Why Your Business Savings Could Be Losing You Money: How to Get Better Interest on SME Cash

Introduction

Did you know that HMRC might actually pay you more interest for early tax payments than your bank pays you on your business savings? It sounds unbelievable, but for many SMEs, that’s the reality. Business savings accounts with the big banks often offer such low rates that even HMRC’s repayment interest looks generous in comparison.

This raises an important question: is your hard-earned money working as hard as it should?

Why This Matters

For business owners, cash is king. Having reserves in place for tax bills, payroll, or unexpected costs gives you security and flexibility. But if those balances are just sitting in low-interest accounts, you’re effectively losing value every day. With inflation still a concern, and better options available from challenger banks, ignoring savings rates can cost your business thousands over time.

The Solution: Shop Around and Be Strategic

1. Compare banks, not just the “big six” – Challenger banks are consistently offering higher savings rates for SMEs than high street names.

2. Segment your savings – Keep money for payroll or immediate costs in easy access, but place tax reserves or long-term funds into higher-yield accounts.

3. Use cash management systems – At Love Accountancy, we help clients set up systems that earmark funds for taxes, emergencies, and future growth. This creates discipline and ensures every pound has a purpose.

4. Don’t ignore the small margins – Even 2–3% extra on your savings can add up to thousands per year, which could be reinvested in staff, equipment, or marketing.

Expert Tips & Common Pitfalls

• Pitfall: Sticking with your “main bank” out of convenience. Most SMEs default to their current account provider, missing better rates elsewhere.

• Tip: Review savings rates at least twice a year. The market moves quickly, and challenger banks often adjust upwards long before high street banks do.

• Tip: Automate where possible. Many cloud-based tools integrate with Xero to help track reserves and manage cash more effectively.

Call to Action

If your business has built up reserves, don’t let poor interest rates erode their value. At Love Accountancy, we help SMEs create practical cash management systems, making sure their money is in the right place at the right time. Book a call today to see how we can help your business make the most of its hard-earned cash.

About Love Accountancy

Love Accountancy is a modern, Exeter-based accountancy firm helping service-based SMEs across the UK manage their finances with confidence. We combine expert advice with smart technology like Xero to save you time, reduce stress, and support your business growth. Whether it’s tax planning, cash flow management, or day-to-day accounting, we’re here to make your money work harder for you.