Getting a savings account is usually very easy – many can be opened online in a few minutes. Here’s how to decide which type is best, compare the top rates and regularly check you’re still getting the best deal.
Work out which type of account is best
Which is best will depend on what you want to do.
Pay in and withdraw money whenever
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The money is on hand when you need it. If you get certain benefits, the Help to Save scheme is best as it gives a 50% bonus. |
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All interest is tax-free. You can save up to £20,000 before 6 April. |
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You’re entered into a monthly prize draw rather than paid interest. You can save up to £50,000. |
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Some bank accounts might pay interest on certain amounts, but many don’t. |
Work around restrictions to maximise the return
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Gives a 25% bonus on savings used for retirement or buying a first home. You need to be aged 18 to 39 to open one. |
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Let you save a set monthly amount in return for a higher interest rate. But you might not be able to withdraw money. |
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Guarantee an interest rate for a set period between six months and seven years. But you can’t withdraw money until the end. |
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If you’ll pay tax on savings interest, these can pay more than normal bonds above. You can withdraw or close early, usually for a fee. |
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Notice accounts |
To take money out you’ll usually need to give between 30 and 120 days’ notice. |
You can have multiple savings accounts, so you might decide opening more than one type is best. For example, one for emergency savings you can access and one with money you can lock away for a higher rate.
If your bank contacts you about changing your interest rate, use this as a trigger to shop around to see if it can be beaten elsewhere.
Work out if you’ll pay tax on savings interest
How much tax-free interest you can earn (6 April to 5 April) depends on your annual income. See how does tax on savings work for a full breakdown.
Interest is assessed for tax in the tax year you can access it. Try the Bank of England’s savings calculatorOpens in a new window to work out how much interest you’d get.
If this is more than your allowance, look for a tax-free savings account for the rest.
Spread your money if you have more than £85,000
The first £85,000 per person, per banking group is protected, so you’d get your money back if a bank were to fail. The exception is NS&I, where all of your savings are protected.
The Financial Services Compensation Scheme (FSCS) protection checkerOpens in a new window shows which banks are covered.
Pay off debts that cost more than savings pay
Savings usually pay a lower interest rate than the one you pay to borrow. So you’re often better off clearing debt first. See our guide How to reduce borrowing on credit for more information.
Compare the top rates
The following sites all list the top paying savings accounts:
- MoneySavingExpert’s top savings comparisonOpens in a new window
- Moneyfacts’ best savings comparisonOpens in a new window
- Which? round up of the best savings ratesOpens in a new window
It’s then a case of opening your chosen account. Many will let you open online in a few minutes, though there are options you can open in an app, over the phone, via post or in a branch.
Always check for any withdrawal restrictions or penalties for closing early. For example, some accounts only let you take out money on one day per year.
Help with the cost of living
Worrying about money because of rising rents, high energy bills or debt? If so, we’re here to help.
Take the first steps to find your way forward with our guides to help you with the cost of living.
Regularly check you’re getting the best rate
The top savings rate can change several times a day, with different banks competing to be the best. So, unless all of your money is in a fixed rate bond, it’s a good idea to regularly check if your rate can be beaten elsewhere.
If your bank increases your rate, still shop around
You’ll be told if your interest rate will increase (or decrease) ahead of time, usually by email or letter. Use this as a trigger to compare the top rates – if your bank has changed their rate, it’s likely others have too.
Banks must make sure you’re on a fair deal – but this doesn’t mean it has to be the best in the market.
