How savings accounts work: ISAs explained

Consumer confidence is at an all-time low amid the current cost of living crisis,  four in five of us are feeling insecure about managing our finances as household incomes become increasingly pressed.  Unsurprisingly, many of us are reacting to the big squeeze by going back to basics: reassessing spending, tightening budgets and borrowing sensibly. 

With less disposable income, price increases and soaring inflation, saving may not be a top priority. But whether you’re already a saver, or considering opening a savings account, it’s well worth investing time to research which savings account is your best fit.

ISAs (Individual Savings Accounts) are one of the most popular ways to save tax efficiently.  If you’ve heard the term before but aren’t sure how this type of savings account works, look no further. We’ve highlighted eight key benefits to help you understand how a Hodge cash ISA works and why it could be the right savings product for you.

How an ISA works: Eight great benefits  

1. It’s tax-free

An ISA is like a standard deposit account but with a key benefit, you don’t pay income tax on the interest you earn, meaning as your money grows it remains sheltered from tax. Each tax year, the government sets a limit for the maximum you can save within an ISA to enjoy this tax-free benefit, for 2022/23 the limit is £20,000.

2. Guaranteed interest rates

A cash ISA is a flexible way to save, often benefitting from higher interest rates than a standard deposit account which will help hedge your funds against rising inflation. Our cash ISA offers fixed rates between one and five years, potentially giving you a greater long-term return with a guaranteed interest rate. 

3. The longer you save, the more you save

If you have a savings goal in mind or feel it’s time to set aside cash to earn tax-free interest, then a Hodge ISA can make your money work for you. We offer fixed rates starting from just one year, just assess the right time frame for you. The longer the term, the higher the interest rate you will benefit from.

4. Flexible for first-time savers

A Hodge ISA is a flexible way to save your personal money, you can choose to save for just 12 months making it a good way to try your hand at savings without committing yourself to anything long term. Perfect for saving for a specific event like a wedding, holiday or saving for a first home.

5. No need to declare

Any interest earned on your savings in your cash ISA does not need to be declared on your tax return.

6. Your money is protected

Your eligible deposits with Hodge Bank are protected up to a total of £85,000 by the Financial Services Compensation Scheme.

7. You can transfer your current ISA to an account with us

Look at our range of ISAs, choose which one suits you best, and hit apply.  If you are looking to transfer a Stocks and Shares ISA from another provider*, you can apply using the Stocks and Shares ISA transfer form.

8. It’s easy to open and simple to manage

You can open a Hodge Fixed Rate ISA online with a minimum deposit of £1,000. You will need to be a UK resident and over the age of 18.

You can find our full range of Hodge Fixed-rate cash ISAs and more information on how savings accounts work at Hodge ISAs.

Want to know more about how savings accounts can work for you?  Read our blog Five of your savings questions answered

^{*Hodge does not currently offer Stocks and Shares ISAs}