Or tell us what you want to invest and see all products

Note

Eligible deposits with UK institutions are protected by the Financial Services Compensation Scheme up to a maximum level of protection of £85,000 per person per institution.

Disclaimer

All rates subject to change without notice. Please check all rates and terms before investing or borrowing.

Quick Links

Quick links are where we have an arrangement with a provider so you can move directly from our site to theirs to view more information and apply for a product. We also use quick links where we have an arrangement with a preferred broker to move you directly to their site. Depending on the arrangement we may receive a modest commission either when you press a 'Go to Provider' or 'Speak to an Adviser' button, when you call an advertised number or when you complete an application.

How Moneyfacts works

  • blue money scales

    BALANCED. Moneyfacts.co.uk is entirely independent and authorised by the Financial Conduct Authority for mortgage, credit and insurance products.

  • free label

    FREE. There is no cost to you. Our service is entirely free and you don't need to share any personal data to access our comparison tables.

  • drawing of pound sign and arrow

    TRANSPARENT. We only receive payment from product providers and intermediaries for quick/direct links and adverts through to their websites.

  • blue binoculars

    COMPREHENSIVE. We research the whole market and scour the small print so you can find the best products for your needs.

Get our weekly newsletter

Weekend Moneyfacts is available free by email to all Moneyfacts.co.uk users.

Please send me Weekend Moneyfacts, Savers Friend and selected third-party offers.

A guide to cash ISAs

At a glance

  • ISAs are one of the most popular ways to save, and with the interest that you earn in these accounts paid tax-free, it is easy to see why.
  • The ability of ISAs to accumulate tax-free benefits and the hope that interest rates will rise means ISAs remain an important savings option, despite the introduction of the Personal Savings Allowance.

Which ISA to choose?

There is a wide variety of cash ISAs on offer, which mainly mirror the types of account on offer in the traditional savings market.

Easy access cash ISAs

Easy access cash ISAs are probably the simplest type of cash ISA, as they allow instant access to your funds. While most easy access ISAs allow unlimited withdrawals, it’s worth noting that some restrict the number of withdrawals that are allowed. Some easy access ISAs also include a short-term bonus which boosts their rate, usually for 12 months. Once the bonus period expires, it is important to check whether the ISA remains competitive, and potentially transfer your ISA if it does not.

Fixed rate ISAs

Fixed rate ISAs tend to pay the best interest rates because providers are happy to pay more in return for knowing they will have the funds for a set amount of time. Terms usually range from one to five years, with the longer the term agreed, the higher the rate of interest that is paid. However, if you want to access your fixed rate ISA funds before the term expires, an interest penalty will normally have to be paid and the ISA may be closed.

Regular savings ISAs

If you want to put a smaller amount away each month, a regular saving ISA may be for you. In return for promising to put a minimum amount of money away on a regular basis, these accounts often pay a higher amount of interest. It should be noted, however, that missing a month or withdrawing the cash usually means the better rate will be lost.

Notice ISAs

If you are happy to give notice before accessing your ISA funds, notice ISAs tend to pay a higher rate of interest than easy access ISAs. Notice periods vary, but typically range between 30 and 180 days. Interest penalties for earlier withdrawals usually fall in line with the notice period.

What is the ISA allowance?

In the 2019/20 tax year, the ISA allowance is £20,000. You can choose to use your ISA allowance in a cash ISA, a stocks & shares ISA, an innovative finance ISA, a lifetime ISA (which has a lower limit of £4,000) or any combination of the four, as long as you don't exceed the annual allowance. This means that the most you can pay into a cash ISA in any tax year is £20,000; if you do this, you will not be able to put any money into any of the other types of ISA. You must pay your money in before 5 April 2020 if it is to count towards the annual ISA limit for the 2019/20 tax year. 

Since the introduction of the Personal Savings Allowance in April 2016, which allows basic rate taxpayers to earn £1,000 of savings income tax-free (£500 for higher rate taxpayers), questions have been raised over the value of using an ISA for savings. However, for the vast majority of savers, making use of their ISA allowance still makes sense. This is because:The tax benefits in an ISA are cumulative, meaning you can shelter ever larger sums from tax year-on-year.

