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Cash ISAs

  • Make the most of tax-free savings
  • Grow your money with interest on your savings
  • Compare different types of accounts to suit your needs

Compare cash ISAs

An ISA is a flexible way to save, and you don’t have to pay tax on your interest. Since ISAs were introduced, the amount you can put into them has grown and you can now stash a lot of savings away. Comparing cash ISAs is a great way to get a better rate. Compare different cash ISAs with Compare the Market today.

What are cash ISAs?

Cash ISAs are essentially tax-free savings accounts. They’re much the same as other savings accounts, except for that all-important tax benefit. Everyone has an annual ISA allowance that they can put in ISA accounts. For the tax year 2024/25 it’s still £20,000.

Different cash ISAs offer different interest rates and features – which is why it’s so important to compare cash ISAs before you choose.

How do cash ISAs work?

Essentially, cash ISAs all work in the same way. You open your account and pay in your savings. Interest is then paid tax free on those savings. But there are some differences, depending on the kind of account you choose.

Instant access ISAs are ideal if you need the flexibility to withdraw your money whenever you need it. But you might find that fixed-rate ISAs pay more interest as you agree to lock your money away for a fixed period of time.

Some ISAs operate through a bank or building society branch, while others are by phone or online only.

You can pay up to £20,000 into your ISAs each tax year. Once that money is in an ISA, it can grow tax-free for as long as it remains there. 

Make sure that if you want to move to another ISA, you complete an ISA transfer. Otherwise it will be classed as a withdrawal and the money will count towards your annual ISA allowance when you deposit it in your new account.

How many cash ISAs can I have?

While you may have built up several cash ISAs over the years, you could only open one per year. But since 6 April 2024, you’ve been allowed to pay into multiple ISAs of the same type, except for Lifetime and Junior ISAs.

For example, you could put money in an instant access cash ISA and the remainder of your allowance in a higher-earning fixed-rate cash ISA, with the same or a different provider.

What types of cash ISA are available?

There are different types of cash ISAs available, so it’s important to understand your needs in order to find the best ISA savings rates for you:

Easy access ISAs

Easy access cash ISAs let you pay in and take out money whenever you like without being charged a penalty fee, meaning you have instant access to your money. However, the provider can change the interest rate at any time.

Some accounts pay a bonus rate for the first 12 months to attract new customers; after that the interest rate will drop.

Fixed-rate ISAs

Fixed-rate ISAs offer a fixed interest rate that’s often higher than an instant access cash ISA, but you have to lock your money away for a set term. If you withdraw your money early, you’ll have to pay a penalty fee.

Some fixed-rate accounts offer the flexibility of a limited number of withdrawals. If you make more than this, your interest rate could go down or you may have to pay a penalty fee.

Junior ISAs

Junior ISAs allow you to save, tax-free, for your child’s future. They come as cash ISAs, and stocks and shares ISAs. 

To qualify for a Junior ISA, your child must be under 18 and living in the UK (unless you’re a Crown servant living outside the UK and the child depends on you for care). 

Until the child is 16, you’re responsible for the account on their behalf. The child cannot withdraw the money saved until they turn 18. 

You can’t compare Junior ISAs with Compare the Market.

Notice ISAs

Notice ISAs require you to give notice when you want to withdraw your money. The notice period varies among providers, but you can typically expect somewhere in the region of 30 to 180 days. 

You may still be able to withdraw your savings from a notice ISA without giving notice, but you’ll normally be charged a penalty fee that’s equivalent to the loss of interest over your notice period. 

Regular saver ISAs

These are good for savers who put money away regularly. To qualify for higher interest rates, you’ll have to make a minimum deposit each month, which can vary among providers. You typically can’t make up any missed monthly payments and you may get a reduced interest rate if you miss payments.

Why might you choose a cash ISA? 

Cash ISAs are a reliable way to earn interest on your savings without paying tax. While the introduction of a personal savings allowance has meant that you can earn tax-free interest on ordinary savings accounts, in the 2024/25 tax year this remains limited to:

  • Basic rate tax payers – £1,000 interest per year
  • Higher rate tax payers – £500 interest per year
  • Additional rate tax payers – £0

If you’re earning more than £1,000 in interest each year and feel you’re paying too much tax on your savings interest, it could be a good idea to shift your money to an ISA. Don’t forget, you can maximise both your personal savings allowance and your ISA allowance at the same time.

How to choose the best cash ISA for you

You’ll want to make sure that a cash ISA is the right fit for you and your savings. Here are some of the most important things to consider when you compare cash ISAs:

Fixed term or instant access

Fixed-term ISAs usually offer better rates of interest, but require you to lock your money away for a set period, with penalties for withdrawing early. Instant-access cash ISAs offer greater flexibility, allowing you to withdraw at any time. However, you might not always get the best ISA savings rates.

