Best cash ISA rates December 2020

Cash ISAs are savings accounts you'll never pay tax on. Just like a normal savings account, you can get cash ISAs which are easy access or fixed term.

Updated

Fact checked

Best cash ISA rates

Table: sorted by interest rate, promoted deals first
Data indicated here is updated daily
Name Product Account type Withdrawals Min. opening balance Interest rate Apply link
Aldermore – 3 Year Fixed Rate Cash ISA
Aldermore
Cash ISA
Instant access (penalty applies)
£1,000
0.75% AER fixed for 3 years
Go to site
Aldermore – 2 Year Fixed Rate Cash ISA
Aldermore
Cash ISA
Instant access (penalty applies)
£1,000
0.7% AER fixed for 2 years
Go to site
Aldermore – 1 Year Fixed Rate Cash ISA
Aldermore
Cash ISA
Instant access (penalty applies)
£1,000
0.6% AER fixed for 1 year
Go to site
Shawbrook Bank – Easy Access Cash ISA - Issue 14
Shawbrook Bank
Cash ISA
1 days notice needed
£1,000
0.5% AER variable
Shawbrook Bank – Easy Access Cash ISA - Issue 14
Shawbrook Bank
Cash ISA
1 days notice needed
£1,000
0.5% AER variable
NatWest – Cash ISA
NatWest
Cash ISA
Instant access
£0
0.01% AER variable
Shawbrook Bank – 7 Year Fixed Rate Cash ISA Bond Issue 3
Shawbrook Bank
Cash ISA
Instant access (penalty applies)
£1,000
1.25% AER fixed for 7 years
Shawbrook Bank – 7 Year Fixed Rate Cash ISA Bond Issue 3
Shawbrook Bank
Cash ISA
Instant access (penalty applies)
£1,000
1.25% AER fixed for 7 years
Shawbrook Bank – 5 Year Fixed Rate Cash ISA Bond Issue 25
Shawbrook Bank
Cash ISA
Instant access (penalty applies)
£1,000
1.1% AER fixed for 5 years
Furness BS – Fixed Rate eSavings Cash ISA (Issue 17)
Furness BS
Cash ISA
Withdrawals not permitted
£1,000
1.1% AER fixed for 5 years
loading

Compare up to 4 providers

What is a cash ISA?

A cash ISA is a savings account where you don’t pay tax on the interest you earn. It’s that simple! Everything you can do with a normal savings account you can do with a cash ISA. The tax-free bit is the only real difference.

In normal savings accounts, you’d get taxed on whatever you earned in interest. A cash ISA lets you keep 100% of the interest, which is why it has been a popular option among UK consumers for years.

Who can open an ISA?

Any person over 16 in the UK can put £20,000 into a cash ISA each tax year. Once your money is in a cash ISA, it stays tax-free year in year out.

In normal savings accounts, you’d get taxed on whatever you earned in interest. A cash ISA let’s you keep 100% of the interest, which is why it has been a popular option among UK consumers for years.

What’s the “best” ISA?

Generally, the best ISA has the highest interest rate.

But as with all things finance, there are different products suited for different needs.

If you want access to your money then the best for you is an easy access cash ISA.

If you’re happy to lock your money away for a fixed term then, you guessed it, a fixed rate cash ISA might be more up your street.

If you’re happy to put money aside for a long time, and are willing to take the risks that come with investing – you should check out stocks and shares ISAs.

Is my money safe in a cash ISA?

Most cash ISAs are completely protected by the Financial Services Compensation Scheme (FSCS), which means all deposits up to £85,000 per provider are guaranteed by the government.

The decline of the cash ISA

Since the EU referendum, the rates of British people putting their money into cash ISAs has halved.

The recent decline of the cash ISA isn’t just down to Brexit, however. There are a couple more important factors which are making the cash ISA less popular.

Personal savings allowance

In April 2016, the ISA was made a bit redundant. Under new government rules, basic-rate taxpayers don’t have to pay any tax on the first £1,000 of interest earned in banks. This is known as the ‘personal savings allowance‘ (PSA), and it has encroached on what used to be the territory of the cash ISA.

Isas vs inflation

You’d be hard pressed to find any cash ISAs which can beat inflation. We’re living through a period which is difficult for savers hoping to protect their nest eggs.

How are inflation and interest rates linked?

Generally speaking, when interest rates are low people tend to save less and to spend and borrow more. Let’s clarify this with an example:

At the time of writing, inflation in the UK is at 2.5%. Put simply, this means a basket of shopping costing £100 this year will cost £102.50p in a year’s time.

Now imagine you’ve also got £100 in a cash ISA paying 1.13%. That £100 will be £101.13p next year.

Because interest rates are low, there’s less incentive to save. If you’re not saving you’re more likely to spend, and you’re more likely to borrow too because it will be cheap to do so.

While recent numbers of people putting their money into ISAs has dipped, it is still a very popular way of holding on to savings.

Check out our cash ISA statistics page to find out more about their popularity.

Are ISAs worth it?

Even though there are better rates available in different savings accounts and current accounts, ISAs still have their benefits.

  • ISA interest doesn’t count towards your PSA. You can make interest in your ISA and still get the £1,000 of tax free savings through your PSA.
  • ISAs give protection against future interest rate changes. If interest rates rise, people will have to pay more tax (in other savings accounts that aren’t tax-free). An ISA offers protection against this.
  • Protects savings if you move up a tax bracket. Having a cash ISA would ring fence your savings if you expect you might have to pay more tax in the not too distant future.
  • Interest rates won’t be low forever! When interest rates rise a bit more, the ISA should return as a more than viable option for those looking to grow their savings.

More guides on Finder

Ask an Expert

You are about to post a question on finder.com:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder.com provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and Terms of Use.

Questions and responses on finder.com are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
Go to site