These accounts let you withdraw and deposit money whenever you like without any penalties. Easy access ISAs typically have the lowest interest rates and are best for short-term or emergency savings.
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Product type | AER | |
---|---|---|
Instant Access Cash ISAs | 5.17% | |
Notice Cash ISAs | 5.10% | |
1 Year Fixed Cash ISAs | 4.80% | |
2 Year Fixed Cash ISAs | 5.15% | |
3 Year Fixed Cash ISAs | 4.39% |
A cash ISA (Individual Savings Account) is a savings product with special tax benefits. ISAs were introduced more than 20 years ago by the government, with the goal of getting more people to save.
With a cash ISA, you can earn interest on your savings, but you don't have to pay any tax on the returns you make.
Any UK resident aged 16 or over can open a cash ISA. If your child is under 16, they can't open an adult ISA, you have to open a junior cash ISA for them instead.
The higher your interest rate, the more money you will make on your savings. However, getting the very highest rate usually means locking your money away for longer or agreeing to give notice before making a withdrawal.
Some accounts limit the number of withdrawals you can make each year or cut the interest rate if you access your cash too often. This can mean better returns on your savings, but only if you don’t need the money. Easy access ISAs pay less interest but allow you to withdraw whatever you need.
If you choose a fixed rate ISA, you’ll have a guaranteed interest rate for a set period. The rates on offer can vary widely, and often depend on how long you lock the money away, so it’s worth shopping around for the best deal.
Some accounts allow you to withdraw money you’ve saved in the same year, without it counting towards your ISA allowance. Other accounts say that money is part of your allowance even though you’ve both paid it in and taken it out in the same financial year.
Some providers save their best rates for existing customers, so check what your account providers offer. You should also check out how easy the account is to manage – for instance, is there an app and can you use it to add cash funds.
Plenty of ISAs will allow you to start saving from just £1, but some impose a higher minimum deposit. There are even regular saver accounts that will pay you higher interest if you commit to saving a certain amount each month.
If you have a fixed rate ISA and you want to withdraw your money before the term is up, you’ll probably face an interest penalty or charges. Equally, some providers will charge you exit fees if you transfer your ISA elsewhere. Check the small print before signing up.
Cash ISAs are attractive to savers because you never pay tax on the interest you earn. However, everyone has a personal savings allowance from the government that entitles them to a certain amount of interest tax free.
So, as non-ISA accounts tend to pay better interest than their ISA counterparts, a cash ISA is best for someone who is already paying tax on their savings interest or near the limit of the personal savings allowance.
If you are a basic rate taxpayer (20%), you can earn up to £1,000 in interest without paying tax, while higher taxpayers (40%) have an allowance of £500. This means that most people won't be paying tax on interest from normal savings accounts anyway. However, additional rate taxpayers don’t have a personal savings allowance at all.
Our editors picked this deal by weighing several factors for each product, including the interest rate, withdrawal conditions, minimum opening balance and more.
Our editors picked this deal by weighing up factors such as the interest rate, term, withdrawal conditions, and minimum opening balance for each product.
Our editors picked this deal by weighing several factors such as the interest rate, withdrawal conditions, minimum opening balance and others for each product.
A cash ISA works exactly the same way as a standard savings account - with three exceptions.
You can only generally pay into one cash ISA in any given financial year - although that doesn't have to be the same product as last year.
You can only pay in £20,000 per person each year - although you can transfer as much as you like from one ISA provider to another, as long as the account provider allows transfers in. This limit is the total you can invest in all different kinds of ISAs. So, if you have a cash ISA and a stocks and shares ISA, you will need to split the limit between them.
All the money you make in interest is tax free.
These accounts let you withdraw and deposit money whenever you like without any penalties. Easy access ISAs typically have the lowest interest rates and are best for short-term or emergency savings.
With a notice ISA, you will need to give notice to withdraw money from your account or you will be penalised via loss of interest or a charge. The notice period varies between accounts but could be up to 180 days. These accounts tend to pay better interest than easy-access ISAs.
Fixed-rate ISAs give you a good interest rate in exchange for you keeping your money locked away for a specific length of time, usually between one and five years. Generally, the interest rates are higher the longer the term of the deal, but this isn’t always true so be sure to shop around.
