Best Fixed Cash ISA Rates

Fixed rate ISAs explained

What is a fixed rate cash ISA?

A fixed rate ISA is a type of cash Individual Savings Account (ISA) that allows you to earn tax-free interest on your savings.

These ISAs can come with fixed terms ranging from less than one year to over five years. You receive a guaranteed rate of interest for the specified period but won’t be able to access your money until the end of the term, unless you pay a penalty charge.

You can deposit some, or all, of your annual ISA allowance (which is currently £20,000) in one or more ISAs per tax-year.

What’s the current interest rate for fixed rate ISAs ?

At the time of writing, the best fixed rate ISAs pay in excess of 4.50% AER.

However, different providers offer different interest rates and, because they can change at short notice, it’s a good idea to check our charts for the most up-to-date list of the top fixed ISA rates.

As of 1 November, the average one-year fixed ISA rate stood at 4.06%, down from 4.18% at the start of October. Meanwhile, the average longer-term fixed ISA rate dropped to 3.84% on 1 November, down from 3.88% in October.

How does a fixed rate cash ISA work?

When you open a fixed rate cash ISA, or transfer from an existing ISA, providers usually require you to make a minimum deposit.

Your funds are then locked away for a set period of time and, in return, you’ll receive a fixed rate of interest from your ISA. This means the interest rate will remain the same throughout the term, regardless of any changes in market conditions.

To avoid any penalty charges, you should keep your money locked in a fixed ISA for the full length of the term.

However, if you want access to your money, it is possible to make a withdrawal or transfer to a new ISA during the term. But it’s important to bear in mind that this will typically come with some form of penalty charge, such as a loss of interest.

What is the minimum deposit required for a fixed rate ISA?

Providers will have their own requirements, so minimum deposits could range from as little as £1 to as much as £10,000. You can see the deposit requirements of each provider by clicking “view further details” on our chart.

Can I add to my fixed rate ISA after the initial deposit?

It may be possible to add to a fixed ISA after you’ve made your initial deposit, but this depends on the individual provider.

Some providers don’t allow any further additions after opening, while others allow you to continue to add to your account without any restriction. Other providers may only allow further deposits for a limited period of time, such as 14 or 30 days.

How often is interest paid on fixed rate ISAs?

Different fixed ISAs pay interest in different ways, including monthly, yearly, on anniversary and on maturity.

Some providers only pay interest in one way and won’t give you a choice, while other providers allow you to choose the method you prefer.

How does compound interest work in a fixed rate ISA?

Compound interest is when you earn interest on the interest already paid on your savings, which allows your money to grow faster. For example, if you deposit £10,000 in an ISA and it earns £400 in interest over one year, interest will be paid on £10,400 in the second year.

What documents do I need to open a fixed rate ISA?

When you open a fixed rate ISA, you’ll often need to provide the following information:

• Your current address and previous address history
• Your contact details
• Your National Insurance number
• Your current account details
• Details of an existing ISA if you want to transfer it to a new fixed ISA

You may also need to provide some identification documents, such as a driving licence or passport.

Can I open multiple fixed rate ISAs in the same year?

Since 6 April 2024, you have been able to open multiple types of the same ISA in the same tax-year.

This means you can open more than one cash ISA in a tax-year, whether that’s multiple fixed rate ISAs or a combination of fixed, easy access and notice ISAs.

For example, you could choose to split your money between a shorter-term fixed ISA and a longer-term fixed ISA to allow you to access some money sooner while the rest continues to earn interest.

You can also open different types of ISA in the same tax-year, such as a cash ISA and a stocks and shares ISA.

However, even though you can open multiple ISAs, you can still only deposit a maximum of £20,000 (your annual ISA allowance) across all of your accounts per tax-year.

It’s worth noting that providers may only allow you to deposit in one of their cash ISAs in a single tax-year.

Can I use a fixed rate ISA for my savings goals?

You can use a fixed rate ISA to help you reach a range of savings goals, whether you’re saving up for a wedding, a dream holiday or a new home, for example. They can also be useful for any savers wanting to put aside money for the future or their retirement, alongside their pension and other savings and investment strategies.

Fixed ISAs allow you to deposit a lump sum and leave it to grow for several years, so they can be ideal if you know you won’t need to access your money until a specific date.

If you’re saving towards your first home, a Lifetime ISA allows you to receive a 25% bonus from the Government on your savings.

Who are fixed rate ISAs for?

Fixed rate ISAs are for any UK resident aged over 18, but they are particularly useful for those who are at risk of being taxed on their savings.

When savings rates were low, many people didn’t need to worry about going over their Personal Savings Allowance (PSA) and paying tax on their savings interest.

However, with higher savings rates, more people may find that they could be charged tax on the interest they earn.

As a result, fixed ISAs may be an appealing option for anyone who wants to avoid paying tax on their savings interest and who can afford to lock away their money for a specified period.

How can I know if an ISA is worth it?

An ISA is worth getting if you have a large amount in savings that earns more in interest than your Personal Savings Allowance.

• For basic-rate taxpayers, the allowance is £1,000.
• For higher-rate taxpayers, the allowance is £500.
• Additional-rate taxpayers don’t have an allowance.

By putting money into an ISA, you won’t need to pay any tax on the interest it earns year after year.

If you’re not at risk of being taxed on your savings, an ISA may not necessarily be worth it. Standard savings accounts typically pay higher interest rates, so you’re likely to get a better return on your money than if you deposited it in a cash ISA.

But, even if you’re not paying tax on your savings at the moment, it may still be worth opening a fixed rate ISA to protect your savings from tax in the future.

