Types of savings account
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At a glance:
When deciding on a saving account, there’s lots of factors to think about.
The main elements are the interest rate, how often you can withdraw money (if you can at all) and whether you will pay tax on the interest you earn.
You will also need to know about whether your interest rate will change during the term of your account, or stay the same.
Access – fixed vs easy access
When choosing a savings account, you will need to know about access.
All types of savings accounts, including ISAs and regular savers, fall into one of these two access categories:
Easy access accounts let you withdraw your money whenever you need it, without notice or penalties. This flexibility is ideal if you want to dip into your savings from time to time. The interest rate for easy access accounts is often variable, meaning it can go up or down.
Fixed access (or fixed-term) accounts require you to lock your money away for a set period, often one, two, three or five years . In return, they usually offer a guaranteed interest rate, which won’t change during the term. This can be a good option if you’re confident you won’t need the money during that time.
It is important to stick to the rules of the account. Withdrawing money early from a fixed-term account can mean losing some or all the interest you’ve earned or even paying a penalty. Always check the terms before committing your savings.
ISAs
An Individual Savings Account (ISA) is a special type of savings or investment account that lets you earn interest or returns tax-free. This makes ISAs different from other savings accounts, where interest may count towards your taxable income.
Key features of ISAs:
Tax-free savings: You do not pay tax on any interest you earn from an ISA.
Annual allowance: For the 2025/26 tax year, you can save up to £20,000 in ISAs. You can split this allowance across different types of ISAs.
Personal savings: ISAs are individual accounts, so you can’t open one jointly with someone else.
Types of ISA:
Cash ISAs – This ISA offers tax-free interest. It can be easy access or fixed term, depending on the provider.
Stocks and Shares ISAs – This ISA lets you invest in things like shares, funds, and bonds. Returns are tax-free, but your capital is at risk, as the value of investments can go up or down.
Innovative Finance ISAs – These ISAs offer tax-free returns on peer-to-peer lending or crowdfunding investments. These accounts can offer higher returns, but they also carry higher risk and are not protected by the Financial Services Compensation Scheme (FSCS).
Lifetime ISA (LISA) – This ISA helps people save for their first home or retirement. You can open one if you’re aged 18–39. You can save up to £4,000 a year into a Lifetime ISA. The government adds a 25% bonus on your contributions (up to £1,000 per year). However, withdrawing money for anything other than a first home or retirement before age 60 usually results in a penalty.
Junior ISA – This ISA is for children under 18. Parents or guardians can open and manage the account, saving up to £9,000 per year tax-free. The child can access the money only after they turn 18.
Help to Buy ISA – this type of ISA is no longer available. If you already have this type of ISA, you can pay in up to £200 each month. The government will top up your savings by 25% (up to £3,000) when you buy your first home. If you are buying with someone who also has a Help to Buy ISA, both of you will get the 25% bonus. You can pay into the ISA until November 2029. You can claim the 25% bonus until November 2030.
We only offer Cash ISAs.
Fixed rate bonds
A fixed rate bond is a type of savings account where you agree to lock your money away for a set period for a guaranteed interest rate. This means you’ll know exactly how much interest you’ll earn. The interest you earn is not tax free.
These accounts are ideal for savers who don’t need to access their money and have a lump sum ready to save.
Regular savings accounts
You can build your savings gradually by depositing money every month into a regular savings account. They are ideal if you want to develop a saving habit or are working towards a goal.
These accounts often come with rules about how much you can pay in each month:
You may need to pay a specific amount in each month.
There may be a limit on how much you can pay in each month (for example, up to £250 per month).
You usually cannot carry over an unused allowance from one month to the next, and missing a payment might change the interest you earn.
Interest rates on regular savers can be higher than standard savings accounts, but they often come with conditions, such as keeping the account open for a full year or limiting withdrawals. Some accounts may reduce your interest rate or close the account if you break the terms.
Children’s accounts
Young people can start building good financial habits early by having a children's savings account.
How they work
Tax-free or tax-efficient savings: Some accounts, like Junior ISAs, allow savings to grow without paying tax on the interest.
Flexible or regular saving options: Some accounts allow occasional deposits, while others encourage regular monthly contributions.
Access rules: In many cases, an adult manages the money in the child's name until the child reaches 16 or 18.
Things to keep in mind
Contribution limits: Junior ISAs, for example, have an annual limit (currently £9,000 per tax year).
Withdrawal restrictions: Some accounts do not allow withdrawals until the child turns 18, while others may allow limited access.
Interest rates: These can vary widely between providers and may depend on how often you save or how long the money stays in the account.
Each provider sets its own rules, so it’s important to compare your options carefully.
The content on this page is for reference. It is not financial advice. For help with money issues, try MoneyHelper.
