Best 1 Year Fixed Rate Cash ISAs

How does a one-year fixed rate cash ISA work?

One-year fixed rate ISAs are a type of Individual Savings Account (ISA) that pay a fixed rate of interest for one year.

What ‘fixed rate’ means

‘Fixed rate’ simply means the interest rate is guaranteed to remain the same over the course of a term; in the case of a one-year fixed ISA, the rate won’t change for 12 months (or until the date specified by a provider).

This is in contrast to variable rate accounts, such as an easy access or notice ISA, where the interest rate can go up or down with little warning.

Deposit limits and rules

Nevertheless, one-year fixed rate cash ISAs work in much the same way as any other type of ISAs. But, there are a few extra rules to be aware of:

• Each tax-year, everyone has a £20,000 allowance they can either deposit into a single ISA or spread across multiple ISAs.
• New rules introduced in April 2024 mean there is no limit on the number of cash ISAs you pay into within a single tax-year – providing you don’t exceed your annual allowance.
• In return for receiving a guaranteed interest rate, you won’t be able to access your money in a one-year fixed ISA before the term ends without facing some kind of penalty – such as a loss of interest. This penalty also applies if you want to transfer your money to another ISA.

How long do I have to deposit money into a one-year fixed rate cash ISA?

Some providers may not allow you to make any further deposits into your one-year ISA after your opening deposit, while others will allow further contributions for a limited period. For more information, select ‘view further details’ next to a listing on our chart.

How is interest paid on a one-year fixed rate ISA?

Just like any other savings account, returns on a one-year fixed ISA are paid at regular intervals. How often interest is received, however, depends on the specific product and provider, and can range anywhere from daily, monthly, quarterly, yearly or on maturity.

Some banks and building societies also offer the choice of having interest paid away or compounded; the former is where any returns are paid into a nominated account, while compound interest remains in the account and will go on to earn interest itself.

Product-specific information can be found on the chart above.

Who can open a one-year fixed rate cash ISA?

One-year fixed rate cash ISAs are open to any UK citizen aged 18 or over, as well as crown servants, members of the armed forces and their spouse or civil partner.

Depending on the provider, one-year ISAs can be operated online and via mobile app, or via more traditional means such as in branch, by post or over the phone. When applying, you may be asked to supply the following:

• Proof of address and identity
• National Insurance number
• Contact details, such as mobile phone number and email address
• A minimum deposit (details of which can also be found by selecting ‘view further details’ on our chart).

While there is no limit on the number of ISAs you can open within a tax-year, take care not to breach your £20,000 allowance.

Benefits of a one-year fixed rate cash ISA

There are some advantages to a one-year ISA which may appeal depending on your savings goals and personal circumstances:

Tax-free interest

As with any ISA, the interest you earn on a one-year fixed ISA is exempt from income tax. In contrast, you may be taxed on interest earned from a traditional savings account or fixed bond if you exceed your Personal Savings Allowance (PSA). The tax benefits of ISAs depend on your personal circumstances and may change in the future.

Security and stability

Securing a competitive fixed rate could protect against fluctuations in the savings market as, even if interest rates were to trend downwards, you’d still receive the same returns.

Short-term flexibility

With a one-year fixed rate cash ISA, your money is locked away for a shorter period of time compared to longer-term fixed ISAs, so you’ll regain access to your cash sooner.

Of course, if you need to make a withdrawal in the meantime, many fixed ISAs permit early access subject to a loss of interest penalty and/or account closure. Again, details of this can be found on our chart by ‘viewing further details’.

Considerations before opening a one-year fixed rate cash ISA

Before applying for a one-year ISA, however, be sure to consider all factors:

What happens at the end of the term?

Once the one-year term comes to an end, your provider should be in contact with further instructions. You may be offered the choice of renewing your fixed ISA or moving to a variable rate ISA with your current provider. Alternatively, you could consider transferring your ISA to another provider, or withdrawing the funds and closing the account.

If you do nothing, your money will typically be moved into a standard variable ISA.

Interest rates and market conditions

While a fixed ISA could safeguard against falling interest rates, it could also leave you out of pocket if typical returns were to rise above the point at which you locked in.

Furthermore, if the rate of inflation is higher than that paid by your one-year fixed ISA, you could end up losing money in real terms.

Early withdrawal penalties

Although some one-year fixed ISAs permit early access subject to a loss of interest penalty, if it’s likely you’ll dip into your saving pot, it may be easier and more cost-effective to opt for an easy access or notice ISA instead.

Is it worth using an ISA or should I just pay tax on my savings?

Chances are, the Personal Savings Allowance (PSA) will be sufficient for many savers as it allows basic-rate taxpayers to earn £1,000 in interest between 6 April and 5 April the following year before needing to worry about paying tax on their returns.