For example, if savings rates rise or if you come into a large sum of money, this could take the interest you earn on your savings over your Personal Savings Allowance. And, because you can only deposit up to £20,000 in ISAs per tax-year, you may still be liable to pay tax even if you max out your current ISA allowance.

By contrast, if you’d made use of your ISA allowance in previous tax-years, you may have been able to continue to avoid paying tax on your savings.

What’s the difference between fixed rate ISAs and easy access cash ISAs?

While both types of ISA offer tax-free wrappers for your savings, fixed rate and easy access cash ISAs have different features.

They both come with their own sets of advantages and disadvantages; the right account for you will depend on your needs, circumstances and savings goals:

*Recent economic volatility has resulted in the gap between fixed and variable rates narrowing. Some fixed accounts are currently offering lower rates than their easy access and notice counterparts due to uncertainty surrounding the future of the savings market.

Locking in a competitive rate with a fixed rate cash ISA may be a good idea if you think interest rates are going to drop. Equally, you may want to consider a fixed rate cash ISA if you’re saving towards a long-term goal and won’t need access to your cash beforehand.

For how long should I fix?

Before settling on a fixed term, you’ll want to assess current market conditions as well as your own savings goals.

If you think interest rates will rise in the near future, you may choose a shorter fixed rate cash ISA of one year or less.

Alternatively, if you think interest rates are likely to drop, you may want to lock in a competitive rate for as long as possible. Learn more about four-year fixed rate ISAs and five-year fixed rate ISAs.

When choosing a fixed ISA term, it’s also important to think about how long you’re comfortable locking away your money for and when you may need to access it.

How does the Bank of England’s interest rate affect fixed rate ISAs?

The Bank of England’s base rate can affect the interest rate on fixed rate ISAs, but not in the same way as variable rate ISAs.

Because the interest rate is guaranteed for the length of the term, any changes to the base rate won’t affect the interest paid on an existing fixed rate ISA. By contrast, the interest rate on an existing variable ISA could change after the base rate rises or falls.

However, ISA providers are likely to factor in the base rate when they set the interest rate on their fixed rate ISAs. As a result, if the base rate falls, providers may lower the interest rate on their ISAs, which means you may have less competitive rates to choose from when opening a new account.

Can I transfer my savings from a standard account to a fixed rate ISA?

Yes, you can move money from your savings account to a fixed rate ISA, as long as you don’t go over your £20,000 ISA allowance. Bear in mind that you may only have a limited time to deposit money into a fixed ISA, and some providers may only allow you to make one deposit when opening the ISA.

Are there any environmental or ethical fixed rate ISAs available?

Yes, there are several providers that offer environmentally friendly fixed ISAs, such as Castle Trust Bank, Gatehouse Bank and Triodos Bank. These providers may plant a tree when you open an account, or they may have a broader ethical ethos, for example.

You can filter our fixed ISA charts to view a list of the “green accounts” available and hover over the green logo on the top right of each listing to see the eco-credentials of an account.

What if I need to withdraw before the end of the term?

If you know you’ll need to make regular withdrawals from your savings, a fixed rate cash ISA may not be the best account for you. Instead, you may want to consider an easy access cash ISA or a notice cash ISA.

While most fixed rate cash ISAs prohibit making withdrawals, some will allow you to gain early access subject to a loss of interest penalty and/or account closure.

Alternatively, all ISAs must allow you to transfer your ISA funds to another provider, although this will also usually incur a penalty in the case of fixed rate ISAs.

You can find out if an account permits early access, and any penalties involved, by viewing ‘further details’ on our charts.

What happens when a fixed ISA matures?

When the term on your fixed ISA ends, or matures, you have several choices available to you.

The provider should contact you several weeks before the end date of your fixed ISA detailing your options. These may include:

• Renewing your ISA so you deposit some, or all, of your funds into another fixed rate ISA with the same provider (you may also be able to add more to your account)
• Moving your funds into a variable rate ISA with the same provider (that allows withdrawals)
• Transferring your ISA to a different provider
• Withdrawing your funds and closing your ISA

If you don’t choose an option, many ISA providers will automatically redeposit your funds into an instant access cash ISA.

What happens to a fixed rate ISA when someone dies?

If the holder dies before the fixed ISA matures, the ISA will officially close when the executor of their estate closes it or when the administration of the estate is complete. Otherwise, the ISA provider will close the ISA three years and one day after death.

The ISA will keep its tax benefits until this point, which means there will be no Income Tax or Capital Gains Tax payable up to that date. However, the ISA will form part of the estate for the purposes of Inheritance Tax.

If you are survived by a spouse or civil partner, they can inherit your fixed rate ISA and retain the tax benefits, but this must be done within three years of the holder’s death. This is known as an Additional Permitted Subscription (APS).

What other types of ISA are available?

Instead of a fixed rate ISA, you may want to consider an alternative ISA such as:

• Easy access ISAs: These are suitable if you want to be able to withdraw from your savings. However, the provider could change the rate, unlike fixed ISAs.
• Notice ISAs: These also allow withdrawals, but you need to provide a certain amount of notice before you can receive your money.
• Regular savings ISAs: If you want to get into a savings habit and deposit into your ISA each month, a regular ISA could be worth considering. However, there aren’t many of these accounts to choose from.
• Lifetime ISAs: Those aged between 18 and 40 years old can open and deposit up to £4,000 in these ISAs each tax-year and receive a 25% top-up bonus from the Government on the amount they deposit. They are designed to help you save for your first home or for retirement.
• Stocks and Shares ISAs: Unlike other ISAs, these are a form of investing. Although this means your money could grow, there’s also a risk that your money could lose value.
• Innovative Finance ISAs: Another form of investing which carries risk, these ISAs allow you to invest your ISA allowance into peer-to-peer lending.