Cash ISA interest rates

Once you’ve decided which type of cash ISA you’re investing in, you’ll want to compare interest rates. That’s where Compare the Market can help. And it’s a good idea to regularly check for better rates, as you can transfer your cash ISA as often as you’d like.

Withdrawal fees

If you have a fixed-term cash ISA but find you need to take out money, you’ll be charged a withdrawal fee.

What are the pros and cons of cash ISAs?

Choosing to invest your money in a cash ISA has a range of benefits, but there are disadvantages to consider too.

Pros:

  • You won’t pay tax on interest earned – this is one of the main reasons why people open cash ISAs.
  • Flexibility when switching – you can transfer your ISA whenever you like to take advantage of top cash ISA rates, provided the ISA you want to move it to accepts ISA transfers. You can also choose to switch your savings to a different type of ISA.
  • Inheritance – you can pass your ISA balance to your spouse or civil partner as a tax-free allowance when you die.

Cons:

  • Penalties for withdrawing early – you’ll be charged a fee if you’re on a fixed-term deal and need to withdraw your money early.
  • Deposit limits – cash ISAs have limits on the amount you can invest each year. For the 2024/25 tax year, this is £20,000.
  • May not be the highest rates – non-ISA savings accounts could offer a higher interest rate than cash ISAs.

Is my money safe in a cash ISA?

As long as the bank or building society that your cash ISA is with is authorised by the Financial Conduct Authority, up to £85,000 of your money will be protected by the Financial Services Compensation Scheme.

If your savings have built up to more than this, in conjunction with any other money you have with the same bank or building society, it’s best to spread your money across different assets or ISAs from different financial institutions.

If you were to open an investment ISA, you take on more risk. The value of your investments could fall, leaving you with less than you initially deposited.

What are the alternatives to cash ISAs?

The alternatives to cash ISAs include:

Lifetime ISAs

Lifetime ISAs are available to anyone aged 18-39, but the money saved in them must be used for buying your first home or as a savings pot for retirement. If you withdraw your money for a non-authorised reason, you’ll have to pay a withdrawal charge of 25%.

You can save up to £4,000 each year in a lifetime ISA until you’re 50. The government will add a 25% bonus to your savings, up to £1,000 per year. 

You can’t compare Lifetime ISAs with Compare the Market.

Stocks and shares ISAs

These allow you to invest in shares, bonds and funds, and you won’t have to pay tax on any potential profit or income.

But be careful with stocks and shares ISAs. While they might make you more money in the long run, you could lose money if you’re not so lucky with the stock market. When investing in stocks and shares, it’s important to know that the value of your investments will change and that your capital is at risk.

Fixed-rate bonds

Fixed-rate bonds allow you to invest a large sum for a guaranteed return on investment, with a fixed interest rate. You won’t have access to your funds until the bond matures at the end of the agreed term.

Remember, you’ll pay tax on your interest if it exceeds your personal savings allowance. This can be an issue with fixed-rate bonds if all the interest is paid in one tax year when the account matures.

Savings accounts

If you’re able to save money regularly, you may be able to earn more interest with a regular savings account. However, you might also have to pay tax on the interest if your total interest earned exceeds your personal savings allowance.

By comparing savings accounts, you’ll be able to find the best rates to help your savings grow.

Current accounts

There are a number of current accounts that offer very competitive levels of interest, comparable to some ISAs and savings accounts. But you typically have to pay a monthly fee for these accounts, which could counterbalance the interest earned.

Plus, you’ll pay tax on the interest if it exceeds your personal savings allowance, although there may be caps on the interest you can earn.

Premium bonds

Premium bonds allow you to invest your money in a monthly scheme. Each £1 bond is treated as an entry, with monthly prizes and jackpots won each month.

You must invest a minimum of £25 to be eligible, and you can invest a maximum of £50,000 per person. Earning money through premium bonds is purely through chance; there’s no level of interest, so you’re not guaranteed a return. But anything you do win is tax free.

Peer-to-peer lending

Peer-to-peer lending allows you to invest your money as a loan to a borrower, who’ll then repay you with interest. The interest rates are generally higher than cash ISAs as you’re taking a risk with your money. But if your borrower is unable to repay their debt, you could lose out.

Innovative Finance ISAs

These allow you to invest in peer-to-peer lending and other niche investments within an ISA wrapper, so your profits are tax free.

Did you know?

In the 2024 Spring Budget, chancellor Jeremy Hunt announced that the UK government is looking to introduce a new type of ISA called the UK ISA. The proposed UK ISA would give savers an extra allowance of £5,000 to save tax-free on top of their existing ISA allowance, while supporting investment in UK companies. At this point the UK ISA is under consultation.

Can I transfer from one cash ISA to another?

Yes, you can transfer your cash ISA savings from one account provider to another at any time, as long as the new account accepts ISA transfers. You can also transfer your savings between different types of ISA. This allows you to take advantage of the best ISA rates or swap to another type of saving.

