Top cash ISAs 2024/25

Top cash ISAs 2024/25
Up to 5.2% easy access or up to 4.91% fixed

A cash ISA is essentially a savings account that offers tax-free interest. For the 2024/25 tax year, individuals aged 18 and above can deposit up to £20,000 into one or multiple accounts. This guide will assist you in determining whether an ISA is right for you and highlights some of the best options available.

Top-pick cash ISAs

• Easy access, allows withdrawals
  • Trading 212 – 5.2%, online/ app
• Fixed-rate ISAs (with access)
  • Kent Reliance – 4.91% for one year
  • Beehive Money – 4.73% for two years

Other ExEconomics savings guides…

Top savings accounts: The top-paying normal savings
Current accounts: Get up to 5.12% on smaller sums

Some ISA rules have changed. On 6 April, the UK Government made some changes to the ISA rules. These include:

• The minimum age you can open a cash ISA increased from 16 to 18.
• You can now subscribe to multiple ISAs of the same type within the same tax year.
• Partial transfers of current year ISA subscriptions are now allowed.

Due to the complexity of making these adjustments, some ISA managers have yet to implement these changes.

What is a cash ISA?

Cash ISAs are essentially tax-free savings accounts. In the UK, anyone 18 or older is granted an ISA allowance at the beginning of each tax year. For the 2024/25 tax year, which concludes on April 5, 2025, the allowance is set at £20,000.

Similar to traditional savings accounts, cash ISAs are available in various forms. There are easy access ISAs, which allow you to withdraw funds at any time, and fixed-rate ISAs, where you receive a guaranteed interest rate but need to commit your money for a predetermined period.

Who are ISAs best for?

Since 2016, the personal savings allowance (PSA) means you get a tax-free amount of interest, earnable in any savings…

• Basic 20% rate taxpayers can earn up to £1,000/year interest tax-free
• Higher (40%) rate taxpayers can earn £500/year tax-free
• Top (45%) rate taxpayers don’t get a PSA

Keep in mind that the interest you can accrue requires a substantial amount of savings to become significant. Between 2016 and 2022, the very low interest rates meant that only a small number of people had to pay tax on their savings interest. At that time, you would need approximately £250,000 in high-yield savings accounts to generate taxable interest.

However, with the recent increase in interest rates, the threshold has shifted. Basic rate taxpayers now only need around £20,000 in standard savings to incur tax liability, while higher-rate taxpayers face this threshold with about £10,000.

If your funds fall short of this amount, it would be advisable to choose a standard savings account rather than a cash ISA, since cash ISAs typically offer lower interest rates compared to regular savings accounts. Individuals who might benefit from opening or maintaining a cash ISA include those who:

• Already pay tax on savings interest. Here opening a cash ISA rather than saving in normal savings is a no brainer.
• Are near the limit where you’ll earn enough interest to pay tax on interest. If that’s the case, money in cash ISAs now could protect you from future tax.
  
• Are happy to lock cash away but may just need to access it. Fixed cash ISAs must let you withdraw money (for a big interest penalty). Normal savings accounts lock your money away with no access.

Might I still be better off in normal savings even if I pay tax?

Some simple maths can help you compare. Take the rate on the ISA you’re looking at and multiply it by:

– 1.25 if you’re a basic-rate taxpayer
– 1.66 if you’re higher-rate taxpayer
– 1.82 if you’re a top-rate taxpayer

The result of that sum is the rate you need to get on normal savings for it to be the winner. If normal savings don’t pay more than that, then you’re better off in the cash ISA.

Cash ISA need-to-knows

To help you work out if opening a cash ISA is right for you, it’s worth getting your head around the following need-to-knows…

1 – You can transfer your ISA to another provider to boost the rate – but it’s vital you do it the right way

Many old ISAs offer poor interest rates, so it’s a good idea to review yours now. If it falls short compared to the best current rates, consider transferring to a new one to increase your returns, but ensure you follow the proper process. Merging your old and new cash ISAs into a single new ISA simplifies future transfers. Additionally, you can transfer an ISA without needing to deposit any new funds.

In our list of top recommendations below, we indicate whether each ISA accepts transfers.

How to transfer an ISA

Transferring an old ISA involves a more intricate process compared to simply changing a standard savings account. However, if you follow the fundamental rule for ISA transfers, the process should proceed without any issues.

