The best cash Isas on the market now

With high inflation, low interest rates, and declining tax benefits, cash Isas are less popular than they were. But don’t dismiss them just yet, says Saloni Sardana. Here, she picks the best cash Isa deals available now.

A cash Isa operates the same way as an ordinary savings account but no tax is charged on any interest you earn. 

However, ultra-low interest rates and the introduction of the personal savings allowance have dented their popularity somewhat. Subscriptions to adult cash Isas fell from 13 million accounts in the 2019-2021 tax year to 12 million in 2020-2021, according to HMRC.

But with the Bank of England raising interest rates to more than 1.25%, rates on cash Isa accounts are now back on the rise too, so it’s worth keeping an eye on what’s available. 

Make no mistake, with inflation at almost double digits, your savings will not grow in line with the cost of living. But by saving money in a cash Isa, you can mitigate some of the damage. 

When choosing a cash Isa there are two main factors to look out for: how long you are comfortable locking your cash up for, and the interest rate.

“Easy access” Isa accounts allow you to withdraw funds without incurring a penalty, and fixed-rate cash Isas offer a fixed rate of return – usually higher the longer you are prepared to lock your money away for. But beware: if you withdraw money before the end of term, then you are likely to be penalised, usually with a reduction in the rate of interest. Generally speaking, the longer you leave the money untouched, the more interest you can earn. 

In addition, many Isas are classed as “flexible”, which means that you can replace any funds you withdraw in the same tax year without affecting your annual Isa allowance. 

Below are some of the best easy-access, one-year fixed-rate and two-year fixed-rate cash Isas. 

The best easy-access cash Isas 

Paragon Triple Access Cash Isa 

This Isa offers interest of 1.35% as long as you make no more than three withdrawals a year. Any more, and the interest rate drops to 0.25% from the fourth withdrawal up to the day before the anniversary of the account opening. It allows you to transfer in any existing Isas you may hold with other providers, and it is a flexible Isa, so any funds withdrawn can be added back in the same tax year without affecting your annual allowance. So assuming you make fewer than three withdrawals, £1,000 will grow to £1,013.50 over 12 months. 

​The account has a minimum opening deposit of £1 and a maximum of £500,000 in addition to any resulting interest. 

Marcus by Goldman Sachs

This online-only Isa offers an interest rate of 1.3% which includes a bonus of 0.25% for the first 12 months. There is no minimum amount you need to deposit when opening an account, but the maximum limit is £250,000. The account does not allow you transfers in, and it is not flexible, so anything you withdraw cannot be replaced. 

Cynergy Bank Online Isa

The Cynergy Bank Online Isa has a minimum deposit of £1 and offers a variable rate of 1.31%. It does allow transfers in at the time of opening the account, but it is not a flexible Isa. 

The best fixed one-year fixed rate cash Isas

Virgin Money 1 Year Fixed Rate Cash Isa 

This Isa has a fixed interest rate of 2.06%. The account has a minimum deposit requirement of £1 and can be opened online or in a branch, but you must already have an account with Virgin Money.

Secure Trust 1 Year Fixed Rate Cash E- Isa 

This Isa has a fixed rate of 2.05% and has a minimum deposit of £1,000. The maximum account balance excluding credit interest is £1,000,000. 

Gatehouse Bank 1 Year Fixed Term Woodland Cash Isa

The 1 Year Fixed Term Woodland Cash Isa (previously known as the Green Cash Isa) operates under Islamic finance principles. So while the account does not offer any interest, it generates profit from its investments on your behalf. The account has an expected profit rate (EPR) of 1.86%, a minimum deposit of £1,000 and a maximum deposit of £1,000,000. It accepts transfers in. Withdrawals within the fixed term will incur a 90-day loss of profit. For every account opened, Gatehouse bank will plant a tree in a UK woodland, hence the account name.

The best two-year fixed rate cash Isas

Paragon 2 Year Fixed Rate cash Isa 

This 2 Year Fixed Rate Cash Isa gives an annual AER of 2.4%, fixed for the two-year term. You need a minimum deposit of £500 to open the Isa and it accepts transfers in. Any withdrawals made within the fixed term are subject to 180 days’ loss of interest.

Castle Trust bank 2 year Fixed Rate e-cash Isa 

The Fixed Rate e-cash Isa gives an AER of 2.43%. The minimum amount required to open the account is £1,000, and the maximum amount allowed in the account is £500,000. You must deposit any cash within 14 days of opening the account, after which time you will not be able to make any further deposits. Transfers in are allowed. 

Virgin Money 2 Year Fixed Rate Cash E-Isa

This Isa gives a fixed rate of 2.36% over a two-year period. A minimum deposit of £1 is required to open the account. You must deposit your money within 30 days of opening the account. Any withdrawals made within the fixed rate period are subject to a charge equivalent to 90 days' loss of interest on the amount withdrawn.

Recommended

A South African adventure
Travel and holidays

A South African adventure

From buzzy Johannesburg to big game drives, South Africa has it all, says Katie Monk
16 Aug 2022
Investors should get ready for a political revolution
UK Economy

Investors should get ready for a political revolution

Liz Truss will beat Rishi Sunak, cut taxes, and then shake up the Bank of England, says Helen Thomas
15 Aug 2022
Why aircraft leasing funds look attractive now
Investment trusts

Why aircraft leasing funds look attractive now

Aircraft-leasing funds crashed during the pandemic, David C. Stevenson explains why the outlook for these funds may be improving.
15 Aug 2022
Don’t listen to the doom-mongers – the future is bright
Economy

Don’t listen to the doom-mongers – the future is bright

With volatile markets, raging inflation and industrial unrest, it may feel like things are bad and likely to get worse. But the end of the world is no…
15 Aug 2022

Most Popular

Are UK house prices set to fall? It’s not so simple
House prices

Are UK house prices set to fall? It’s not so simple

Figures suggest UK house prices are starting to slide, but we shouldn’t take these numbers at face value, explains Rupert Hargreaves.
11 Aug 2022
Is gold cheap relative to equities?
Gold price

Is gold cheap relative to equities?

Dominic Frisby looks at the Dow-gold ratio and explains why gold is starting to appear inexpensive compared to equities.
12 Aug 2022
Share tips of the week - 12 August
Share tips

Share tips of the week - 12 August

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
12 Aug 2022