To transfer your cash ISA, you’ll need to get in touch with your ISA provider and fill out an ISA transfer form. Make sure you do this, as just withdrawing the money means you’ll lose the ISA’s tax benefits.

A like-for-like transfer should take no more than 15 working days. If you’re transferring to a different type of ISA, you can expect it to take up to one month.

Money deposited in previous years can be transferred in part or entirely. From 6 April 2024, you can make partial transfers of the current year’s subscription. Previously you had to move it all.

Check with your provider for any restrictions they may have on transferring ISAs.

Are cash ISAs worth it?

It depends on your personal circumstances and how much you want to save tax-free.

Basic rate taxpayers can earn up to £1,000 in interest tax-free under the personal savings allowance (PSA). If that’s more than enough for you, you could consider widening the net to see if you could get better rates by comparing different types of savings account.

If you do pay tax on your savings interest, then a cash ISA can allow you to save more tax-free. But they’re not just for savers over or nearing their PSA threshold.

Cash ISAs can also be a good option for longer term savings. If you regularly top up your ISA and maximise your ISA allowance every year, you can build up a lot of interest – and it will remain tax-free for as long as it’s in an ISA.

How to find the best cash ISA rate

Cash ISA rates are influenced by the Bank of England base rate. And with the rate currently at 5.25% – its highest since the 2008 financial crisis – it’s a good time to be a saver.

At the time of writing, you can find competitive rates on both easy access and shorter term fixed-rate deals, while longer term fixed-rate ISAs aren’t offering the highest rates. But that could be because providers expect the Bank of England to drop its interest rate in the near future.

Although an easy access cash ISA could offer the best rates now, if the rate is variable it could go up or down at any time, typically in line with the Bank of England base rate.

With a fixed-rate ISA, you might miss out on higher rates if the base rate increases. But if the base rate goes down, you’ll benefit from higher rates for longer.

ISA providers are in competition with one another to attract your savings. And that means one of the best ways to find the best cash ISA rates is to shop around. We can help with that.

How do I open an ISA?

Most account providers will let you open an ISA either in branch, over the phone or online. 

You’ll need to give the provider personal details, like your National Insurance number and address, along with ID to help prevent money laundering.

You may need to deposit a minimum amount to open the ISA. You can easily see the minimum and maximum deposit limits in our ISA comparison tables.

As of 6 April 2024, you need to be a UK resident aged at least 18 to open an ISA account.

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Frequently asked questions

Can I make withdrawals from a cash ISA?

Yes, you can withdraw money from your cash ISA at any time. Check the terms of your ISA to see if you’ll be charged for making a withdrawal.

If you have a flexible ISA, you can make a withdrawal then put the money back in during the same tax year. This won’t reduce your current year’s ISA allowance.

If you have a fixed-term ISA, you’re likely to be charged a fee for withdrawing your money early.

What is the difference between a cash ISA and a savings account?

The main difference between cash ISAs and savings accounts is the way they treat the interest you earn. With a cash ISA, the interest you earn isn’t taxed for as long as you have the account.

But the interest earned from a savings account could be subject to tax. Depending on your personal circumstances, you can earn up to £1,000 in interest each tax year without paying tax on it, but anything beyond that is subject to tax.

Can I open a cash ISA with bad credit?

Yes, you can open a cash ISA regardless of your credit score. Unlike a standard bank account, cash ISAs aren’t categorised as credit products, so you won’t need to pass a credit check to open one.

What’s a flexible ISA and how does it work?

A flexible ISA allows savers to withdraw and replace money without the replacement cash counting towards the annual ISA allowance.

For example, if you pay £1,000 into a non-flexible ISA then withdraw £900, you’ve used £1,000 of your annual ISA allowance. But with a flexible ISA, you’ve only used £100 so would be able to save a further £19,900 in the same tax year.

A flexible ISA could be worthwhile for you if you think you’ll be able to save up to or close to your yearly maximum savings allowance, but you want the flexibility to withdraw and replace your money frequently, as needed. Not all ISA providers offer flexible cash ISAs.

Can I combine multiple old ISAs into one?

Yes, you can combine multiple ISAs into one. You can move ISAs into an existing ISA account (as long as the provider accepts ISA transfers) or you can transfer into a new ISA.

What happens to your ISA allowance at the end of the year?

Your ISA allowance resets each tax year. If you fail to use your full allowance for the year, it’s lost and you can’t carry it over to the new tax year.

What happens to a cash ISA when you die?

When you die, if you’re survived by your spouse or civil partner, they can inherit your ISA savings as a one-off additional tax-free allowance. That means they can keep the savings in an ISA and won’t need to pay tax on them, even if they’ve already used their allowance for the year.

Otherwise, your ISA savings will form part of your estate. The executor of your estate will have to pay inheritance tax on any part of your estate that’s over the tax-free threshold.