Choosing between an ISA and a savings account
In this guide
How do I decide what’s right for me?
Deciding whether to open a savings account or an Individual Savings Account (ISA) can feel overwhelming. By understanding the differences between the two, you can empower yourself to decide which best suits you.
| Savings | ISAs |
|---|---|
| You may pay tax on your interest earned, dependent on your earnings. | Any interest earned on an ISA is tax-free*. |
| Different savings accounts have different limits on how much can be saved in them. | Save up to £20,000 in the current tax year. Some ISAs allow you to transfer in your allowance from previous years too. |
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You can choose between: |
You can choose between:
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Some savings accounts allow you to withdraw or add money at any time. Some may have a withdrawal limit. That means you may only be allowed to make a certain number of withdrawals each year. |
Flexible cash ISAs allow you to take money out and replace that money in the same tax year. Not all ISAs are flexible, so if that’s important to you, make sure you check carefully before you open one. Like savings accounts, some ISAs may have a withdrawal limit. That means you may only be allowed to make a certain number of withdrawals each tax year. |
| You can open multiple savings accounts, but some will only allow you to open one account. | You can save in multiple ISAs of the same type in each tax year (apart from lifetime ISAs). However, some providers may only allow you to save in one cash ISA with them. |
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.
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