If you want to save money, you need to decide where to keep your savings. Two options are cash ISAs and savings accounts.
The main difference is that a cash ISA is a tax-efficient way to save money. Interest on your savings is paid free from UK income tax and capital gains tax.
While both could help your money grow, choosing the right one (or a combination of both) for your circumstances can help maximise your money’s growth potential.
The government sets a limit for how much can be saved in an ISA each financial year and doesn't charge any tax on the interest or income you earn. In the current tax year, this limit is £20,000.
As well as cash ISAs, there are other types of ISA, such as stocks and shares ISAs. Any income or capital gains made from investments held in a stocks and shares ISA are exempt from UK income tax and capital gains tax.
A savings account is a bank account you can use to put away money you don't immediately need in order to earn interest. Depending on your circumstances, you may be charged tax on the interest earned.
With a regular savings account, you can contribute money each month up to a certain limit. These accounts usually offer a slightly higher interest rate than ordinary savings accounts, but there may be restrictions on how you access the money.
If you’re saving an amount up to £20,000, an ISA offers you a tax-efficient way to save.
There's no annual limit on how much you can put into savings accounts.
With your Personal Savings Allowance (PSA), you can:
However, this depends on your individual circumstances and may be subject to change in the future. Additional rate taxpayers do not qualify for a PSA.
Some easy access savings accounts can also offer more flexibility in accessing your money, compared to non-ISA regular savings accounts. This can be helpful if you’re not comfortable locking away your money for a set period.
Use our savings comparison tool to help find the right savings account for you.
The value of any tax benefits described depends on your individual circumstances. Tax rules may change in the future.
A Junior ISA is a tax-efficient savings account for children under 18.
They can't withdraw the money until they turn 18.
HSBC doesn’t currently offer Junior ISAs, but you can find out more about them in our guide.
