Two options are Individual Savings Accounts (ISAs) and savings accounts.
While both could help your money grow, picking the right one (or a combination of both) for your circ*mstances can help ensure your money grows as fast as possible.
ISAsare a tax-efficient way to save money. The government sets a limit for how much can be saved each financial year, and doesn't charge any tax on the interest/income you earn. In the current tax year, this limit is £20,000. There are several types of ISAs including:
Some ISAs have certain conditions and bonuses that can help speed up your saving.
Cash ISA age limit
From 6 April 2024, there are changes to how old you need to be to open a cash ISA.
To open a new cash ISA, you need to be either:
ISA providers aren't obliged to offer the transitional arrangements. HSBC won't allow customers under 18 to open a new cash ISA from 6 April 2024, but will consider changing this in the future.
Subscribing to more than one of the same type of ISA
If you're aged 18 or over, you'll now be able to subscribe to more than one of the same type of ISA in the same tax year – subject to staying within the overall annual limit.
For example, you could subscribe to a cash or stocks & shares ISA with one ISA provider and also subscribe to one with a different provider.
This change doesn’t apply to Lifetime ISAs, where it's still only possible to subscribe to one Lifetime ISA in a tax year. HSBC doesn't offer Lifetime ISAs.
From April 6 2024, ISA providers are not obliged to allow subscriptions to more than one ISA of the same type in the same tax year with themselves, and HSBC will not be offering this.
Other optional changes that not all providers are implementing
If you've gone a whole tax year without making a subscription to an existing ISA, you can now restart subscriptions without needing to complete a new application.
Since 6 April, some providers allow you to make a partial transfer of subscriptions made in the current tax year, but HSBC is not currently allowing this.
We'll update our website if we make any changes to our ISAs in the future.
You can use a savings account to put away money you don't immediately need in order to earn interest. Depending on your circ*mstances, you may be charged tax on the interest earned. Some accounts may also have restrictions on making withdrawals.
Easy access accounts
You can withdraw your money whenever you like without paying a penalty. The interest on these accounts is usually not fixed, so banks may alter the interest rate.
Fixed term accounts
You can put your money away for a set period of time and will earn a fixed rate of interest, but there may be restrictions on how you can access your money.
Regular savings accounts
You can contribute money each month up to a certain limit. These accounts usually offer a slightly higher interest rate than ordinary savings accounts, but there may be restrictions on how you access the money.
If you’re saving an amount up to £20,000, an ISA offers you a tax-efficient way to save.
The value of anISA can also be passed onto your spouse, or civil partner, tax-efficiently if you pass away. This isn't the case with an ordinary savings account.
However, this depends on your individual circ*mstances and may be subject to change in future. Additional rate taxpayers do not qualify for a PSA.
Some savings accounts can also offer more flexibility in accessing your money. This can be helpful if you’re not comfortable locking away your money for a set period.
Use oursavings comparison toolto help find the right savings account for you.
The value of any tax benefits described depends on your individual circ*mstances. Tax rules may change in the future.
FAQs
If you're saving an amount up to £20,000, an ISA offers you a tax-efficient way to save. The value of an ISA can also be passed on ISA can also be passed on This link will open in a new window to your spouse, or civil partner, tax-efficiently if you pass away. This isn't the case with an ordinary savings account.
Which is better, an ISA or a savings account? ›
If you want to protect yourself from paying tax on any interest income, then an ISA may be your best choice. But if you want to frequently add and withdraw money, a general savings account may better suit your needs.
What is the savings rate for HSBC ISA? ›
Key HSBC cash ISA account details: HSBC Cash ISA Loyalty rate: 2.85% AER (2.81% tax free) HSBC Cash ISA Standard rate: 2.50% AER (2.47% tax free) HSBC Cash ISA Premier customer loyalty rate: 3.20% AER (3.15% tax free)
ISA child ISA better than savings account? ›
A Junior Cash ISA is similar to a bank or building society savings account although the money is locked in and cannot be withdrawn until age 18. But Junior Cash ISAs come with one big advantage – your child doesn't have to pay tax on the interest they earn on their savings, and you don't have to either.
