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What are Cash ISAs?

Cash ISAs are Individual Savings Accounts structured as a ‘tax wrapper’ which means it lets you save without having to pay any tax on the interest you earn.

You save up to £20,000 each tax year (this is your ISA allowance) without paying tax on any of the interest you earn on your savings, and you don’t have to declare it on your tax return. They are useful for high earners with a lot of savings who might not be covered by the personal savings allowance, which lets you earn £1,000 of savings interest tax-free as a basic-rate tax payer, or £500 if you’re in the higher-rate band.

Cash ISAs can be either variable rate or fixed rate accounts. Variable means the rate can change depending on what the Bank of England base rate is, while a fixed rate account offers you an unchanged rate for a certain time period, but you will usually have to lock your money away for between one and five years.

A no-notice variable rate Cash ISA lets you access your money at any time, or you could go for one with a notice period or a fixed term for a better rate, but the interest rate you can earn is subject to change.

How do Cash ISAs work?

You can only open one Cash ISA in any tax year, but you can hold more than one. You can switch any money you hold in an ISA so, for example, if you had a fixed-rate Cash ISA and the term came to an end you dropped to a worse interest rate, you could do an ISA transfer to move your money to a higher-interest paying account. Note that you must not withdraw the money in cash and pay it in to a new account, you have to do an actual ISA transfer as otherwise you would lose the tax benefits.

Advantages of Cash ISAs

  • The main advantage of a variable rate Cash ISA is that you do not pay tax on the income you receive.
  • They can be flexible and easy access, so you can get your savings when you need them, although some accounts can have a fixed term and still pay a variable rate.
  • Your savings are protected up to £85,000 in the event your FCA-regulated provider collapses.
  • If you save for longer, you get better rates. The longer the term of the ISA, the better rate you could get. If you do need to withdraw your money early you may have to pay a penalty or the account may be closed

Disadvantages of Cash ISAs

  • The returns may not be as good as a stocks and shares ISA, although this largest depends on the performance of the stock market.
  • They do not offer the best interest rates – as the product is tax efficient they are more expensive for providers to operate. So you may find you get a better interest rate with a regular savings account of fixed-rate bond.
  • If you have a variable cash ISA, there is uncertainty over the rate you will get, as a variable rate product can change what it pays in line with the Bank of England’s base rate of interest.
  • You may not be able to access your cash for a fixed term, and this can work against you if rates go up and you’re locked in to a lower-paying deal. Depending on whether you think interest rates will go up or down from here, you could choose a longer or shorter fixed term for your ISA.

Best fixed-rate Cash ISA rates:

With fixed-rate Cash ISAs the interest rate is fixed for a certain time and you are guaranteed to receive regular income.

  1. Paragon Bank 5 Year Fixed Rate Cash – AER 4.27%
  2. Paragon Bank 3 Year Fixed Rate Cash – AER 4.26%
  3. Paragon Bank 2 Year Fixed Rate Cash ISA – AER 4.25%
  4. Aldermore 3 Year Fixed Rate Cash ISA – AER 4.10%
  5. Aldermore 2 Year Fixed Rate Cash ISA – AER 4.00%
  6. Paragon Bank 1 Year Fixed Rate Cash ISA – AER 3.80%
  7. Leeds BS 2 Year Fixed Rate Cash ISA – AER 3.75%

Best variable-rate Cash ISA rates:

With variable Cash ISAs the interest rate may change based on the underlying rate set by the Bank of England so it’s important to understand that the interest rate you receive can change.

  1. Skipton BS Cash eISA Saver – AER 2.10%
  2. Aldermore 30-Day Notice Cash – AER 2.05%
  3. Marcus by Goldman Sachs® Cash ISA – AER 2.00%
  4. Nationwide BS 1 Year Triple Access Online ISA – AER 2.00%
  5. Saga Cash ISA – AER 2.00%
  6. Ford MoneyFlexible Cash ISA – AER 1.90%

Cash ISA alternatives

If you have already used up your ISA allowance or want to see if there are better saving account interest rates Hargreaves Lansdown offers an Active Savings product, where you can save across a range of different savings accounts without having to open up a new account each time.

We have also listed below some of the latest saving account switching offer and providers with some of the best interest rates for your savings.