If you want to transfer, never withdraw money from a cash ISA! You’ll immediately lose all the lasting tax benefits.

Instead of handling the transfer yourself, get in touch with your new provider and complete an ISA transfer form. They will take care of everything, including moving the funds, ensuring your ISA remains tax-free.

Banks have set a standard of 15 working days for completing the transfer, so you should start earning interest within this period. If the process extends beyond 15 working days, it’s advisable to reach out to the ISA provider to request an expedited transfer or seek compensation if the delay results in a significant loss of interest.

Can I transfer more than one old ISA into a new one?

Combining all your previous ISAs into a single account is permitted and can be a strategic move to boost the interest rate on your total ISA funds. This is because interest rates on money saved in older ISAs often diminish over time.

To proceed, simply inform your new provider that you wish to transfer funds from several old ISAs. However, be cautious not to exceed the £85,000 limit with a single financial institution, as doing so would exceed the UK’s savings protection threshold (refer to “Are your savings safe?” for more information).

Is there any reason not to transfer?

Your existing provider might impose a penalty if you decide to transfer your account elsewhere. While such penalties are rare nowadays (with the exception of fixed ISAs, which may incur charges if you withdraw before the term ends), it’s crucial to verify this, especially if your accounts have been held for a long time.

A minor penalty, like losing 30 days’ worth of interest, generally isn’t a major concern. However, a larger fee could make switching less advantageous, as the cost of the penalty may outweigh the benefits of a higher interest rate. If your ISA does include an exit penalty, calculate whether the improved interest rate from switching will be worth the potential penalty.

Can I transfer my ISA to somebody else?

Unfortunately, that’s not possible. While you can withdraw cash from an ISA and pass it to someone else, the money loses its tax-free status once it’s removed – unless any interest earned is covered by your (or their) personal savings allowance. Additionally, joint ISAs are not an option; ISA stands for ‘individual savings account,’ meaning each person is entitled to their own separate allowance.

Can I transfer a stocks & shares ISA into a cash ISA?

The transfer options available vary by provider. While many allow you to move stocks and shares ISAs into cash ISAs and vice versa, some restrict transfers to only coming from other cash ISAs. Therefore, it’s important to verify the specifics with your provider before setting up the account.

Can I do a partial ISA transfer?

Yes. You have the flexibility to move either a portion or the entirety of your ISA deposit to a different ISA provider whenever you choose. This applies to contributions made in the current tax year as well as funds from previous years. With the updated ISA regulations effective from 6 April 2024, partial transfers of contributions from the current year are now allowed, in addition to full transfers.

2 – Cash ISAs can be flexible – letting you replace withdrawn cash

Certain cash ISAs offer flexibility, allowing you to withdraw and later replace funds within the same tax year without impacting your annual ISA allowance.

For example, if you had £1,000 in a flexible cash ISA and withdrew £500, you could later reinvest that £500 within the same tax year without it counting against your £20,000 ISA limit.

However, it’s important to replace the withdrawn amount into the same flexible ISA to avoid affecting your £20,000 annual allowance.

In contrast, withdrawing £500 from a non-flexible ISA would reduce your yearly ISA limit, even if you subsequently deposited £500 back into the account.

In our recommendations below, we specify which ISAs offer this flexibility. For comprehensive details on flexible ISAs, refer to our section on Flexible ISAs.

3 – If you’re saving for a first home or retirement, consider a Lifetime ISA

The Lifetime ISA (LISA) was introduced on 6 April 2017, providing a 25% government bonus on your savings if used for buying a first home or for retirement. To be eligible to open a LISA, you must be between 18 and 39 years old.

You can contribute up to £4,000 annually into a LISA, and the bonus can be utilized for purchasing property valued up to £450,000. However, if you withdraw funds for reasons other than buying a first home or after reaching age 60, a 25% penalty will apply. It’s possible to open both LISAs and cash ISAs within the same tax year. For more details, refer to our Lifetime ISA guide.

4 – Cash in an ISA stays tax-free YEAR AFTER YEAR

Cash held within an ISA remains exempt from taxes for as long as it stays there. The goal is to maximize the protection of your funds, which is why we consistently emphasize the importance of utilizing the full ISA allowance if possible.

