Best cash ISA rates UK 2023

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.

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 during which it is incredibly difficult for savers hoping to protect their nest eggs.

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.

Which are the best cash ISAs at the moment?

Our best cash ISAs are the highest interest rates available. To get the latest rates, we use Moneyfacts data, which covers nearly the full market of savings products and is checked and updated daily. We don’t include accounts from private banks.

All the cash ISAs in our list have savings protection – for most, this is the Financial Services Compensation Scheme (FSCS). Other schemes include that of NS&I, which is 100% backed by HM Treasury, and the Gibraltar Deposit Guarantee Scheme.

• Metro Bank – 1 Year Fixed Rate Cash ISA - 5.71%
• Virgin Money – 1 Year Fixed Rate Cash ISA Exclusive Issue 8 - 5.65%
• Leek Building Society – 2 Year Existing Customer Only Fixed Term Cash ISA - 5.55%
• Leek Building Society – 1 Year Existing Customer Only Fixed Term Cash ISA - 5.5%
• Kent Reliance – Cash ISA 1 Year Fixed Rate - Issue 86 - 5.35%

An overview of our Cash ISA comparison

Bottom line

Saving is always a wise idea, and if you can find an ISA account that suits your needs – for example, if you want to access your money quickly from a cash ISA, or you’re happy to take a punt on a stocks and shares ISA – then opening an account is worth considering.

But bear in mind that interest rates are pretty low right now, and so it’s most definitely worth looking at other savings options as well before you decide where to put your money away.