What is the difference between an ISA and a regular savings account?

An Individual Savings Account, commonly referred to as an ISA, and a regular savings account are both popular savings options, but they have distinct differences in terms of tax benefits, contribution limits, and accessibility. ISAs are designed specifically to encourage saving and investment, offering tax-free growth on interest earned and capital gains. This means that any interest or returns generated within the ISA are not subject to income tax or capital gains tax, making them an attractive option for savers looking to maximize their returns. Additionally, there is a limit to the amount that can be contributed to an ISA each tax year, which is set by the government. For the current tax year, individuals should refer to the official guidelines to confirm the contribution limit. On the other hand, a regular savings account, while easy to open and manage, typically does not offer the same tax advantages. Interest earned on a traditional savings account is usually subject to income tax, although individuals may benefit from a personal savings allowance. Furthermore, there are generally no contribution limits with regular savings accounts, allowing for greater flexibility in saving amounts. Overall, the choice between an ISA and a regular savings account depends on the individual's financial goals and preferences, particularly concerning tax implications and saving flexibility. Individuals interested in exploring specific products offered by Nationwide Building Society may wish to consult the latest information available on their website.