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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 in 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. Here’s how to find and compare different cash ISAs.
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 a personal allowance that they can put in an ISA. For the tax year 2023/24 it’s still £20,000.
Different cash ISAs offer different interest rates and features – which is why it’s so important to compare cash ISA rates before you choose.
How do I use a cash ISA?
How you use your cash ISA depends on the type of account you’ve opened. Instant access ISAs are ideal if you need that flexibility to withdraw your money whenever you need it, but they don’t offer the typically stronger interest rates of a fixed rate cash ISA, which make you lock your money away for an agreed period. So, decide what you need from an ISA, and you can find the right one to suit your needs.
Keep in mind, you can only open, or pay into, one cash ISA per year. You’re also only allowed to pay a maximum of £20,000 across your various types of ISA. However, you can merge existing accounts without breaking this limit.
Cash ISAs are a great way to make your money work better for you, with plenty of options offering flexibility.
What types of cash ISA are available?
There are different types of cash ISA to think about, so it can be hard to find the best cash ISA for you:
- Easy access ISAs let you pay in and take out money whenever you like, meaning you have instant access to your money. However, unless you have a flexible ISA, taking money out will mean that you could lose your tax-free allowance on that money. For example, if you withdrew £1,000 from your easy access ISA, but then wanted to put it back in shortly afterwards, you’d need to wait until the new tax year.
- Fixed rate ISAs offer a fixed interest rate that’s often higher than an instant access 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.
- Lifetime ISAs are available to anyone aged 18-39, and can be used to buy your first home, or as a savings pot for retirement. These cannot be compared with Compare the Market.
- Junior ISAs allow you to save for your child’s future. They must be under 18 and living in the UK (unless you’re a Crown servant or depend on you for care). These come in the form of both cash ISAs and stocks and shares ISAs. Until the child is 16, you are responsible for the account on their behalf. The child cannot withdraw the money saved until they turn 18. These cannot be compared with Compare the Market.
- Notice ISAs are sort of in between easy access and fixed rate ISAs. Notice ISAs mean you don’t have to lock your money away for a set period, but you will need to give notice as to when you want to withdraw your money. The notice period can vary between providers, but expect somewhere in the region of 30 to 120 days.
- Regular saver ISAs are good for savers who put away, well… regularly. You won’t have to lock your money away for years, but, to qualify for the better interest rates, you will have to commit to meeting a minimum monthly deposit, which can vary between account providers.
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 personal savings allowance has meant that you can earn tax-free interest on ordinary savings accounts, this is 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 you feel you’re currently paying too much tax on your savings interest, it could be a good idea to shift your money to an ISA for those tax advantages. Don't forget, you can maximise both your personal savings allowance and your ISA allowance at the same time, if you can afford it.
What should you consider when comparing cash ISAs?
As an investment, you’ll want to make sure that a cash ISA is the right fit for you. Here are some of the most important things to consider when comparing cash ISAs:
Fixed term or instant access
Fixed-term ISAs usually offer better rates, but require you to lock your money in for a set period, with heavy penalties for withdrawing early. Whereas, instant-access ISAs offer greater flexibility, allowing you to withdraw at any time. However, you won’t get the best ISA rates.
Cash ISA rates
Once you’ve decided which type of cash ISA you’re investing in, you’ll want to compare the rates available to you. It’s definitely worth using a comparison service like Compare the Market, not only when you’re first opening your ISA as an investment, but to regularly look for better rates elsewhere, as you can transfer your cash ISA as often as you’d like. The best rates are typically found with the longer fixed-term ISAs.
Withdrawal fees
If you entered a fixed-term cash ISA, with the intention of seeing the term through, but your circumstances changed and you were unable to do so, you’ll be charged a fee to withdraw your money. This may cause you to lose much of your previous earnings, or even eat into your original amounts deposited. Make sure you’re aware of these fees, to avoid any nasty surprises.
What are the pros and cons of cash ISAs?
Choosing to invest your money in a cash ISA has a range of benefits, but it’s not without its drawbacks, too.
Pros:
- You won’t pay tax on interest earned – this is one of the main reasons people use ISAs. The interest earned on your account is entirely yours to keep, maximising your saving potential.
- Flexibility when switching – you can transfer your ISA as many times as you’d like, whenever you’d like. This means you can take advantage of competitive rates at any time. You’re also able to switch to a new type of ISA, which offers further investment flexibility.
- Completely free – while also avoiding any tax on the interest you earn, cash ISAs are completely free, with no monthly charges that you may find on other types of savings or current accounts.
- No age limits – there’s a type of ISA out there for everyone. This includes no upper age limits for cash ISAs, while anyone under the age of 16 can have a Junior ISA opened in their name.
