Savings account types explained
Learn about different types of savings and ISA accounts, how they work and what might be the right account for you
Published:21 Jan 2025
How savings accounts work
Savings accounts provide a place for you to put your money aside - whether that’s in a lump sum, or to gradually grow your savings.
You might be looking to save for something specific like a home deposit, a car, a holiday or retirement. Or maybe it’s to build a safety net so you have money set aside for whenever you might need it.
There are various types of savings accounts, with different rates, terms and restrictions. Whichever type you choose, you’ll earn money on your savings based on your account's interest rate.
Types of savings accounts
Most savings accounts can fall under three categories in terms of accessing and depositing money.
- Instant-access savings accounts
These accounts allow you to pay in and take out money whenever you need to - at Tesco Bank we offer a range of Instant Access accounts. - Restricted savings accounts
Providers may offer accounts with restrictions on the number of withdrawals or deposits that can be made, or the amount that can be deposited or withdrawn. With these types of accounts the interest rate may change depending on the restrictions being met. We don’t currently offer any accounts of this kind. - Fixed-rate savings accounts
Fixed rate accounts typically allow you to deposit within the first 30 days of opening the account. Different providers will offer different fixed rate periods and the interest rate will remain fixed for the duration of that time. For example, we offer fixed rate accounts over 1 year, 18-months, 2, 3 and 5 years. Some providers may allow some access to your funds during the fixed period, for others there is no access.
What’s the difference between an ISA and a savings account?
An ISA (individual savings account) is a type of savings account that lets you save tax-free. This is because the interest earned from an ISA won’t contribute to your Personal Savings Allowance.
This doesn’t necessarily mean you’ll pay tax on the interest earned in a regular savings account, it depends if the amount of interest you earn exceeds your Personal Savings Allowance in the tax year.
The amount you can save each tax year is known as your ISA limit. You can pay in up to the current limit of £20,000 across all ‘adult’ ISA accounts you may have combined (Cash ISA, Stocks and Shares ISA, Innovative finance ISA, Lifetime ISA). In addition, you can save up to £9,000 across all Junior ISA accounts held in your child’s name.
Whilst you can only save up to the ISA limits per tax year, there’s no limit to how much money can be held in an ISA. You might hold more than the limit in your ISA if:
- You build on your ISA savings each year and the total account balance grows to more than £20,000 (or £9,000 for a Junior ISA).
- You can transfer funds that you’ve saved in previous tax years from other ISA accounts you hold. As long as you follow the official ISA Transfer Process the transferred funds won’t count towards your ISA limit for the current tax year.
Like other savings accounts, there are usually different types of Cash ISAs available. These can include: instant-access, limited access or fixed-rate.