Important information
Tax treatment depends on your individual circumstances and may be subject to future change.
Designed to keep your savings and investments tax-free, a cash Isa also offers you a guaranteed return. We’ve listed the best cash Isa rates in the UK so that you can choose an account wisely.
A cash Isa is a tax-free “wrapper” for your savings. That means any interest earned is sheltered from income tax.
However, the amount you can save into a cash Isa is limited to your £20,000 allowance. If you decide to spread this money across a stocks and shares Isa, for example, then this reduces your ability to save.
Below we explain how your savings are taxed and whether a cash Isa is right for you.
In this article, we list:
Read more: Best stocks and shares Isas
A cash Isa not for you? Open a stocks and shares Isa with AJ Bell
While cash Isas provide guaranteed growth, a stocks and shares alternative could end up paying more over the long run.
If you’re looking for a place to open your account, consider Times Money Mentor award-winning AJ Bell. It has access to thousands of funds and is suited for investors of all skill levels.
Best cash Isa rates
The best cash Isa rate for you will depend on a variety of factors, such as your ability to save, deposit size, and savings goal.
Those looking to use their Isa allowance for building a “rainy day fund” – or something they can access immediately in case of an emergency – might prefer an easy access Isa. The current rate of 5.17% is the best across all Isas and we explain how it works below.
One thing to note is that the rate is variable, which means it can change at Plum’s discretion. So, for an account which provides more certainty you may wish to consider a fixed rate Isa. The top paying rate in this sector is 5.05% over a one year term.
Everything you need to know about ISAs: what is an ISA, how do ISAs work, what are the different types of ISA, and is an ISA worth it
A fixed rate Isa can be a great option if you don’t need access to your savings and if you’re saving towards a longer-term goal. Longer-term Isas, with terms of five years or more, are paying rates up to 4.08%.
Otherwise, if you’re saving towards your first home or retirement then a lifetime Isa often comes with handy perks. Below we explain how the best cash Isa rate of 4.40% is effectively boosted with a £1,000 deposit.
Take our test: Which Isa is best for me?
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Best easy access cash Isas
Currently fintech provider Plum offers the best cash Isa rate at 5.17%.
While the organisation doesn’t hold a banking licence it still comes with FSCS protection. This is because the account is held by CitiBank, the multinational American provider that has a full banking licence in the UK.
A £5,000 deposit will earn £259 a year in interest if the rate never changes.
Best fixed-rate cash Isas
The best fixed cash Isa rates largely depends on your term, and right now shorter term bonds are attracting better rates.
We break them down below:
Best one year fixed-rate Isa
Virgin Money, which remains one of the most accessible accounts on the market, offers the top one year fixed Isa at 5.05%. It can be opened online or via traditional methods, such as via telephone or branch.
Depositing just £5,000 with the provider will earn you around £252.50 in interest for the year while your entire £20,000 allowance would earn £1,010. If it weren’t in an Isa wrapper, this would exceed the personal savings allowance for a basic rate taxpayer.
Best two year fixed-rate Isa
OakNorth Bank offers the best two year fixed cash Isa rate at 4.63%, and its competition follows close behind. Based on a £5,000 deposit your money would earn £475 over the term.
Best three year fixed-rate Isa
Shawbrook Bank’s three year fixed rate of 4.44% requires a minimum deposit of £1,000. For a smaller initial deposit OakNorth Bank needs a deposit of at least £1.
A £5,000 deposit with Shawbrook Bank would earn approximately £695 in interest over the three year period.
Read more: How are my savings taxed?
Best five year fixed-rate Isa
Shawbrook Bank offer the best five year fixed cash Isa rate of 4.11%. Based on a £5,000 deposit, this would earn £1,115 in interest over the five year period.
However, since this is a highly competitive section of the market it’s worth comparing your options from other providers too.
Best notice cash Isa rates
In the past some of the best notice accounts have offered better cash Isa rates than its easy access counterparts. It largely made sense because notice accounts come with more accessibility constraints.
However, today’s market-leading easy access rate is better than the top notice account.
Best lifetime cash Isa rates
Lifetime Isas can be a great place to save for a house deposit or retirement due to the added government bonus.
In essence, you can save up to £4,000 into your account each tax year and for every contribution made the government will add a 25% bonus on top. This means the maximum you can earn via this bonus is £1,000.
Lifetime Isas come in cash or stocks and shares form, with cash Isas offering a guaranteed rate of interest.
Moneybox, at a rate of 4.40%, offers the best cash Isa rate in this sector. This means the maximum £4,000 each tax year would earn around £1,220 with the government bonus. That’s assuming if you make the full £4,000 deposit this month.
Moneybox’s rate also includes a 0.90% bonus for 12 months, so when this is up it’s worth reviewing your savings and seeing if there’s a better option available.
Read more: Best lifetime Isas for a house deposit or retirement
Are cash Isas worth it?
A cash Isa is a useful place to keep your savings, especially if you’re a high earner.
This is because the tax you pay on your savings is linked to your income tax bracket.
Under current legislation, you may be eligible for a personal savings allowance, which allows you to earn a certain amount of interest each year before it is liable for income tax.
The personal allowance is as follows:
| Income tax bracket | Earnings bracket | Personal savings allowance |
| Basic rate taxpayer | £12,571 – £50,270 | £1,000 |
| Higher rate taxpayer | £50,271 – £125,140 | £500 |
| Additional rate taxpayer | £125,141 and over | £0 |
So, a basic rate taxpayer and a higher rate taxpayer would need to save £20,000 and £10,000 a year at 5% respectively to use their entire allowance.
For an additional rate taxpayer, meanwhile, their bill could soon add up. If they had £20,000 in a one year bond at 5% they’d earn £1,000 in interest and £450 would be liable in income tax.
By putting this money in a cash Isa instead, you would pay no tax on your interest.
How many cash Isas can I have?
Previously, you could only invest in one Isa type each tax year. For example, if you opened an easy access cash Isa and deposited £10,000, you weren’t allowed to open a fixed rate cash Isa at the same time and use up your remaining allowance.
Instead, the remaining £10,000 would need to be invested in an alternative account such as a stocks and shares Isa.
As of the new tax year, this rule has been abolished and you’re free to invest in as many cash Isas as you see fit.
You can also still transfer Isa allowances between providers and products.
Read more: Are you really getting the best savings rates?
What is a flexible Isa?
Cash Isa FAQs
A flexible Isa allows you to withdraw money from your account and replace it without affecting your £20,000 allowance.
For example, you paid £5,000 into a flexible easy access Isa and this leaves you with a £15,000 remaining allowance. But you then decide to withdraw £2,000 from your account to cover an emergency.
If your Isa was flexible, your allowance would increase to £17,000 and under a non-flexible Isa it would remain at £15,000.
A flexible Isa can therefore be a great option if you’re building an emergency fund and aren’t available for stocks and shares Isas.
Can I have a cash Isa and a stocks and shares Isa
Yes. Our guide explains the benefits of having both Isas.
What are the best cash Isas for over 60s?
Besides a Lifetime cash Isa, those over the age of 60 have access to the best cash Isa rates mentioned above.
Important information
Some of the products promoted are from our affiliate partners from whom we receive compensation. While we aim to feature some of the best products available, we cannot review every product on the market.