Cons:
- The best returns require longer terms – if you want to take advantage of the best rates, you’ll need to tie your money into longer fixed terms. This means you’ll have less access to your money. Instant-access ISAs offer a suitable alternative, but the rates aren’t as high.
- Penalties for withdrawing early – if you’re on a fixed-term deal and need to withdraw your money early, you’ll need to pay a heavy fee
- Deposit limits – cash ISAs have limits on the amount you can invest each year. In 2021, this currently stands at £20,000. This is not a cap per ISA, it is a cap per individual.
Is my money safe in a cash ISA?
If your cash ISA provider were to go under, up to £85,000 of your money would be safely covered by the Financial Services Compensation Scheme. If you’re looking to invest more than this amount, it’s best to spread your money across different assets or ISAs from different financial institutions. You can only open one ISA per tax year, so keep this in mind if you’re looking to invest large amounts.
In a standard cash ISA, your money should be safe and you earn interest on your savings. If you were to open another type of ISA, such as a stocks and shares ISA, you take on a certain level of risk, like any other type of investment.
What are the alternatives to cash ISAs?
If you’ve decided that you want a tax-free savings account, there are a number of alternatives to cash ISAs:
Stocks and shares ISAs
These types of ISA allow you to invest in shares, but protects your investment from any tax on any potential profit or income. Stocks and shares ISAs are used as long-term investments, so you should be prepared for investments of five years as a minimum.
You should be careful with these investments, because, while they might make you more money in the long run, if you’re not so lucky with the stock market, you might even lose money. When investing in stocks and shares, it’s important to know that the value of your investments will change, and 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 during this time, which means the best rates are tied to the longest terms, so it’s typically seen as a longer-term investment. However, the returns are guaranteed, making them an attractive option for those with the money to take advantage.
Savings accounts
While not always offering interest rates as strong as ISAs, standard savings accounts can offer you greater flexibility. By comparing savings accounts, you’ll be able to find the best rates to help your savings grow.
Current accounts
While you may not think it at first, there are a number of current accounts which offer very competitive levels of interests that can be comparable to some ISAs and savings accounts. If you compare the rates on offer between providers, we can help you find rates which will help boost your savings further.
Premium bonds
Premium bonds allow you to invest your money in a monthly scheme. Each £1 bond is treated as an entry, almost like a raffle ticket, with monthly prizes and jackpots won each month. Prizes start from £25, but reach all the way up to £1 million. You must invest a minimum of £25 to be eligible, and 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.
Peer-to-peer lending
Peer-to-peer lending allows you to invest your money as a loan to a borrower, who will then repay you with interest. Peer-to-peer loans usually offer higher rates of interest, which make them a potentially lucrative investment, but they come with the risk of any loan, with your return on investment purely the result of your borrower being able to repay their debt.
Innovative Finance ISA
In 2016, the Innovative Finance ISA was introduced, which allows you to pay your peer-to-peer interest earnings into an ISA account, which protects it from incurring interest charges.
Can I transfer from one cash ISA to another?
You can transfer your cash ISA savings from one account provider to another at any time, as many times as you’d like. You can also transfer your savings between different types of ISA. This allows you to compare and swap to take advantage of the best ISA rates, or swap to another type of saving.
To do this, 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 from one account and opening another isn't the same and you’ll face the various limits and charges for doing so. 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.
Any money that’s been invested for the current year must be transferred in its entirety. Money deposited in previous years can be transferred in part or whole. Make sure you understand any rules your new provider might have about transfers in. Some of them don't allow transfers at all, while others may expect you to do it as part of the opening process within a strict time limit.
How to find the best cash ISA for transfers?
Transferring your cash ISA is an easy way to boost your interest rate. Many ISAs have an introductory or fixed-term rate, which is usually the best rate, but this can plummet once that period ends. To make the most of your savings, transferring your cash ISA is a great way to make your money work best for you.
To find the right cash ISA for you, comparing the latest available deals is a great place to start. You’ll be able to check the interest rates, as well as any balance limitations, to help you find the right deal for you.
How to find the best cash ISA rate?
Normally, the longer fixed-rate accounts offer higher ISA rates. These lock in your funds, restricting your access, but reward you with a higher level of interest.
The type of cash ISA you take out may also affect your rate. Fixed-rate cash ISAs typically offer better interest rates than instant-access ISAs, which usually offer the lowest rates. Regular cash ISAs can offer good rates, but often require a minimum monthly deposit in order for you to qualify for the interest rate.
How do I open an ISA?
Opening an ISA is pretty simple. Most account providers will let you open an account either in branch, over the phone or online. As long as you haven’t exceeded your total ISA allowance for the year already (which we’re guessing you haven’t if you’re reading this), then you are good to go.
