YouTube thumbnails should be at least 1280 × 720 pixels. If you go larger, just make sure it has a 16:9 ratio.
Since thumbnails are usually viewed at very small sizes on YouTube, it’s important to regularly zoom out while designing and watch for details that get lost, especially text with low contrast.
In Photoshop, keeping the Navigator panel open (Window > Navigator) provides a constant small preview of your thumbnail while you work at full size. This makes it easier to catch readability issues early.
When exporting, use JPEG or PNG and keep the file size under 2MB. A quick and reliable option is File > Export > Quick Export as JPEG, with the quality set around 7, which maintains image clarity while staying within YouTube’s limits.