Skipping a year could lead to regret down the line, especially after five years. For those with substantial savings, there is the opportunity to progressively shield more of your money. Individuals who began saving when ISAs were first introduced in 1999 might now have accumulated a considerable tax-free amount, potentially reaching up to £241,520 plus interest with the 2023/24 allowance.

5 – If you don’t use your ISA allowance by the end of the tax year, you lose it

Each tax year, which runs from 6 April to the following 5 April, individuals aged 18 or older receive a new ISA allowance. However, if you don’t use this allowance, it’s forfeited.

Once a tax year concludes, you cannot contribute any additional funds to that year’s ISA allowance. For example, if you didn’t contribute anything during the 2023/24 tax year, where the maximum allowance was £20,000, that opportunity is lost. Similarly, if you only contributed £2,000 in the 2023/24 tax year, you can’t add more to it now that the tax year has ended.

If you do make a deposit within the tax year, you can keep that money in your ISA, tax-free, for as long as you wish. When the new tax year begins on 6 April, you’ll have the chance to contribute a fresh allowance for the new year.

6 – You can now open and pay into multiple cash ISAs in the same tax year

You now have the option to open and/or contribute to multiple cash ISAs within a single tax year. This means you could, for instance, set up both a fixed-rate cash ISA and an easy-access cash ISA with different providers in the same tax year. However, remember that the combined contributions to all your ISAs in a tax year must not exceed the £20,000 ISA limit.

Additionally, you can distribute your £20,000 ISA allowance across various ISA types. For example, you could invest £3,000 in a stocks and shares ISA, £4,000 in a Lifetime ISA, and the remaining £13,000 in one or more cash ISAs within the same tax year.

7 – Your savings are protected up to £85,000 per person per financial institution in an ISA

The safety of ISA savings operates just like traditional savings. As long as your funds are deposited in a bank or building society account regulated in the UK, they are safeguarded by the Financial Services Compensation Scheme. This fundamental principle also applies to cash ISAs.

The first £85,000 per person, per financial institution is guaranteed.

Although it seems straightforward, the actual regulations are quite intricate. Not all banks in the UK are regulated by UK authorities, and there are complex regulations concerning how various banks are registered and what qualifies as a ‘financial institution’. For comprehensive details about these regulations, refer to our in-depth guide, “Are Your Savings Safe?”

How to maximise safety

If your savings exceed £85,000 (which includes cash ISAs and other accounts) at a single bank, only the first £85,000 is fully protected in the rare event that the bank fails. To ensure complete security, it’s wise not to exceed this limit with any single bank. Instead, distribute your funds across multiple institutions.

The cash ISAs featured in this guide are provided by banks that are safeguarded by the UK’s Financial Services Compensation Scheme.

Top easy-access cash ISAs

Easy-access cash ISAs offer the flexibility to withdraw your money whenever you need it, without facing any penalties. This makes them an ideal choice if you anticipate needing to access your savings or if you’re unsure about future needs. However, keep in mind that the interest rate on these accounts can fluctuate as determined by the bank. On the other hand, if you don’t expect to need immediate access to your funds, a fixed-rate ISA might be a better fit. While these accounts may not offer higher interest rates at the moment, they guarantee a fixed rate for a set term, with the option to withdraw funds (albeit with a fee).

Easy-access cash ISAs – what we’d go for

Interestingly, the leading easy-access cash ISAs are offering rates comparable to the best easy-access savings accounts. Therefore, even if you’re not seeking the tax advantages of an ISA, it could still be worth choosing one while the rates remain attractive.

Trading 212 – 5.2%, online/ app

Top online accounts with unlimited withdrawals. Top rate comes from investment platform Trading 212, which pays 5.2% and can be opened online or via app with £1 and offers daily interest payments.

Top app-based account, with some important caveats. Plum pays the top rate of 5.17%, though the rate drops after a year. You also can’t get this top rate if you transfer in from an existing ISA, and you can only make three penalty-free withdrawals a year.

Prefer an established name? Virgin Money pay 4.76% (min £1) but limits you to three penalty-free withdrawals a year. Leeds BS offers unlimited withdrawals, but pays slightly less at 4.75% (min £1,000)

My building society or bank has a better rate than accounts here. Why isn’t it featured?

