\n Whether you\u2019re saving for loved ones, or for a cruise to celebrate your retirement, getting into a good savings habit can help make a big difference \u2013 and it\u2019s never too late to start.\n<\/p>\n
\n 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\u2019s not exactly motivating!\n<\/p>\n
\n 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 \u00a320,000 each tax year without paying any tax on the interest you earn.\n<\/p>\n
\n 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 \u00a320,000, the amount you can pay into a cash ISA each year will reduce, depending on your age.\n<\/p>\n
\n If you\u2019re aged 65 or over on April 6, 2027, there is no change and the cash ISA allowance will remain at \u00a320,000. If you\u2019re aged 64 or under on April 6, 2027, your cash ISA limit will fall to \u00a312,000. The remaining \u00a38,000 can only be invested in a stocks and shares ISA.\n<\/p>\n
\n The important bit? Anything you pay into a cash ISA before the start of the 2027\/28 tax year won\u2019t be affected. So, you might want to consider taking advantage of the current limit while you can.\n<\/p>\n
\n Nathan Wade, head of membership at Suffolk Building Society (Image: Suffolk Building Society)\n<\/p>\n
\n You\u2019ve also got plenty of time to explore other savings options as well. There\u2019s a wide range out there, although they don\u2019t have the same tax benefits as ISAs. Some of the main options you might want to look at include:\n<\/p>\n
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.<\/p>\n
However, you won\u2019t 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.<\/p>\n
Limited access accounts can be ideal if you want more flexibility than a fixed rate bond but only need to make limited withdrawals.<\/p>\n
Some accounts will allow you to make additional withdrawals if you accept a penalty, while others won\u2019t. So, make sure you know what you\u2019re committing to before you sign up.<\/p>\n
Regular savings accounts are great for building good savings habits. They\u2019re 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.<\/p>\n
\n Before you decide which option to go for, it\u2019s worth thinking about how much you might be able to save each year:\n<\/p>\n
Work out a budget for your monthly expenses\u202f\u2013 include all your outgoings then multiply them by 12 to see how much you spend each year.\u202f
\n Add up your other annual expenses\u202f\u2013 for things like holidays, your car and gifts.\u202f
\n Think about any savings you can make\u202f\u2013 take a good look at what\u2019s in your budget and think about where you can make your money go further.
\n Work out how much you have left\u202f\u2013 subtract your total annual outgoings from your annual income and you\u2019ll see how much you can save each year.<\/p>\n
\n Whatever you decide to do, remember that the amount of tax you may need to pay will depend on your individual circumstances.\n<\/p>\n