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.