Lifetime ISAs are designed to help people under the age of 40 to save for their first home or towards retirement. The maximum annual deposit is £4,000 each year, to which the government adds a 25% bonus.
Junior cash ISAs allow you to save for your child’s future, as long as he or she is under 18 and living in the UK. The money in the account can be withdrawn by the child once they reach 18 years of age.
These accounts generally pay a higher rate of interest that’s fixed for a set period – say 12 months. To qualify, you must agree to pay in a certain amount each month, often between around £25 and £250.
These accounts let you withdraw and deposit money whenever you like without any penalties. Easy access ISAs typically have the lowest interest rates and are best for short-term or emergency savings.
With a notice ISA, you will need to give notice to withdraw money from your account or you will be penalised via loss of interest or a charge. The notice period varies between accounts but could be up to 180 days. These accounts tend to pay better interest than easy-access ISAs.
Fixed-rate ISAs give you a good interest rate in exchange for you keeping your money locked away for a specific length of time, usually between one and five years. Generally, the interest rates are higher the longer the term of the deal, but this isn’t always true so be sure to shop around.
Lifetime ISAs are designed to help people under the age of 40 to save for their first home or towards retirement. The maximum annual deposit is £4,000 each year, to which the government adds a 25% bonus.
Junior cash ISAs allow you to save for your child’s future, as long as he or she is under 18 and living in the UK. The money in the account can be withdrawn by the child once they reach 18 years of age.
These accounts generally pay a higher rate of interest that’s fixed for a set period – say 12 months. To qualify, you must agree to pay in a certain amount each month, often between around £25 and £250.
There are many alternatives to a cash ISA, but where to save for the best returns depends on what you want to do with your money and when you need access to it. Here are some of the main options:
Stocks and shares ISAs - these let you put money into shares and other investments without paying income tax or capital gains tax on the growth. Returns could be far higher than with a cash ISA, but the value of your money could also fall if your investments perform poorly. Stocks and shares ISAs are best for long-term savings, so you can ride out any volatility.
Standard savings accounts - you won't pay tax on the first £1,000 of interest you earn if you're a basic rate taxpayer, although this drops to £500 if you're a higher rate taxpayer and £0 if you’re an additional rate payer.
Fixed-rate bonds - these fixed-rate savings accounts allow you to invest a large sum for a fixed period for a guaranteed return. During the fixed period, you have no access to your funds, so they’re better for medium-term savings.
High-interest current accounts – some current accounts offer high rates of interest on positive balances. This can make them a good place to stash emergency savings you may need to access quickly.
Our best cash ISA rate is currently 5.16%.
Yes, your money is safe in a cash ISA as most are backed by the Financial Services Compensation Scheme (FSCS, which protects your money up to £85,000 with a single institution).
Whether you can take money out of a cash ISA and put it back in again depends on which kind of account and provider you choose. Some ISAs let you withdraw money and replace it during the same tax year without using up any more of your ISA allowance. Find out more here.
You can take money out of your cash ISA whenever you want if it allows unlimited withdrawals. However, there may be restrictions on paying money back in. Find out more here.
You can have as many ISAs as you want, but you can only pay into one cash, one stocks and shares, one innovative finance and one Lifetime ISA in each tax year. Your allowance can be split across all types of ISA. Find out more here.
As well as a cash ISA, you can also pay into one of each of the other three types of ISA each year. So that's a stocks and shares ISA, Lifetime ISA – if you’re aged 18 to 50 – and innovative finance ISA. Your ISA allowance must be split between them though, so you can't pay in more than £20,000 a year in total.
Yes, you can have an ISA if you have bad credit as your finances are not checked when you open a savings account. If you need help choosing the right savings account, read this guide.
You can only open or pay into one cash ISA a year, but your ISA allowance can be split across different types of ISA. You could therefore pay into a cash ISA, a stocks and shares ISA, an innovative finance ISA and a lifetime ISA in the same year – but you can’t put in more than £20,000 overall.
Yes. In the Autumn Statement 2023, Jeremy Hunt revealed that the rules around ISAs would change in April 2024.
For example, the government plans to scrap the rule of only having one of each type of ISA and will allow people to have multiple subscriptions to the same type of ISA. Plus, the government will allow partial transfers of ISA funds between providers during the year.
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