Whether you’re saving for loved ones, or for a cruise to celebrate your retirement, getting into a good savings habit can help make a big difference – and it’s never too late to start.

There is one downside though. Depending on how much you put aside, and where you put it, you may end up having to pay tax on the interest you earn. That’s not exactly motivating!

This is where ISAs can help. They offer a simple, tax-efficient way to save that can help you retain more of your interest. ISAs allow you to save £20,000 each tax year without paying any tax on the interest you earn.

However, you may have heard that the government has announced some changes to ISAs from next year. While the overall annual ISA limit will remain at £20,000, the amount you can pay into a cash ISA each year will reduce, depending on your age.

If you’re aged 65 or over on April 6, 2027, there is no change and the cash ISA allowance will remain at £20,000. If you’re aged 64 or under on April 6, 2027, your cash ISA limit will fall to £12,000. The remaining £8,000 can only be invested in a stocks and shares ISA.

The important bit? Anything you pay into a cash ISA before the start of the 2027/28 tax year won’t be affected. So, you might want to consider taking advantage of the current limit while you can.

Nathan Wade, head of membership at Suffolk Building Society (Image: Suffolk Building Society)

You’ve also got plenty of time to explore other savings options as well. There’s a wide range out there, although they don’t have the same tax benefits as ISAs. Some of the main options you might want to look at include:

Fixed rate bonds, which are sometimes referred to as fixed rate or fixed term savings accounts. They pay a set rate of interest for a specific period, ranging from a few months to several years. They normally have a higher interest rate than instant access savings accounts.

However, you won’t be able to get to your money during the term of the bond, in most cases. So, you need to be happy to park your savings for a certain amount of time.

Limited access accounts can be ideal if you want more flexibility than a fixed rate bond but only need to make limited withdrawals.

Some accounts will allow you to make additional withdrawals if you accept a penalty, while others won’t. So, make sure you know what you’re committing to before you sign up.

Regular savings accounts are great for building good savings habits. They’re also ideal if you want to save little and often. They tend to have higher interest rates than instant access savings accounts too but usually have more restrictions, such as how much you can pay in each month.

Before you decide which option to go for, it’s worth thinking about how much you might be able to save each year:

Work out a budget for your monthly expenses – include all your outgoings then multiply them by 12 to see how much you spend each year. 
Add up your other annual expenses – for things like holidays, your car and gifts. 
Think about any savings you can make – take a good look at what’s in your budget and think about where you can make your money go further.
Work out how much you have left – subtract your total annual outgoings from your annual income and you’ll see how much you can save each year.

Whatever you decide to do, remember that the amount of tax you may need to pay will depend on your individual circumstances.

Visit gov.uk to find out about your personal savings allowance or speak to a financial advisor. And if you’d like to review your savings plans, why not book an appointment at your local Suffolk Building Society branch for a chat.

Visit suffolkbuildingsociety.co.ukfor more information.

This article is for general information only and cannot be relied on as financial advice for individuals. Consult your professional adviser.