ExEconomics.com is a national platform that caters to England, Scotland, Wales, and Northern Ireland. Our goal is to highlight accounts accessible to everyone, which means they should be available for setup online, over the phone, or via mail.

Accounts that require visiting a branch pose a challenge, especially if they are not provided by major banks, as not everyone will have convenient access. For instance, residents in Carlisle might find it difficult to utilize branch-based accounts from Suffolk Building Society due to the absence of a nearby branch.

Exploring local building societies and banks can sometimes lead to discovering exceptional branch-based accounts. However, as a nationwide site, we are unable to feature every single option available.

Top fixed-rate cash ISAs

Fixed-rate savings accounts are designed to secure your funds for a specific term, offering stable interest rates in exchange. Legally, cash ISA providers are required to allow access to your money. However, some may insist on closing the account or transferring funds out to access your cash, often imposing significant penalties on withdrawals. These penalties can range from losing 60 to 365 days’ worth of interest.

When opening a fixed cash ISA, you generally need to deposit your savings within a period of two to four weeks, though this timeframe can differ among providers, with some offering longer periods. If you aim to utilize your full annual ISA allowance of £20,000, you might need to consider an easy-access ISA or open additional fixed accounts each tax year.

If you already have a fixed-rate ISA, recent rate increases might make it worthwhile to switch. Since ISAs allow early withdrawal with an interest penalty, checking with our ISA switching calculator could be beneficial.

Fixed-rate cash ISAs – what we’d go for

At present, one- and two-year fixed rates are noticeably higher compared to three- and five-year rates, which means there’s not much reason to commit to a longer term unless you’re seeking complete certainty of returns over an extended timeframe. Additionally, if you don’t require the tax advantages of an ISA, normal savings accounts offer better interest rates.

Kent Reliance currently pays the top rate for a one-year fix at 4.91% (min £1,000), while Beehive Money pays the top rate for a two-year fix at 4.73% (min £500).

If you want a longer fix, Close Brothers pays the top rate for three-year fixes at 4.55% (min £10,000), while UBL UK pays the top rate for five-year fixes at 4.26% (min £2,000).

Prefer an established name? Top rates here come from Santander at 4.62% for one year (min £500) and TSB at 4.35% for two years (min £1).

A PS about Close Brothers. It’s in the tables below, where we list based on the top rates. We’ve received several inquiries regarding this issue, particularly after its stock value dropped due to involvement in car finance mis-selling. This situation likely explains the bank’s push to attract depositors. Importantly, as with all regulated banks, there’s a complete UK savings protection guarantee of up to £85,000 per individual, per bank. If your savings exceed this amount, it’s wise to be cautious and spread your deposits across different banks to limit your risk, and this advice applies here as well.

The ISA Savings Calculator

Whether you’re planning for a specific goal or simply building your savings, this calculator is designed to help you estimate how much you could accumulate by a certain date. It takes into account your account’s interest rate, the duration needed to reach your target, and the monthly contributions required to achieve a specific savings goal.

For the most accurate results, input the AER (Annual Equivalent Rate), which can typically be found on your account statement. Keep in mind that since most interest rates fluctuate, the calculator provides an approximate outcome that may vary if the rate changes.

The calculator is designed with the assumption that you make deposits at the start of each month. If your deposit schedule differs, the results may be slightly off. For those who deposit lump sums instead of regular monthly contributions, you can calculate an equivalent monthly amount to get an approximate outcome. Experiment with the results to understand how different savings patterns might impact your total.

Want to complain about your savings provider?

If your savings provider has applied the wrong interest rate or failed to credit your account with interest, there’s no need to remain silent about it.

It’s always worth trying to call your provider first to see if it can help, but if not, you can use free complaints tool Resolver. The tool helps you manage your complaint, and if the company doesn’t play ball, it also helps you escalate your complaint to the free Financial Ombudsman Service.

Cash ISA FAQs

Here are some common ISA-related queries.

Q – If I open and pay in to an ISA in the current tax year, then the rate drops, can I move it?

A – Yes. Absolutely, and you should consider doing so. You can move cash from your ISA at any time, whether it’s the entire amount or just a portion of your balance. This applies to both your current tax-free contributions and funds from ISAs you opened in previous years.

Q – What happens to a cash ISA if the holder has passed away?

