Which savings account is right for me?

Banks and building societies offer savings accounts because holding cash deposits lets them loan money to other customers, which is how they make a profit. It can also lead to savings customers taking other products like current accounts, mortgages and loans. Interest is worked out as a percentage and paid into the account on a monthly or yearly basis. 

It's a very safe way to save your money, as up to £120,000 per person is protected by the Financial Services Company Scheme (FSCS). That means you'll get your money back if something happens to the bank or building society. Money beyond this limit isn't covered, so it's worth checking that your accounts aren't with banks or building societies in the same group.

You can deposit and withdraw your money in lots of ways, including online banking, mobile banking, telephone banking, and in-branch visits.  Some accounts can have minimum amounts you’ll need to pay in to open them or require regular payments. 

Both savings accounts and ISAs are good ways to save your money, but they have a few differences which we’ll lay out below. 

Tax

In a regular savings account, you may have to pay UK Income Tax on your savings interest. You’ll get a Personal Savings Allowance (PSA) of up to £1,000 based on your earnings, any interest  received above that is taxed. How much you’ll pay will depend on whether you’re a basic rate (20%), higher rate (40%) or additional rate (45%) taxpayer. 

If you earn below £17,570, you could get an additional allowance called the Starting Savings Rate, which starts at £5,000 for people below the tax threshold of £12,570 and drops by £1 for each £1 you earn above it. This is added to your PSA. So, if you’re below the tax threshold, you could earn up to £6,000 in savings interest before you pay any tax. 

You'll need to notify HMRC about the interest received and pay any tax due.  If any tax is due, it will either be taken by including it in the following year’s tax code, if you pay take through the PAYE system, or you’ll pay it as part of your self-assessment tax return. 

With an ISA, if you keep within your ISA allowance, then your savings interest or investment gains are free from UK Income Tax or Capital Gains Tax. That means you’ll keep more of the money you’ve made.  

Contribution limits

There are no limits to how much you can put into different savings accounts in a tax year. Although, individual accounts may have a maximum you can put in. It’s also wise to remember the £120,000 FSCS compensation limit per person. 

With an ISA, you’re limited to a £20,000 allowance in any tax year. This can be split across any ISAs you hold or open. We have more information on ISA allowances here.

Flexibility

With savings accounts you get a choice about the access to your money. With some, you can take out cash at any time without penalties, making them ideal for short-term goals or an emergency fund to cover unexpected bills. Others can require notice or that you leave your money there for a fixed term. 

Some ISAs do offer you flexibility to withdraw and pay back your money in the same tax year, but you’ll be limited by the £20,000 ISA allowance.  

Options for your money

With savings accounts, your money will stay in cash. Some accounts, like easy access savings, allow you to withdraw funds whenever you need them, making them useful for short-term goals or emergency funds. Others, such as fixed-term accounts, may offer higher rates but limit access for a set period.

ISAs offer a range of investment options, including cash ISAs, stocks and shares ISAs (where your money is invested in the markets), and others like innovative finance ISAs that focus on peer-to-peer lending.

When your money is invested, this gives opportunities for bigger returns, but also comes with higher risks compared to a standard savings account – and you may get back less than you’ve paid in. If you’re looking to invest for the longer-term, at Aviva we offer a stocks and shares ISA. 

The value of your investment can go down as well as up – and you may get back less than you’ve paid in. 

With an easy access account, you get the flexibility to withdraw your money whenever you need it with no penalties or restrictions – but with some it can take up to 3 working days to get your money. Easy access savings accounts offer variable interest rates – which can go up or down over time based on market conditions. Usually, these accounts offer lower interest rates compared to fixed-term accounts as a trade-off for having access to your money whenever you want. 

With a notice account, you'll have to give advance notice to the bank or building society before you can take money out. These notice periods could range from one month to six months, depending on the specific account and provider. Some providers may offer periods outside of this range, too. Once you've deposited your money, you typically can’t withdraw it until the end of the notice period – or without losing some or all the interest. Notice savings accounts usually offer higher interest rates compared to easy access savings accounts, as an incentive for you to keep your money in the account for longer periods.

A fixed term savings account lets you deposit a lump sum of money for a set amount of time – anything from three months to five years. In return, you get a fixed rate of interest. Once you've deposited your money, you typically can’t withdraw it until the end of the fixed term – or without losing some or all the interest. The benefit of fixed-rate savings is that you can generally find some of the best interest rates around. You’ll need to be sure you won’t need any of that money quickly though, so it’s not a great place for something like an emergency fund. 

We offer fixed terms starting from as short as three months. If you're looking for an easy access, notice or fixed term account, try Aviva Save – it’s our one-stop savings marketplace with a range of competitive accounts.