Regular savings cash ISAs

What You Need to Know About Regular Savings ISAs: Benefits, Limits and Restrictions

Regular savings ISAs can be ideal for those looking to reach their savings goals. They ask you to commit to saving a small amount each month and in return you’ll earn tax-free interest, which could make them a great addition to your savings portfolio.

Most providers will have a limit on the amount you’ll be able to save each month, which makes them particularly suitable for those who take a “little and often” approach to saving. It also means you’ll easily be able to stick within your annual ISA allowance, as you’re restricted in how much you can save.

Just bear in mind that you may be required to make a set number of payments each year, and can be penalised if you miss a monthly deposit. This could be a loss of interest penalty, but in some cases could result in closure of the account. Withdrawals may also be restricted and there can be opening restrictions as well (some accounts are only available to locals, for example), and you may be limited in how you can open and manage the account.

How does interest work on regular savings cash ISAs?

It’s important to note that interest payments can work a little differently on regular savings ISAs, and you may earn less than you’re expecting – typically, the amount of interest you’ll actually receive will be around half of the headline rate.

This is because you’re drip-feeding money into the account on a monthly basis, rather than saving a lump sum all at once. So for example, let’s say you’ve chosen an account that pays 4% interest over the year and are looking to save £500 a month, or £6,000 in total. In the first month you’ll earn 4% on £500, in the second month you’ll earn it on £1,000 and so on. It’s only in the final month that you’ll earn 4% on the full £6,000.

Regular saver ISA or regular savings account?

On your search for a regular saver, you may be wondering whether to opt for a cash ISA version or a standard regular savings account. At first glance, the interest rates offered on regular savings accounts are far higher than for cash ISAs, so if rate is your main criteria, you’ll likely be swayed that way.

Yet the key advantage of a regular savings ISA is its tax-free status, with returns always free from tax regardless of how much you have saved. Of course, thanks to the personal savings allowance this may not be too much of a concern – basic rate taxpayers can earn up to £1,000 in interest tax-free each year, or £500 for higher rate taxpayers – but if you think you’ll breach your limit, a cash ISA version may be the way to go. The tax benefits of ISAs depend on your personal circumstances and may change in the future.

How do I open a regular savings ISA?

Eligibility requirements

The eligibility requirements for a regular savings ISA are similar to other cash ISAs. This usually includes being a UK resident and being over the age of 18.

This being said, some providers will have additional requirements to consider, so if you want to find out more about opening criteria, select ‘view further details’ next to each listing on the chart above.

Choosing the right account

The right account ultimately depends on your individual preferences, so it’s worth asking yourself the following questions:

Are you after the highest returns? – For many, the best account will be the one offering the most competitive rate. However, this isn’t necessarily the best account for your needs so it’s crucial to consider all aspects of the account before deciding.

How much are you looking to save? – Alongside a minimum monthly deposit, regular savings ISAs typically limit the maximum amount you can put away each month, so if you have a larger monthly contribution, make sure to look for accounts that can accommodate this.

Required information

When applying, make sure you have with you any documents that can verify your identity, address and age, as well as your National Insurance number.

As regular savings ISAs usually require a minimum deposit each month, the provider could also ask for bank details for the account you wish to pay from, or details of any current ISA if you plan to open the account via ISA transfer. To avoid being caught out, it’s best to check what’s needed ahead of time.

Application process

The application process varies between accounts, including the method in which the account can be opened.

You can check to see an account's opening options to the right of each listing on the chart above. If you prefer to do your banking from home, for example, look out for accounts that operate online, via app, by post or by phone.

No matter how the account can be opened, make sure to review each step of the process carefully to ensure there are no mistakes in your application. To help with this, each listing also displays any opening criteria and additional information to help you understand what is required.

Set up direct debits

When opening a regular savings ISA, some providers may suggest setting up a direct debit to automatically pay your deposit each month. While this can take away the stress of remembering to make a payment each month, it may be more difficult to change the amount you wish to pay later down the line.

Most accounts will allow you to set up a direct debit anytime, but it’s best to check with the provider.

Account management

Like when opening a regular savings ISA, it’s also important to consider how it can be managed as this affects how easy it is to use day-to-day. You’ll be able to see how each account can be managed next to its opening options for each listing.

Annual ISA allowance

As with any type of ISA, you can only save a combined £20,000 each year across all your accounts as part of your annual ISA allowance. As regular savings ISAs restrict the amount you can deposit each month, this can make it easier to track your savings to help make sure you don’t exceed this threshold.

If you already have one, or multiple ISAs, make sure you know how much of your allowance you have left in the current tax-year before committing to a new account.

How soon after opening a regular savings ISA can I pay into it?

This varies. Some accounts may allow you to make a deposit right away, while others could require you to set a specific date for your monthly payments.

Alternative types of ISA to consider 

Not sure if a regular saver ISA is right for you? Consider these options instead.