You’ll need to be at least 16 years old to open an account, but you won’t need to face a credit check. This is because an ISA isn’t a credit product. You won’t get an overdraft or be able to borrow against it, so your credit score won’t come into it.
Other than that, you’ll just need some of your personal details, like you’re National Insurance number, address and occupation, along with a few forms of ID to help prevent money laundering
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Frequently asked questions
Can I make withdrawals from a cash ISA?
While you can withdraw money from your cash ISA at any time, it’s not always wise to do so. If you have an instant-access ISA, you have full flexibility with your money and are able to withdraw at any time. However, if you have a fixed-term ISA, you will be charged significant fees for withdrawing your money early. Fixed-term ISAs often offer better rates than instant access ISAs, which makes it a tradeoff for potential earnings vs. flexibility.
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 is completely protected from being taxed, for as long as you have the account. Whereas, the interest earned with a savings account will still be subject to tax. Depending on your personal circumstances, you can earn up to £1,000 in interest free of charge, but anything beyond that is subject to tax.
How do Help to Buy ISAs work?
The Help to Buy ISA scheme closed on 30 November 2019. From this date, new accounts are no longer available. However, if you have an existing account, or opened one before 30 November 2019, you will still be able to benefit from your Help to Buy ISA until November 2029.
With Help to Buy ISAs no longer available, you might want to consider a Lifetime ISA instead. A Lifetime ISA allows you to save up to £4,000 a year, which is more than the Help to Buy ISA. Lifetime ISAs are separate to cash ISAs, and cannot be compared with Compare the Market.
If you’re saving to buy your first home, you’ll still get a bonus from the government that will boost your savings by 25%. For every £200 you save you'll get a bonus of £50, up to a maximum of £3,000. The maximum amount you can save every month is £200.
If you’re buying with a partner, and they also have an existing Help to Buy ISA, you can combine your savings to help you get on the property ladder. To qualify for the scheme the home you buy must be priced under £250,000 or £450,000 in London.
You need to have saved at least £1,600 to get the bonus. The bonus is paid once it’s certain that the house purchase will go ahead, and you reach completion. Your solicitor or conveyancer can help you when it’s time to claim your bonus and close your account. You need to make sure the rules are followed, otherwise you might not be able to claim your bonus.
What do you need to compare cash ISAs?
You don’t need anything to compare ISAs. But you will need some basic personal details to apply, such as your National Insurance number, address, occupation and any current ISA account details you might want to switch into the new ISA.
A lot of cash ISAs are available to apply for online (we’ll show you how to apply for the options we find for you, whether it’s online, by phone, post or if you must go into a branch).
Also, you may need to meet a minimum deposit. This might be £1 or it might be £1,000 – it depends on the ISA you choose. You can easily see what the minimum and maximum limits you can deposit are in our ISA comparison tables.
Can I open a cash ISA with bad credit?
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. This means you can open a cash ISA, regardless of your credit score.
What are flexible ISAs and how do they work?
Flexible ISAs were launched in April 2016. This type of ISA allows savers to withdraw and replace money without the replacement cash counting towards the annual ISA allowance. While these were uncommon initially, their popularity has grown considerably, with significantly more providers offering this type of ISA.
If you think this is a feature you need, then check that the ISA account you want to open offers it.
Can I combine multiple old ISAs into one?
You can transfer ISA accounts as many times as you like, whenever you like. This includes combining multiple ISAs into one. ISAs typically lose a huge portion of their earning potential when the introductory rate expires. If you’re sitting on multiple ISAs, and the rate has dropped considerably, you should consider combining your money into a single account. Preferably one with a better rate.
How many ISAs can I have?
Thankfully, there isn’t an ISA limit, which means you can open as many ISAs as you’d like. However, you’re only able to open one ISA each year. If you hold multiple ISAs, you should consider combining them into one account. However, if the amounts you’re combining total more than £85,000, this will exceed the limit you will be protected for by the Financial Services Compensation Scheme (FSCS). If you’d like to protect your money further, it’s best to spread amounts beyond this among several accounts with different banks or account providers
What happens to your allowance at the end of the year?
Your ISA allowance resets each tax year, allowing you to invest further across your ISA(s), with tax-free status, once again. In the tax year 2023/24, the ISA allowance is £20,000, which can be split across multiple ISAs. If you fail to use your full allowance for the year, this is lost and does not carry over into the new tax year.
Why compare cash ISAs with Compare the Market?
To find the right ISA rate for you, comparing the available rates allows you to quickly look at your options. The strongest rates don’t necessarily come from the big banks – you might find a great deal with a smaller online provider you’ve never heard of before.
We can help you compare cash ISAs from a wide range of providers. You can choose from instant access or fixed rate. We’ll give you all your options at a glance in a simple, clear table for easy comparison and highlight the key features of each ISA available.
