Should I Get a Cash ISA or a Cash Savings Account?
For keen savers, putting your money in the right account to gain interest is key to making the most of the money you have. But how do you choose between a Cash ISA and a Cash Savings ISA?
One reoccurring question in financial sphere is whether or not a saver should get a Cash ISA or a Cash Savings Account. The answer is fairly simple.
The right savings account for you will depend on one key factor: you.
Your needs, savings goals, spare cash and what you want from your account should be your main concerns when picking a savings account.
A Cash ISA is a savings account in tax free wrapper. You can deposit up to £20,000 in any ISA account every tax year under the current tax allowance. Any interest you earn on these savings is completely tax free.
A Cash Savings Account is exactly what is says on the tin – it’s a savings account. Your savings can gain interest here too and these are tax-free up to £1000 for basic rate tax payers, and up to £500 for higher rate taxpayers. Often these will pay interest at higher rates than Cash ISA accounts, but any interest earned beyond the allowance will be taxed.
I should get a Cash ISA if….
- You don’t want any of your interest to be taxed
- You’re long-term saving
- You’ve not taken advantage of any of your £20,000 tax-free allowance for this tax year - use it or lose it!
- You’re able to save a larger amount of money
- You know you’ll need access to your funds at a fixed point (A Fixed-Term Cash ISA would be the best fit here)
- You’ve already used your tax savings allowance on a regular Cash Savings Account, but have more savings and want to earn more interest
I should get a Cash Savings Account if…
- You don’t think you’ll earn more than £1000 in interest per tax year
- You are in a good habit of regularly saving small amounts
- You know you’ll need immediate access to your funds
- You want to earn a higher interest rate on your savings (compared to Cash ISAs)
- You have the time to research and switch accounts each year, to make sure you get the best deal possible.
More about the best Cash ISA deals.