Easy access cash ISA

Easy access cash ISAs can offer a lot more flexibility than a regular savings version, letting you add as much as you want to your pot and most allowing restriction-free withdrawals as well (but make sure to check the terms and conditions of your chosen account, as some providers limit the number of withdrawals that are allowed each year). Yet the downside is that there’s no incentive to save, which means it can be easier to get out of the habit. This means it’s important to consider the options carefully, and remember, there’s nothing to stop you from getting both kinds of account to maximise your savings potential.

Fixed rate ISAs

Even if you don’t have a large lump sum to invest, fixed rate ISAs can still be a good alternative for growing your savings. While not offering the same flexibility as an easy access ISA, these accounts offer guaranteed returns in exchange for locking your money away for a specified term (typically ranging from one to five years). While this can protect your pot against falling interest rates it also means you won’t benefit should they rise. What’s more, as further contributions are largely restricted, fixed ISAs are less suitable if you plan to regularly save, and usually have penalties when trying to withdraw funds on short notice.

Stocks and shares ISA

If you’re seeking higher returns than can be achieved with a cash savings account, you may like to consider a stocks and shares ISA instead. These offer the potential for far greater gains, yet they also come with a lot more risk, and you may end up with less than you put in. But if you’re comfortable with that, you could consider setting up a monthly direct debit to invest in a stocks and shares ISA, which still lets you save regularly with the chance to secure a larger pot at the end – and of course, all returns will still be tax-free. 

Alternatively, to get a wider view of the best deals out there, make sure to check out our weekly update of the best ISA rates available.

How much can I save in a regular savings ISA?

While you’ll be limited on how much you can put away each month, the overall amount you can save in a regular savings ISA is only restricted by your ISA allowance unless stated otherwise by the provider.

Do I need to make a monthly payment?

Yes, a regular savings ISA requires a minimum deposit each month. While this can make it easy to build up your savings habits, make sure you can afford to set aside the minimum amount each month to avoid any potential penalties.

Can I withdraw money from my regular savings ISA at any time?

While you typically can access your funds with a regular savings ISA, you could face penalties for making too many withdrawals.

This usually results in a loss of interest but can sometimes lead to account closure or your funds being transferred to another account type.

Is the interest earned on a regular savings ISA taxable?

Just like with any other ISA, any interest earned from a regular savings ISA is not liable to be taxed.

What happens if I miss a monthly deposit?

Some providers may allow you to miss a payment, while others may penalise you for not paying into the account, or for failing to meet the minimum monthly requirement.

This could see you earning a smaller rate on your balance or could even cause account closure, or your balance being transferred to a different account type.

Can I have more than one regular savings ISA?

Yes, as of the 2024/25 tax-year, there is now no limit on the number of ISAs you can hold (aside from Lifetime ISAs), including regular savings ISAs.

However, if you plan to have multiple accounts, make sure to keep an eye on your ISA allowance.

How is interest calculated on a regular savings ISA?

As mentioned above, the interest earned on a regular savings ISA tends to be lower than you might expect, as you’re gradually building up your pot as opposed to depositing a lump sum.

Our chart quotes interest as the Annual Equivalent Rate (AER) which shows you how much you’ll earn over the span of a year, taking the effects of compounding into account. Our monthly savings calculator can help you work out how much your money could be worth after a certain period.

Are regular savings ISAs suitable for long-term saving?

If you don’t have a lump sum to invest or are simply looking to discipline your savings habits, a regular savings ISA can be a solid option for building your portfolio over the long-term.

By only committing to saving what you can afford each month, you’re less likely to find yourself dipping back into your pot to cover expenses in the short-term, therefore helping your savings grow.

However, while these accounts can be used for an emergency fund, keep in mind that other options like easy access accounts or easy access ISAs have fewer restrictions on withdrawals, making it easier to get at your money on short notice.

Can I transfer my regular savings ISA to another provider?

Yes. As of the 2024/25 tax-year, you can transfer all or part of your regular savings ISA to another provider whenever you like, without affecting your annual ISA allowance.

This can be to the same type of ISA or a different type, and includes any deposits made in the current or previous tax-years, though check with your provider to see if they have any restrictions on transferring.

Make sure you contact the provider you’re looking to move to, and they’ll let you know the next steps in the process. It’s important to avoid withdrawing funds yourself as this could impact your ISA allowance.

Is there a minimum amount I need to open a regular savings ISA?

You’ll typically need a minimum deposit in order to open a regular savings ISA, usually ranging between £1 and £25. Keep in mind this initial investment amount tends to be the same as the minimum monthly deposit requirement.

For how long do I need to keep my regular savings ISA running?

Unless stated otherwise by your provider, there’s no limit on how long you can keep saving into a regular savings ISA.

Once you’ve reached your savings goal, you could consider moving your balance to a higher paying account through an ISA transfer.

Is there a regular saver ISA?

Yes. While less common on the market compared to their non-ISA counterparts, regular savings ISAs do exist, and can help you save little and often without having to worry about being taxed on your earnings.