18 Month Fixed Rate Cash ISAs

What is an 18-month fixed rate ISA?

An 18-month cash ISA is simply a type of fixed ISA that pays a guaranteed rate for 18 months. This means the interest rate won’t change for this period, giving you a predictable return on your money.

As with other ISAs, the interest earned is exempt from income tax.

These accounts could be useful for savers who want to put money towards a short-to-medium term goal, such as a wedding, a holiday or a new car, as they won’t be tempted to dip into this money for any other purpose. Just make sure the 18-month term ends before you need to access your savings, as the provider will usually apply a penalty if you want to withdraw before the end of the fixed period.

How an 18-month ISA works

An 18-month ISA works in much the same way as any other fixed account – after opening the ISA you’ll need to add money to it, but make sure to check what the minimum deposit requirements are. Some providers allow you to open an ISA with as little as £1, while others expect £1,000 or more; check the "Product Specification" on our chart to find out the details.

Depending on the provider, you may only be able to make one deposit when you open the account, but others may allow further additions for a limited period, such as 14 or 28 days. Just make sure that you can comfortably afford to lose access to the sum for the full 18-month term.

Bear in mind too that you can only deposit a maximum of £20,000 across one or more cash ISAs in a single tax-year.

Once deposited you’ll start earning interest on your money, which may be paid monthly, yearly or on maturity of the account. Because the rate is fixed, you’ll know exactly how much interest you’ll earn by the end of the term. However, in return for receiving this guaranteed rate, you typically won’t be able to withdraw from your savings (or transfer to a different ISA) during the 18-month period without incurring some form of penalty.

At the end of the 18-month term, the provider will often move your money into a standard variable ISA or other type of ISA unless you request otherwise.

Can I withdraw money from an 18-month ISA?

Yes, you’re allowed to withdraw money from an 18-month ISA, but this will nearly always result in a penalty of some kind. This will typically be an interest penalty (for example, you might lose 120 days’ worth of interest) but may also result in closure of the account. Different providers impose different penalties, so always check the terms and conditions ahead of time.

Bear in mind that these penalties can also apply to transfers away from the account, so always factor this into your need to access your money. This is why fixed ISAs should ideally only be used for lump sum savings where you have access to an accessible emergency fund elsewhere.

What happens at the end of the 18-month fixed term?

At the end of the 18-month term you’ll be free to access your money and withdraw or transfer it where you see fit. You may want to reinvest it with the same provider, move it to an entirely new account, or withdraw it completely. Note that you’ll need to give the provider instructions on what you wish to do with the money, otherwise it’ll typically be paid into an account of their choosing, which will normally be a variable (and lower) rate.

Bear in mind that if you want to retain the money’s tax-free status and keep it invested in an ISA, you’ll need to follow the specific ISA transfer process to move it to another account. Don’t just withdraw it and deposit it yourself, as this will count as “new” money for the tax-year which will eat into your annual allowance. Find out more about how to transfer an ISA in our guide.

Who are 18-month ISAs for?

18-month ISAs are most suited to those who have medium-term goals for their savings, or who simply don’t want the inflexibility of locking their money away for a longer time period.

They’re particularly suitable for those who have a lump sum that they want to shield from tax – especially if they’re approaching their PSA limit with other accounts – but they’ll need to be happy to lose access to that sum for the full 18 months. This means they’ll need more accessible savings elsewhere that they can call upon in an emergency.

What do I need to open an 18-month ISA?

To open an 18-month cash ISA, you need to be a UK resident aged 18 or over. Crown employees and members of the armed forces serving abroad (and their spouses or civil partners) are also eligible to open an ISA.

When applying, you need to tell the provider some key details, such as your:

• name
• address
• date of birth
• National Insurance number
• current account details
• contact information.

If you’re transferring in from another ISA, you’ll also need to give the provider the details of this account.

How can I manage my account?

The way you can manage your 18-month ISA depends on the provider. For example, you may be able to manage it online, via mobile app, by phone, in branch or by post. Some providers offer multiple management methods while others may only offer one.

You can see the different ways you can manage each ISA on our chart.

What is the minimum deposit required to open an account?

Minimum deposit requirements vary between ISAs and providers. You may be able to open some 18-month ISAs with as little as £1 but others may ask for several thousand pounds.

Click “Product Specification” next to an account on our chart to see the minimum deposit required.

Make sure to check if you can add to your savings after your initial deposit. Some may only allow one deposit, which means you need to think carefully about how much you add to your account, while others allow you to add to your savings for a limited period after opening.

Are there any other requirements?

Providers will have their own set of terms and requirements, such as a minimum opening deposit (as discussed above).

But, as well as the requirements of an individual account, it’s important to think about the general terms and conditions of opening an ISA, particularly your annual ISA allowance.

While you can have and open multiple cash ISAs within the same tax-year, you can only pay in a maximum of £20,000 across all your ISAs.

So, if you’re saving into one or more ISAs alongside an 18-month ISA, make sure you keep track of how much you deposit in all of these accounts.

Should I consider fixing for a longer term?

It’s up to you to decide whether an 18-month ISA is right for you or whether you should fix for a longer term. These accounts are a kind of middle-ground between short- and long-term ISAs and may appeal to savers who want to secure a guaranteed rate but aren’t comfortable locking away their money for two years or more. You will be able to access your savings after 18 months, so it’s not as much of a commitment as depositing a lump sum in a two- or three-year ISA, for example.

However, if you have some money that you’re confident you won’t need to access in the near future, it may be worth securing a fixed return for a longer period. This would protect your savings from any future drops in rate (as the interest rate will be fixed for the specified period), but, on the other hand, if interest rates rise during the term, you could miss out on higher-paying accounts. Researching how savings rates are expected to change over the coming years can help to inform your decision on how long to lock in a rate for, but remember that interest rates may not always move as predicted.

As well as the market, it’s important to think about your individual situation when deciding whether an 18-month ISA or an ISA with a different length term is more suitable. Ask yourself how long you are willing to lock away access to a portion of your savings and when you are likely to need it, taking into consideration the money you have saved elsewhere.

Furthermore, it’s not necessarily a case of choosing an 18-month ISA or a longer-term ISA; you could have multiple ISAs with different term lengths. This can be a useful way to “ladder” your savings so you can access some of your money when one account matures, while the rest continues to earn interest in a separate account.

Alternatives to 18-month ISAs

Instead of an 18-month ISA, you may want to consider a one-year ISA or two-year ISA, which are more common products. This means you’re likely to have more accounts to choose from and may be able to secure a more competitive rate than if you only looked at 18-month ISAs.

If you want a fixed ISA with a longer term, you could also consider a three- or five-year fixed ISA.

Alternatively, if you want the option to dip into your savings, easy access ISAs or notice ISAs could be suitable options.

You may also want to look at standard savings accounts, such as an 18-month bond, instead of ISAs as you may find these pay higher rates.

However, it’s important to bear in mind that you will need to pay tax on any interest you earn from your savings if you earn more than your Personal Savings Allowance (PSA). By contrast, you don’t need to pay any tax on interest you earn on ISAs.

Note that the tax benefits depend on your personal circumstances and may change in the future.