Last updated: 8 February, 2021
What is a regular savings account?
A regular savings account is a great place to start if you'd like to start saving.
With regular savings accounts, you have to put a minimum amount in each month. So they're a good option for people who are committed to starting a regular savings habit.
You'll usually get good interest rates with a regular savings account, compared with other types of savings accounts. The interest tends to be paid annually. The rate you're given to begin with might only last a year.
You might find that there are some restrictions such as how much you have to pay in, or how many withdrawals you can make a year.
How to get the best regular savings account
Before choosing a regular savings account, there are a few important things to think about. Ask yourself:
How much do you want to save each month? This can be between £1 and £3,000, depending on which regular savings account you choose.
How do you want to manage your account? You could manage your account online, by post, by phone or in a branch.
How much access do you want? Some accounts don't let you withdraw for a set term, so check this carefully if you need to be able to access your savings.
Once you know what you want, you can find the highest interest rate available by comparing the regular savings accounts in our table below.
You'll often find that the regular savings accounts offering the best interest rates come with the most restrictions.
Find out how to manage a regular savings account here.
How much do I have to pay in each month?
This can vary depending on which regular savings account you go for. It could be a set amount such as £50 a month, or it could be an amount within a set bracket, such as £25-£50 a month.
If you don't make the agreed payments, you risk losing your interest. Some banks may even close your account. Others don't mind you missing the odd payment, so check your terms and conditions carefully.
If you're struggling to make a payment, contact your bank or building society to discuss this.
Although many accounts will set a limit on how much you can put in, you could have more than one regular savings account. That way, you could save more and earn more interest. But you can't have more than one with the same bank or building society - each regular savings account would have to be with a different provider.
For how long can I take advantage of the advertised interest rates?
You'll usually get the advertised rates for a year, as long as you pay money in each month during that time.
For this reason, many people switch to a new regular savings account after a year.
Are there different types of regular saver?
Yes, there are two types of regular savings account available, depending on your situation.
New customer regular savings account: You can open these accounts as a brand-new customer. You don't have to have any existing financial connection to the bank or building society.
Existing customer regular savings account: These are offered to existing customers of a bank or building society. The bank or building society often gives existing customers a higher interest rate.
To make sure you're aware of all your options, make a note of where you hold existing savings and current accounts. Then speak to your banks and building societies. It might be that you qualify for a better regular savings account that's only available to existing customers.
Can you withdraw money from a regular saver?
With most regular savings accounts, you can't withdraw any money for a set term, such as 12 months.
Some do let you withdraw cash any time you like, but then they don't let you replace the money you took out until the next calendar month.
If you don't want any restrictions on how often you save or withdraw your money, you could save into an instant access account instead. But be aware that the interest rate you get won't be as high.
Tax on regular savings accounts
If you exceed your 'personal savings allowance', then you pay tax on the interest you earn from your regular savings account.
Everyone can earn a set amount of money each tax year before having to pay tax on the earnings. This includes savings interest.
For most savers, the interest you earn won't be taxed. You can save your money in the account that's best for you, without having to worry about paying tax on your earnings. This means that most taxpayers can earn interest from a regular savings account in the same way they would from a cash ISA, which is always tax-free.
In the 2020/21 tax year, the personal savings allowance lets you earn up to £1,000 in interest without paying tax if you're a basic rate tax payer. For higher rate tax payers the allowance is £500.
In addition, your total income would need to exceed your personal allowance before you start paying income tax at all. The personal allowance was £12,500 for the 2020/21 tax year but it's been confirmed that this will increase to £12,570 for 2021/22.
If you earn under £17,500, you can also benefit from the starting rate for savings. This is an additional allowance to add to your personal savings allowance. For the 2020/21 tax year this was set at £5,000 for those who earn £12,500 or less, falling by £1 for every £1 you earn above £12,500.
This means you'll only pay tax on savings interest if the amount of interest you earn exceeds:
your starting rate for savings (if you earn under £17,500)
and your personal savings allowance
and your total income exceeds your personal allowance.