While the Personal Savings Allowance is currently adequate for most savers to avoid paying tax on their savings without using an ISA, savings rates will not have to rise too much further before tax may become an issue. For instance, if rates were to reach 5%, non-ISA balances of £20,000 and over would become taxable for basic rate taxpayers (£10,000 and over for high rate taxpayers).

If the Government were to review the way savings are taxed in the future, the Personal Savings Allowance seems far more vulnerable to change than the more established ISA regime. It would be extremely difficult to justify the removal of tax advantages from money already held in ISAs compared to lowering or even scrapping the Personal Savings Allowance.

ISA FAQs

How much can I put into an ISA?

Because of their tax advantages, the Government limits the amount that one person can pay into an ISA each tax year. A tax year runs from 6 April to 5 April the following year.

We’ve gathered together information on this year’s ISA allowance, as well as many other important taxation considerations. This includes the current income tax rates and personal savings allowance, for those who aren’t sure whether they need to worry about taxation on their savings returns, as well as pension rates, inheritance tax and much more.

Can I have more than one ISA?

You can hold a cash ISA, a stocks & shares ISA, an innovative finance ISA and a lifetime ISA all in the same tax year.

However, what you can’t do is put new money into more than one of the same type of ISA in the same tax year. So, if you have already opened a cash ISA after 6 April of the current year, and have made contributions into it, you cannot open another cash ISA and pay into it until the next tax year.

Can I withdraw cash whenever I like?

This is likely to depend on the type of ISA you have and any rules that your ISA provider has for making withdrawals. With easy access ISAs, you can usually withdraw your money when you want to. However, with fixed rate ISAs, your funds are supposed to be tied up until the end of the fixed term.

In reality, most fixed rate ISAs will allow early access to funds, but an interest penalty will have to be paid. Similarly, while a notice period is meant to be observed if you have a notice ISA, some providers will allow earlier withdrawals on an interest penalty.

Can I take money out of a cash ISA and put it back in?

If your ISA is ‘flexible’, you can take out money then replace it during the same tax year without reducing your current year’s allowance. It should be noted, however, that ISA providers do not have to offer the ‘flexible ISA’ option, so you should always check with your provider first.

Inheriting ISAs

It is now possible for a surviving spouse or civil partner to inherit the ISA savings of a loved one when they die and continue to benefit from the tax-free benefits built up. This can be done using an additional, one-off ISA allowance, equal to the value of the deceased’s ISA holdings.

The ‘additional permitted subscription’ allows the survivor to re-shelter the assets in an ISA in their own name, without encroaching on their own ISA allowance for that tax year. Although inheritance tax (IHT) will still apply, transfers between spouses on death are IHT free.

Is my money safe in an ISA?

As long as the ISA is provided by a UK regulated bank or building society account, it is protected under the Financial Services Compensation Scheme (FSCS). This means that the first £85,000 of money saved with a particular financial institution is covered should the ISA provider fail.

Moneyfacts tip

Moneyfacts tip Leanne Macardle

If you have built up a total ISA fund in excess of £85,000, you may want to think about spreading the money between different providers.

What are the advantages of ISAs?

The main advantage of an ISA is its tax-free status, with returns and capital growth free from income and capital gains tax. This is important because the interest you earn from a traditional savings account may be subject to income tax; so, depending on how much savings interest you earn, up to 45% of this may be taxable.

Who can open an ISA?

The fact that ISAs are accessible to almost all has also played a key part in their success. Anyone who is resident in the UK for tax purposes and aged 16 or over is entitled to open a cash ISA. The age rises to 18 for a stocks & shares ISA. Crown employees, such as diplomats or members of the armed forces, are eligible too, along with their spouses or civil partners.

Moneyfacts tip

Moneyfacts tip Leanne Macardle

Looking to save for a child? View today's best Junior ISA rates that pay interest tax-free.

Cookies

Moneyfacts.co.uk will, like most other websites, place cookies onto your device. This includes tracking cookies.

I accept. Read our Cookie Policy