A – If you’re married or in a civil partnership, you can receive an additional ISA allowance if your partner passes away. This allowance, called an ‘additional permitted subscription’ (APS), is in addition to the annual £20,000 limit and can match the total amount your partner had saved in their ISAs.

You have several options. You can retain the ISA with the current provider, transfer it to another provider that accepts APS (not all do), or if the ISA is transferred to someone else, you still receive the extra allowance. To claim this allowance, you will need to provide your partner’s full name, address, date of birth, date of death, your marriage or civil partnership certificate, and their National Insurance number if available. Some providers might also request a copy of the death certificate.

The allowance you’ll inherit will depend on when your partner died:

• Before 6 April 2018. You’ll inherit an allowance equivalent to the total value of your partner’s ISAs at the date of death.
• On or after 6 April 2018. You’ll inherit an allowance equivalent to the total value of the ISAs once their estate is settled, when their ISAs are closed, or at the third anniversary of their death, whichever is earliest – so any growth in value will be taken into account.

The inherited allowance can be utilized within three years following your partner’s passing or up to 180 days after their estate has been settled, depending on which occurs later.

It’s important to understand that inheriting the allowance is distinct from inheriting the actual cash in the ISA. For instance, your partner might decide to leave some or all of their ISA funds to another person. In this case, you would still receive the additional allowance but would need to contribute to it using your own savings.

If you are not married or in a civil partnership, you will not be eligible to inherit any extra allowance.

Q – Should I use my ISA allowance for cash or stocks & shares?

A – This article discusses the benefits of using an ISA for saving versus investing.

When you place money in a cash ISA, the benefit is straightforward: the interest earned is tax-free. However, when it comes to investing, the advantage of using your ISA allowance depends on your individual situation.

• Are you comfortable with an element of risk? When you invest in a cash ISA, the interest rate provided is fixed, so you know exactly what you’ll earn. However, with stocks & shares ISAs, there is no such certainty. These investments inherently carry risk because the value of your assets can fluctuate—rising or falling based on the performance of your funds, bonds, and shares.
• Are you eligible for capital gains? Stocks & Shares ISAs provide an exemption from capital gains tax, which is a tax applied to profits made when you sell assets like investments. However, for the 2024/25 tax year, you are allowed to earn up to £3,000 in profits before this tax kicks in. This means that the tax advantage offered by ISAs mainly benefits those who plan to sell significant assets within a single tax year; for others, it might not be as relevant.
• Will you put money into bonds? If you’re investing in bonds like corporate bonds or gilts (government bonds), the income you earn is tax-free. For other types of bonds, a stocks & shares ISA can protect that income from being taxed.
• Will you get an income? If you earn income from dividends, the first £500 is tax-free. Any dividends beyond this threshold are taxed at different rates: 8.75% for basic-rate taxpayers, 33.75% for higher-rate taxpayers, and a hefty 39.38% for additional-rate taxpayers. However, if your dividends are within a stocks & shares ISA, you won’t incur any tax on them, regardless of your tax bracket. This can result in substantial savings if your dividend income exceeds the standard allowance.

If you’re subject to tax on savings interest, it’s important to compare the tax liabilities on savings held outside a cash ISA versus those on investments outside a stocks & shares ISA. If you’re uncertain about the best approach, you might consider the previous ISA setup where you could divide your allowance equally between cash and investments.

For smaller investors who don’t anticipate utilizing their capital gains and are focusing on share investments, it’s advantageous to maximize the use of cash ISAs first and then allocate any remaining funds to shares. Larger investors, particularly those investing in bonds, should prioritize fully utilizing their stocks & shares ISAs. For further details, refer to our guide on Stocks & Shares ISAs.

Q – Can I swap between stocks & shares, innovative finance and cash ISAs?

A – Absolutely, you can transfer your funds between different types of ISAs, including from a stocks & shares ISA to a cash ISA and vice versa, as often as you wish. This flexibility helps you manage your tax-free savings more effectively. The same applies to innovative finance ISAs, provided they give you access to your money, though note that higher interest rates are usually associated with longer fixed terms.

Make sure to verify that your chosen provider accepts transfers, as not all do. Additionally, be mindful of potential fees associated with both stocks & shares ISAs and innovative finance ISAs. There may be charges for setting up or withdrawing from an ISA, so frequent transfers could end up costing you.