Use a standard instant access savings account, and if you’ve large amounts of savings, you’ll have to pay tax on the interest. Basic-rate taxpayers have to give 20% of the interest above their £1,000 personal savings allowance earned straight to the Government. For higher-rate taxpayers, it’s 40% above their £500 personal savings allowance. And for additional-rate taxpayers, it’s 45% on all savings interest – there’s no personal savings allowance available for additional-rate taxpayers.
With a cash ISA, there’s NEVER tax to pay on interest.
Cash ISAs are simply savings accounts where the interest is NEVER taxed. And any interest you earn doesn’t count towards your personal savings allowance, so if you’ll earn a lot of interest, you can protect more of it in an ISA.
Just like normal savings accounts, there are a variety of cash ISAs available, including instant access, regular savers and fixed-rate deals. You don’t have to pay to open a cash ISA. For details of the best payers, read Top Cash ISAs.