Find our best fixed rate ISAs
Lock your money away for a set period and get interest rates of up to 4.3%
Our best fixed cash ISA rates today - last updated Nov 14 2024
| Product type | AER | |
|---|---|---|
| 1 Year Fixed Cash ISAs | 4.30% | |
| 2 Year Fixed Cash ISAs | 4.55% | |
| 3 Year Fixed Cash ISAs | 3.90% |
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What is a fixed-rate cash ISA?
A fixed-rate cash ISA locks your money away for a set term, during which you earn a fixed rate of interest.
The terms on fixed-rate cash ISAs can vary from one year to seven years and the interest rate will vary depending on the term of the bond.
Some fixed-rate ISAs pay interest monthly or annually, while others pay when the account matures.
Currently, the government has set a £20,000 limit on the amount you can add to your ISAs for the 2024/25 tax year, which runs from 6 April 2024 to 5 April 2025. But you can transfer an old ISA balance to a new ISA provider without affecting this. Not all providers allow transfers, and some have restrictions, so check the details carefully before choosing your fixed-rate product.
You're then given a window to add as much money as you like - up to the maximum £20,000 limit. This period starts when you open the account. Once it ends, your money earns tax-free interest until the end of the term, when the account matures.
Some providers will allow you to make multiple deposits, so if you plan to use your full ISA allowance for the year but don’t have all the cash up front, it’s worth checking the rules before signing up to a fixed-rate ISA.
As of this tax year, you can open and pay into as many cash ISAs as you wish, so you could split your ISA allowance across multiple cash ISAs. For example, £5,000 could be added to an easy access cash ISA and £15,000 to a fixed-rate cash ISA.
How to choose a fixed rate cash ISA
The interest rate
Maximising your returns is obviously your main aim with any savings account. The best rates are typically reserved for longer-term ISAs, but you can still get a good rate by comparing rates from different providers.
The term
Currently, longer terms have lower interest rates as you are locking in a competitive interest rate for longer. It's also important to be aware of the downfalls of long-term ISAs. For instance, while you may be able to lock in a good rate now, if rates rise further, you might lose out. If you think you may need access to your money at some point, you should also opt for something that offers more flexibility.
Access
Most savings accounts are about balancing the interest rate you get with the access you need. Think carefully about whether you'll need to withdraw any of your money, as fixed rate ISAs lock your money away for the entire term and withdrawing early can be costly.
Our best fixed-rate cash ISA
Our editors picked this deal by weighing up factors such as the interest rate, term, withdrawal conditions, and minimum opening balance for each product.
How are fixed-rate cash ISAs taxed?
Growth on ISAs is tax-free, which means that you don’t have to pay income or capital gains tax on any of the interest you earn. You also don’t have to pay any tax when you withdraw the money, making it a good way to save.
The maximum you can save into all your ISAs collectively is £20,000 per year. Most providers will stop you from paying more than the ISA limit each year, but if you have several ISAs, for instance, a stocks and shares ISA, a Lifetime ISA, and a cash ISA, you’ll need to ensure you don’t breach the limit.
If you have overpaid, you should call HMRC immediately on the income tax support helpline on 0300 200 3300. Any money saved above the limit is not eligible for the tax exemption and HMRC will take steps to “repair” the ISA and claim any tax owed.
If your ISA allows withdrawals, you may be able to remove the money before the end of the tax year. If HMRC contacts you, you’ll need to prove that you’ve fixed the error.
What is the difference between a fixed-term and an instant access cash ISA?
Instant access cash access ISAs allow you to withdraw money whenever you want. Fixed-term ISAs lock your money away for a set period in return for better rates. Some fixed rate ISAs will allow you to withdraw the cash early, but you’ll face an interest penalty to do this.
Fixed rate ISAs are a good idea if you know you won’t need the cash over a set period. For instance, because it is money earmarked for a specific goal and you have other savings. If you’re building an emergency fund or think you might need to access the cash, you’re better off with an easy access account, even though the rates might be lower overall.
Is a fixed-rate ISA for you?
Generally, fixed-rate ISAs don’t tend to pay as much interest as an equivalent traditional savings account.
And while ISAs have tax advantages, the personal savings allowance (currently up to £1,000 a year) means that most people don’t have to pay tax on their savings anyway, so there’s little benefit in choosing an ISA over other more competitive accounts.
However, if you’re a higher-rate taxpayer, or the interest you earn across all your savings exceeds your allowance then ISAs can be useful tools.
It’s always worth remembering that savings accounts including cash ISAs typically pay less than inflation, so if you’re putting money away for the long-term you might want to consider investing in a stocks and shares ISA instead.
