How to choose a savings account

Savings or ISA? 

So, you want to start saving? You'll need to choose a savings account that suits your goals.  

Before you decide what savings account is right for you, there are a few things to think about. 

A savings account and an Individual Savings Account (ISA) each offer different benefits. However, one may be more suitable for your circumstances than the other. It's a good idea to compare the differences before choosing. Here are some of the differences between a savings account and an ISA: 

How long do you want to save for? 

Thinking about how long you want to save for will help you decide what account suits you. Both savings accounts and ISAs can come with a variety of different term lengths.

Do you need access to your money? 

Some savings accounts don’t allow you to withdraw money, or may limit the number of withdrawals you can make. Think about how often you might want to access your savings before deciding which account to open. 

What’s the interest rate? 

The interest rate is the amount you earn from your savings. Depending on the account you choose this could be paid monthly, annually or at the end of the term. As it can vary, you should think about which option suits your needs. 

Compound interest

Will you need to pay tax? 

Any interest earned on an ISA is tax-free*. However, if you have a savings account which isn't an ISA, you may need to pay tax on the interest you earn. The UK Government sets allowances for each financial year which will determine whether you need to pay tax. This is based on the amount of interest you earn and your income. 

The information in this guide was accurate when published.    

*Tax-free means the interest you earn isn’t subject to UK Income Tax and Capital Gains Tax. Tax treatment depends on your individual circumstances and could change in future.