Before you put any money into a savings account, make sure you're paying as little tax as possible.
There are a number of ways you can reduce the amount of tax you pay on a savings account.
R85 forms
If you're a non-taxpayer then it stands to reason that you, er, shouldn't pay any tax on your savings. However, banks are required to deduct some tax from the interest they pay you unless you fill out a form confirming that you are a non-taxpayer. This is the imaginatively named Form R85. Fill it in, send it off and, Bingo, the interest on your savings is now paid to you in full with no tax deducted. This saves you the bother of having to claim the tax back via a tax return.
Spousal transfers
Similarly, if you have a spouse who's a non-taxpayer, then open an account in their name and get them to fill in Form R85.
Cash ISAs
These are mentioned elsewhere. If you don't need to use your full ISA allowance each year for other savings and investments, then you might as well park your money in one of these particularly as they usually pay better rates than ordinary Instant Access accounts.
Current account or offset mortgages
These basically work by having your mortgage debt in your bank account as a whopping great big overdraft so any savings you have are set off against it. The interest rate you get on your (pseudo) stash of savings is automatically the same as the interest rate you pay on your mortgage. It is the equivalent to earning tax-free interest at the mortgage rate and it's more efficient than using an ISA because it gives you a better rate of interest and means you can save your annual ISA allowance for stock market investments.
The con is that you need to be really disciplined to ensure that you don't borrow against the overdraft and that you have a firm plan in place to actually reduce the mortgage.
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