Does an ISA count as savings? ›
An ISA is an Individual Savings Account – it allows you to save or invest money in a tax-efficient way.
Why choose ISA over savings account? ›
ISAs are tax-free. No income or capital gains tax is imposed on returns in the ISA, while the returns on a savings account are liable to income tax. ISAs are flexible and offer many investment opportunities, making them earn better interest than a regular savings account.
Why use an ISA over a savings account? ›
You could pass on your ISA balance to your spouse or civil partner as a tax-free allowance in the event of your death. This isn't something that traditional savings accounts provide. An ISA is a safe place to save your money without any investment risk.
Does HSBC have a high interest savings account? ›
HSBC offers a broad range of savings accounts with interest rates up to 5%.
How does HSBC ISA work? ›
Cash ISAs work like other savings accounts, with the added bonus of being tax efficient. You can choose from: fixed rate cash ISAs – which offer you a fixed interest rate over a set period of time. variable rate cash ISAs – which have a variable interest rate over a set period of time.
Which UK bank has the best ISA? ›
Easy-access cash ISAs – what we'd go for
| Top rates for online accounts with unlimited withdrawals. Though rates can be beaten below. |
|---|
| Charter Savings Bank (min £5,000) | 4.97% | Online |
| Family BS (min £500) | 4.86% (min withdrawal £100 a time) | Online/ post/ branch |
| Kent Reliance (min £1,000) | 4.86% | Online/ branch |
8 more rowsWhat are the pros and cons of cash ISAs?
- Advantages: Tax-free savings, stable value, and the ability to transfer to better accounts.
- Disadvantages: Interest rates may decrease, funds might be locked in fixed-rate ISAs, and not all accounts permit transfers, sometimes incurring exit fees.
In times of low interest and high inflation, ISAs aren't always the best place for your savings. This is because the amount of interest you can earn, which is often linked to the Bank of England's base rate, usually doesn't beat the rate of inflation.
Should I open a junior ISA or savings account? ›
A Junior ISA is recommended as the best ISA for children. It is designed for children and is tax-efficient to save for your child's future. A Junior stocks and shares ISA account is ideal as you can earn higher interest than a Junior cash ISA. However, Junior stocks and shares ISAs are riskier.
Is it safe to have more than 85000 in bank in the UK? ›
The FSCS protects 100% of the first £85,000 you have saved, per UK-regulated financial institution (not per account). So in simple terms, if your bank were to fail, the FSCS aims to get any savings up to this amount back to you within seven working days.
Do I have to pay tax on my savings in the UK? ›
Personal Savings Allowance
You may also get up to £1,000 of interest and not have to pay tax on it, depending on which Income Tax band you're in. This is your Personal Savings Allowance. To work out your tax band, add all the interest you've received to your other income.
Is there an ISA for over 60s? ›
A cash ISA for the over 60s is a savings account that comes with extra tax benefits. ISAs, which stands for Individual Savings Accounts, were introduced by the government more than 20 years ago to replace PEPs (personal equity plans) and TESSAs (tax-exempt special savings accounts).
What are the disadvantages of an ISA account? ›
What are the disadvantages?
- Contribution limits: Cash ISAs and investment ISAs both have a contribution cap of £20,000 for the current tax year (2019/20).
- No tax relief: ...
- Withdrawn money cannot be replenished: ...
- Allowance cannot be carried forward: ...
- You cannot have an ISA in joint names: ...
- Inheritance tax liabilities:
Putting money into an ISA
Every tax year you can save up to £20,000 in one account or split the allowance across multiple accounts. The tax year runs from 6 April to 5 April. You can only pay into one Lifetime ISA in a tax year.
Do you pay tax on ISA interest? ›
You pay no Income Tax on the interest or dividends you receive from an ISA and any profits from investments are free of Capital Gains Tax.
Is there any benefit to an ISA? ›
Some of the main advantages include: Tax-free — As with all types of ISA, you can save tax-free. For 2023-2024, you can invest up to £20,000 in ISAs without paying tax on the interest you earn. You also don't need to declare your cash ISA on a tax return, so that's one less bit of admin to worry about.