A fixed-rate ISA might be right for you if:
You’re prepared to lock your money away for a better rate
You know you won’t need the cash for the duration of the term
You’re a basic rate taxpayer who earns more than £1,000 in interest per year
You’re a higher-rate taxpayer who has used up your £500 savings allowance
You’re an additional rate taxpayer with no savings allowance
You’re saving for the short- or medium- term
You find a fixed-rate ISA paying higher interest than equivalent savings accounts
What happens at the end of a fixed-rate term?
When the term on your fixed-rate cash ISA ends, it is said to have “matured”.
Typically, your bank or building society will contact you long before your ISA reaches maturity to ask you what you want to do with your money and give you some options. In most cases, your provider will give you a selection of options.
These could include:
Reinvesting the money in a new fixed-rate ISA
Setting up a new fixed-rate ISA with your existing funds and adding an additional amount
Reinvesting a proportion of the ISA and withdrawing the rest
Closing your account and cashing in all your savings
Transferring the cash to an easy-access ISA
How can you cash in a matured fixed-rate cash ISA?
If your fixed-rate cash ISA has matured and you've chosen to cash in your money, follow these three steps.
Complete the form provided by your bank or building society
Wait for your provider to transfer the money into your nominated account
Decide what you want to do with your money
If you decide to reinvest your money, comparing the latest rates on offer for a new fixed-rate cash ISA is a good idea. You should also consider whether other types of savings accounts or investment products might be a better fit for your savings goals.
If in doubt, you can speak to a financial adviser for further guidance on what to do.
Pros and cons
Pros
Cons
What is AER?
The annual equivalent rate (or AER) is the official rate for all savings accounts in the UK. It’s designed to make it as easy as possible to compare one product with another and is calculated to show how much interest you’d earn if you put money into your account and left it there for 12 months.
If your ISA pays interest annually, then the AER will be the same as the gross savings rate. That’s because your interest is only added at the end of the year.
However, if your account pays monthly, then the interest you earn will compound. For instance, if you put £100 in an account paying 5% gross monthly, then the first month you’d make £5 in interest. The second month, you’d earn 5% of £105, which is £5.25. And over the year, you’d earn more and more interest each month as your savings grow. The AER takes this into account to give you an overall savings rate over a year. So, while the gross rate is 5%, the AER will be higher.
This means that you can compare the interest for monthly and annually paying savings accounts to see what’s best.
Some savings accounts offer higher rates over a short introductory period. For instance, they might pay 7% for the first six months, and 4% thereafter. For these accounts, the AER calculates how much interest you’ll get over the first year. In this case, the AER will be lower than the gross rate, as it includes the lower interest once the introductory rate has ended.
FAQs
What is your best interest rate for a fixed-rate cash ISA?
Currently, our best interest rate for a fixed-rate cash ISA is 4.3%.
Can I have more than one fixed-rate ISA?
Yes, you can open a new fixed-rate cash ISA each year, so it is possible to have several running simultaneously. Plus, you can split the allowance across multiple cash ISAs - this is a new rule which gives savers more flexibility and access to the best rates.
What is an ISA bond?
It is a cash ISA that ties your money up for a set term with a fixed interest rate. It is also known as fixed rate cash ISA.
Do I need a credit check to get a fixed-rate ISA?
No. You do not need a credit check to open savings accounts, including fixed rate ISAs. Credit checks are usually used when you want to borrow money, for instance if you want a loan, credit card or mortgage.
Can I withdraw from a fixed-rate ISA?
Not without facing penalties, unless the term has ended. Closing the account early typically results in a large interest penalty based on the full ISA term. So, if you think you’ll need to withdraw your money, consider an easy-access ISA or savings account instead.
Can you transfer a fixed-rate ISA before maturity?
Some providers will allow you to transfer your fixed-rate ISA before maturity in return for an interest penalty, which can be very costly. Others forbid withdrawals of any kind.
If you think you’ll need your cash early, you should therefore look at other savings products such as easy-access ISAs or savings accounts instead.
Can the interest rate go down on a fixed-rate cash ISA?
No, once you open a fixed-rate cash ISA you will get the rate you signed up for throughout the full term of the account.
Can I transfer other ISAs into a fixed-rate ISA?
Yes, you can transfer ISAs from previous tax years when you open the account, but only if the ISA accepts transfers. Find out more about how ISA transfers work here.
Can I transfer my ISA to someone else?
No, you cannot transfer an ISA to another person. If you want to give your money to someone else, you’d need to withdraw it from your ISA account and then transfer it, losing the tax benefits.
What happens to a fixed-rate ISA if someone dies?
When you die, your ISA savings are considered part of your estate. You can leave the money to a loved one, but they might have to pay inheritance tax on it. The ISA will end either when your executor closes it, when the administration on your estate is completed, or three years and one day after you die.
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