4.75 % AER
raisin
Investec 2 year 4.75 % AER fixed rate bond
Your deposits with Investec 24 Month Fixed Term Deposit are eligible for protection by the…Show More
Your deposits with Investec 24 Month Fixed Term Deposit are eligible for protection by the Financial Services Compensation Scheme (FSCS). The FSCS is the United Kingdom’s statutory deposit guarantee scheme that covers deposits in individual savings accounts up to £85,000, per banking group regulated by the Financial Conduct Authority or the Prudential Regulation Authority. It is available for deposits with most UK high-street and online banks and means if the bank fails, and deposits become unavailable, the scheme may cover your deposit account deposit up to the £85,000 per person, per banking group limit. Compensation limits are per person per firm, not per deposit. Be aware that if you have other deposits with this bank (or banking group) then the £85,000 protection applies only to eligible deposits up to this limit.Details:
  • Bank: Investec
  • Country: United Kingdom
  • Interest rate: 4.75 % AER
  • Term: 24 Months
  • Interest type: Fixed
  • Minimum amount: GBP 1,000.00
  • Maximum amount: GBP 85,000.00
  • Interest payment: Interest paid upon maturity
  • Costs: No costs
  • Availability: At the end of the term
  • Currency: GBP
Show Less
4.85 % AER
raisin
Zenith Bank 4.85 % AER 3 year fixed rate bond
Your deposits with Zenith Bank UK Ltd 36 Month Fixed Term Deposit are eligible for…Show More
Your deposits with Zenith Bank UK Ltd 36 Month Fixed Term Deposit are eligible for protection by the Financial Services Compensation Scheme (FSCS). The FSCS is the United Kingdom’s statutory deposit guarantee scheme that covers deposits in individual savings accounts up to £85,000, per banking group regulated by the Financial Conduct Authority or the Prudential Regulation Authority. It is available for deposits with most UK high-street and online banks and means if the bank fails, and deposits become unavailable, the scheme may cover your deposit account deposit up to the £85,000 per person, per banking group limit. Compensation limits are per person per firm, not per deposit. Be aware that if you have other deposits with this bank (or banking group) then the £85,000 protection applies only to eligible deposits up to this limit.Details:
  • Bank: Zenith Bank UK Ltd
  • Country: United Kingdom
  • Interest rate: 4.85 % AER
  • Term: 36 Months
  • Interest type: Fixed
  • Minimum amount: GBP 1,000.00
  • Maximum amount: GBP 85,000.00
  • Interest payment: Annual interest payment
  • Costs No costs
  • Availability: At the end of the term
  • Currency: GBP
Show Less
4.90 % AER
raisin
Tandem Bank 3 year 4.90 % AER fixed rate bond
Your deposits with Tandem Bank – 36 Month Fixed Term Deposit are eligible for protection…Show More
Your deposits with Tandem Bank – 36 Month Fixed Term Deposit are eligible for protection by the Financial Services Compensation Scheme (FSCS). The FSCS is the United Kingdom’s statutory deposit guarantee scheme that covers deposits in individual savings accounts up to £85,000, per banking group regulated by the Financial Conduct Authority or the Prudential Regulation Authority. It is available for deposits with most UK high-street and online banks and means if the bank fails, and deposits become unavailable, the scheme may cover your deposit account deposit up to the £85,000 per person, per banking group limit. Compensation limits are per person per firm, not per deposit. Be aware that if you have other deposits with this bank (or banking group) then the £85,000 protection applies only to eligible deposits up to this limit.Details:
  • Bank: Tandem Bank
  • Country: United Kingdom
  • Interest rate: 4.90 % AER
  • Term: 36 Months
  • Interest type: Fixed
  • Minimum amount: GBP 1,000.00
  • Maximum amount: GBP 85,000.00
  • Interest payment: Annual interest payment
  • Costs: No costs
  • Availability: At the end of the term
  • Currency: GBP
Show Less
5.00 % AER
raisin
Tandem Bank 5.00 % AER 5 year fixed rate bond
Your deposits with Tandem Bank – 60 Month Fixed Term Deposit are eligible for protection…Show More
Your deposits with Tandem Bank – 60 Month Fixed Term Deposit are eligible for protection by the Financial Services Compensation Scheme (FSCS). The FSCS is the United Kingdom’s statutory deposit guarantee scheme that covers deposits in individual savings accounts up to £85,000, per banking group regulated by the Financial Conduct Authority or the Prudential Regulation Authority. It is available for deposits with most UK high-street and online banks and means if the bank fails, and deposits become unavailable, the scheme may cover your deposit account deposit up to the £85,000 per person, per banking group limit. Compensation limits are per person per firm, not per deposit. Be aware that if you have other deposits with this bank (or banking group) then the £85,000 protection applies only to eligible deposits up to this limit.Details:
  • Bank Tandem Bank
  • Country United Kingdom
  • Interest rate 5.00 % AER
  • Ter m60 Months
  • Interest type Fixed
  • Minimum amount GBP 1,000.00
  • Maximum amount GBP 85,000.00
  • Interest payment Annual interest payment
  • Costs No costs
  • Availability At the end of the term
  • Currency GBP
Show Less
£25
raisin
Refer a friend
Recommend a friend to raisin and you could both receive £25
If you use raisin to save money you can use their refer a friend scheme to earn £250 for…Show More
If you use raisin to save money you can use their refer a friend scheme to earn £250 for you and them.How it works:
  1. Receive £25 into your Raisin Account for every friend you refer who funds a savings account with £5,000 or more.
  2. Each one of your referred friends will receive £25 into their Raisin Account when they register with us and fund a savings account with £5,000 or more.
  3. All you need to do to take advantage of our refer a friend bonus is fill in the names, locations and email addresses of the friends who you want to refer, and we’ll send them an email stating that you’re inviting them to join the Raisin UK savings marketplace.
Terms and conditions apply Show Less
1.25%
Hargreaves Lansdown
Paragon Easy Access 1.25% AER
1.25% AER. 1.25% Gross p.a. Minimum opening balance £1.00 Maximum balance £500,000.00…Show More
1.25% AER. 1.25% Gross p.a. Minimum opening balance £1.00 Maximum balance £500,000.00 You must be an individual aged 18 or over, applying for your own product and UK resident. Show Less
Hargreaves Lansdown
Hargreaves Lansdown Active Savings
Get interest rates as high as 5% and manage your savings in one place with a Hargreaves…Show More
Get interest rates as high as 5% and manage your savings in one place with a Hargreaves Lansdown Active Savings Account. Pick and mix interest rates that are often the best in the market, from easy access savings to fixed rate bonds. Show Less
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