There is a huge selection of savings accounts in the United Kingdom (UK) for you to put your extra cash in. Though, how can you choose which is the best for you and what are the differences between the accounts? We look at the accounts and the particulars you need to save your money in each. When saving in the UK a lot depends on a range of factors; are you a British tax payer, how much money you have, how long you’re are willing to put it away for without touching it for?
All these factors will determine which the best savings account is for you. Lets look at five types of saving account and the options that you should look at when making your decision.
Instant Access Savings Accounts
This is the most accessible type of bank account. Just put your money into these accounts for easy withdrawals. Some banks allow you to withdraw from these with a bank card, others over the counter. You can also transfer money online across to your current account within days with an Instant access savings accounts. The downside of these accounts is that they offer only low interest rates. There may also be a bonus interest rate as an introduction which falls after a certain period. Some Instant access savings accounts allow users to transfer some money to their current account without penalising the interest rate.
UK taxpayers can use ISA’s to make the most of their savings. You usually have to pay tax on your savings interest return at either the 20% or 40% rate; however with a tax ISA this can be a thing of the past. ISA’s allow you to earn tax free interest, so you will not have to pay any tax whatsoever on the interest you make on an ISA. However ISA’s don’t offer the most attractive rates of interest return and so may not suit everyone’s needs. You should check the return after tax you will receive on a normal savings account and compare it to the return you will get on a tax ISA account. Ensure you take into account your tax rate when doing this, as you will be taxed at the higher end of it if you are in the 40% bracket. If you are not a UK tax-payer you won’t have to pay tax on any savings, so it is best to go for a higher paying savings account. The limit of the amount of money you can put in an ISA is £5,340, once you’ve saved this you will need to put money in a different type of savings account if you wish to keep saving.
Notice Savings Accounts
These bank accounts are called so as you need to give notice of when you want to take savings from your account. You can give your bank 30, 60, 90 days of notice before you take the money out. Otherwise you may be penalised. These offer higher interest rates than many other accounts. They are generally in the format of variable interest, meaning you should shop around and examine the market before you save with one of these.
Normal Savings Accounts
Savers have to deposit money each month in these no matter what. They may also restrict you putting in more than a certain amount each month. As well as this savings accounts may limit the amount of withdrawals you can make. Interest rates are also pay on the amount you build up gradually. So though they may look attractive your interest return may be more modest.
Fixed Rate Bonds
You get a fixed rate on your savings however you can’t touch your money in the period you’ve invested your money. The longer you invest the better your return will be. This can be from 1-5 years, depending on your preference. You may be able to get the money out in an emergency but your interest rate return will suffer badly. They are a good way to protect savings in a time of falling investments, but if bond rates increase after your investment in good times; you’ll only get the original lower rate meaning your bond is losing out.
The information contained within this article about savings accounts is the opinion of the author and is intended purely for information and interest purposes only. It should not be used to make any decisions or take any actions. Any links are included for information purposes only.