Best 2 Year Fixed Rate ISAs | Rates Up To 4.50%

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Two-year fixed rate cash ISAs explained

Two-year fixed ISAs work in the same way as any other fixed-rate Individual Savings Account (ISA).

Savers can deposit a sum of money into the ISA which will pay a guaranteed rate of interest for two years. You won’t be able to access your money or transfer to another ISA during this period, unless you’re willing to incur some form of penalty, such as a loss of interest.

You may only be allowed to make one initial deposit into the ISA, with no option to add to your savings after this point. However, some providers may give you the option to add to your savings for a specified period after opening the ISA.

Bear in mind that you can only deposit a maximum of £20,000 into ISAs each tax-year. Read more in our guide to the ISA allowance.

At the end of the two-year term, you should hear from your provider about the options you could take. If you do nothing, it’s likely that the provider will move the money from your two-year ISA into a standard variable ISA at the end of the term.

Interest on a two-year ISA can typically be paid monthly, on anniversary or on maturity, but the options available will depend on the provider. You don’t need to pay tax on this interest.

Should I open a two-year fixed ISA?

You may want to consider opening a two-year ISA if you have a lump sum that you won’t need to access for at least two years. Because the rate won’t change during the term, you will receive a guaranteed return on your money, unlike on variable rate ISAs where the rate could go up or down.

However, variable ISAs are likely to be more suitable if you want access to your savings or if you want to make regular deposits into your account.

Two-year ISAs, or any other ISA, are particularly useful if you’re worried about being taxed on the interest you earn on your savings. Thanks to the annual ISA allowance, you can deposit up to £20,000 in ISAs per year without paying tax on the interest.

Alternatives to two-year ISAs

If you think you’ll need to access your money within two years, you could consider putting your money into a one-year fixed ISA or a fixed ISA with a term up to one-year. These accounts will still pay a guaranteed rate of interest, but for a shorter period.

Or, if you prefer to have the option to withdraw from your savings whenever you need, an easy access ISA or notice ISA may be more appropriate.

If you’re comfortable locking away your money for longer than two years and want to secure a guaranteed return on your money, you could consider a three-year ISA, four-year ISA or five-year ISA.

ISAs are particularly appealing because the interest you earn is exempt from tax. However, you can often find better rates on standard savings accounts, which means they could be a more attractive option if the interest you would earn on your savings is within your Personal Savings Allowance (PSA).