However, if you hold more substantial deposits in your savings accounts and/or are a higher or additional-rate taxpayer, an ISA could be worth considering.

That being said, ISAs often (but not always) pay less than traditional savings accounts, so it’s worth weighing up the tax benefits versus the potential for higher returns.

Furthermore, not all banks and building societies offer ISAs, so you may find more choice when opting for a traditional savings account.

How to choose the best one-year fixed rate cash ISA

While it’s crucial to secure the best returns on your hard-earned cash, it’s also important to find an account that meets your needs and requirements. Below, we list some of the factors that could help you compare one-year fixed rate ISAs:

Interest rate comparison

Perhaps the first thing you should consider is whether an account offers a competitive interest rate; ideally, it needs to pay above the current rate of inflation for your money to have an opportunity to grow in real terms.

Whereas variable rates tend to rise and fall in line with changes to the Bank of England base rate, a provider will typically use forecasts for the future direction of the savings market to determine its fixed pricing. For instance, if there are expectations for the Bank of England to reduce the UK’s central interest rate in the months ahead, you may see one-year fixed ISA rates start to decline pre-emptively.

Related guide: UK base rate explained and how to respond to changes

Consumer demand can also influence rates; the weeks leading up to the end of the tax-year on 5 April, for example, is often a popular time for providers to raise returns or launch attractive new products as many savers look to maximise their ISA allowance before it resets.

Related guide: What is ISA season and why does it matter for your savings?

Other key features to look out for

• Bonuses: Where an account’s headline rate is inclusive of an introductory bonus, it’s important to check whether you’re still receiving competitive returns once the offer expires. If not, you may want to consider transferring your ISA to another bank or building society (but bear in mind this could incur a loss of interest penalty if transferring a fixed ISA).

• Accepts transfers in: While all providers must allow ISAs to be transferred out, they are not obliged to accept transfers in. If you have money in an existing ISA you’re looking to transfer to a one-year fixed ISA, you can check what types of ISA (if any) a particular provider accepts transfers from by selecting ‘view further details’ on our chart.

• Flexible rules: Flexible ISAs let you replace any withdrawn funds without it counting towards your annual ISA allowance. However, this feature may be less necessary in a one-year fixed ISA, as most either prohibit contributions entirely or only accept further additions for a short window of time.

Reputation and customer service

Although it may be tempting to stick with a more familiar brand, some of the best one-year ISA rates can often be found from lesser-known challenger banks which actively seek  customer deposits. You can rest assured that all the providers listed on our charts are subject to the same FSCS protection as some of the UK’s biggest banks and building societies.

Is a one-year fixed rate cash ISA a good option for short-term saving?

A one-year cash ISA could be a good option if you have a savings goal you’re looking to accomplish in 12 months’ time – if you’re looking to grow a lump sum to put towards the cost of a wedding, holiday or car, for example.

But, if you’re saving towards an even shorter-term goal, you may be better off with a less than one-year fixed ISA or even an easy access ISA.

Is a one-year fixed ISA right for me?

You may want to consider a one-year fixed rate ISA if:

• you’re confident that you won’t need to access your savings for 12 months
• you want to avoid paying tax on your savings interest
• you have a lump sum to deposit
• you want to lock in a guaranteed rate for one year.

However, a one-year ISA may not be right for you if you want to be able to access your savings to cover an emergency expense, for example, or if you want to gradually add to your savings over time.

Alternatively, some savers may prefer to lock in a guaranteed rate for a longer period if they don’t need access to their money.

While a longer-term fixed ISA may not necessarily pay as high a rate as a one-year ISA, you’re guaranteed to receive that rate for a longer period. This means that, if rates fall, you could end up earning more interest than if you had taken out a one-year ISA and then looked for a new fixed ISA at the end of the term.

On the other hand, if rates rise, you could miss out on higher interest rates if your money is locked into a longer-term ISA.

Alternatives to one-year ISAs

If a one-year cash ISA isn’t for you, there are some alternatives you could consider.

Longer terms

For example, if you want to put your money away for a longer period, there are two-year ISAs and three-year ISAs available. Or, if you’re sure you won’t need to access your money in the near future, there are five-year fixed ISAs on the market too.

Flexibility

If you prefer to have the option of accessing your money, you could consider an easy access ISA or a notice ISA. These ISAs allow you to add to your savings and make withdrawals as you choose, although you need to give the provider a specified amount of notice before you can withdraw from a notice ISA. Note that the interest rate on these ISAs is variable, which means the provider can increase or decrease it as they choose.

With these ISAs, it’s important to check whether withdrawals and further deposits would affect your ISA allowance. Read more about this in our guide to flexible ISAs.

If you’re not worried about being taxed on your savings interest, you may want to consider a one-year bond or a standard savings account as these typically pay higher rates than their equivalent ISA product.