ISAs vs savings accounts: Your money, your choice

In the showdown between Individual Savings Accounts (ISAs) ISAs and other savings accounts, you need to find the right fit for your finances. But what’s the difference between the two? Let’s break it down in plain English, so you can make the right call for your cash.

What’s a savings account?

Picture this: a safe place for your hard-earned money, with the bonus of earning a little extra in interest on the side. That’s a savings account for you – as long as you follow the terms and conditions!

Difference between ISAs and savings accounts

Here’s the kicker. ISAs have a superpower – they can build interest tax-free*! Yep, that’s right. While other savings accounts can also earn you interest, ISAs take it up a notch. You can earn tax-free interest on savings of up to £20,000 a year***.

What’s an ISA savings account?

Think of an ISA as the VIP section of the savings world. It’s got all the perks of a regular savings account but with added tax benefits**. Whether you’re looking for cash savings, investing in stocks or making lifetime plans, there’s likely an ISA for you.

Just as a heads up, we currently only offer Cash ISAs at Leeds Building Society.^

Benefits of an ISA

Let’s talk perks. With an ISA, you’re not just saving – you’re saving smarter. Say goodbye to handing over your hard-earned interest to the taxman. Plus, ISAs can offer flexibility and choice, letting you tailor your savings game plan to suit your style.

Is an ISA better than a savings account?

It’s like choosing between a regular coffee and a fancy latte – both give you a caffeine kick, but one comes with extras. If you’re all about maximising your savings and keeping more of your interest, an ISA could be right for you.

Choosing a savings account

When it comes to picking the right savings account, it’s like shopping for the perfect pair of jeans - you want something that fits just right. Consider your goals, compare interest rates, and check out the perks each account offers. Whether you’re after easy access, high interest rates or guaranteed returns, there’s a savings account out there with your name on it.

How do ISAs work?

Each year you get an allowance to stash away tax-free cash, stocks or investments in your ISA. For the 2024/2025 tax year that amount is £20,000 per year***.

Any interest, dividends or gains you make? Yep, they’re all yours, tax-free. As long as you don’t go over your ISA allowance (or break any other rules of your account).

You can split your allowance across different types of ISAs, such as Cash ISAs, Stocks and Shares ISAs, Innovative Finance ISAs and Lifetime ISAs. Each type of ISA caters to different financial needs and goals, but the one thing they have in common is that you don’t have to pay tax on the interest you earn in them**.

Read our ISA guide to find out more about how ISAs work.

The wrap-up

In the battle between ISAs and other savings accounts, you get to choose the winner. With the freedom to decide how you save, you have the power to shape your financial future. Whether you’re saving for a rainy day, a dream vacation or retirement, finding the right savings strategy can set you on the path to financial success.

So, what are you waiting for? Explore your options, weigh up the pros and cons, and start saving smarter today! Your money, your choice – make it count.

Take action

Now that you’re armed with this knowledge, it’s time to take action. Weigh up your financial goals, consider your risk tolerance, and choose the savings option that best meets your needs. Whether you opt for the tax-free* benefits of an ISA or the simplicity of a traditional savings account, the important thing is to start saving and investing in your future. Your financial journey begins now!

*Tax-free means that interest payable is exempt from income tax.

**The tax treatment depends on the individual circumstances of each customer and may be subject to change in the future.

^ Cash ISAs are available to individuals aged 18 or over who are resident in the UK for tax purposes.

This guide is intended as a summary only and does not constitute legal or financial advice given by Leeds Building Society. No reliance should be placed on this guide. We recommend that you seek independent legal advice and/or financial advice if you have any questions or queries.

***Deposits in any tax year are subject to the limits set by HM Revenue and Customs (HMRC) and may therefore be subject to change.