eligible depositor, per authorised firm.
A limited company or Limited Liability Partnership (LLP) can receive separate protection as a legal entity. Sole traders share their limit across personal and business deposits.
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This article is for general informational purposes only and does not constitute legal or financial advice. While we aim to keep our content up to date and accurate, UK tax laws and regulations are subject to change. Please speak to an accountant or tax professional for advice tailored to your individual circumstances. Pi Accountancy accepts no responsibility for any issues arising from reliance on the information provided.