About the figures in this article: average rates are Bank of England monthly averages of quoted rates on new accounts (series IUMZID2 and IUMB6VJ), checked in October 2026. They're market averages, not best-buy rates. Rates change often, so check providers' own pages before opening an account. This article doesn't cover the whole market.

A cash ISA is a savings account where the interest is tax-free. For several years, many savers had little reason to use one, because low rates meant most people's interest stayed within their Personal Savings Allowance. Two things have changed: average fixed rates have risen in 2026, and more people are paying tax on savings interest.

What is a cash ISA?

You don't pay tax on interest earned in a cash ISA. You can pay up to £20,000 a year into ISAs in total in the 2026/27 tax year, across cash ISAs, stocks and shares ISAs, innovative finance ISAs and Lifetime ISAs. Allowance you don't use can't be carried forward to the next tax year. Money stays tax-free for as long as it remains in an ISA.

What changes from 6 April 2027

• People under 65 will be able to pay no more than £12,000 a year into cash ISAs, within the same £20,000 overall limit. People aged 65 or over keep a £20,000 cash ISA limit.

• People under 65 won't be able to transfer money from a stocks and shares ISA or innovative finance ISA into a cash ISA.

• Interest paid on cash held inside a stocks and shares ISA or other non-cash ISA will face a flat 22% charge.

Source: GOV.UK policy paper, 17 September 2026. Check GOV.UK for the latest position.

What's happened to rates

At its latest decision on 5 November 2026, the Bank of England raised the Bank Rate from 3.75% to 4%. The next decision is due on 17 December 2026. The Bank Rate isn’t the rate you’ll get on products like a credit card, mortgage or savings account, but it influences them.

Average fixed rates have risen in 2026 because they're priced partly on where markets expect the Bank Rate to go. According to the Bank of England:

Source: Bank of England (series IUMZID2, IUMB6VJ). Average quoted rates on new accounts, including unconditional bonuses.

CPI inflation was 3.1% in the 12 months to August 2026 (ONS). On these averages, the two-year fixed cash ISA rate was about 1.4 percentage points above inflation, and the instant-access rate about 1 point below it. Individual accounts can pay more or less than the average. Read more: how fixed savings rates have changed in 2026.

Why tax on savings matters more now

Outside an ISA, interest above your Personal Savings Allowance is taxed:

The allowance hasn't changed since 2016, and income tax thresholds are frozen until April 2031. According to HMRC figures obtained by AJ Bell, around 2.64 million people were expected to pay tax on savings income in 2025/26, up from about 647,000 in 2021/22. Hargreaves Lansdown reported in September 2026 that more than 4.5 million are expected to pay in 2026/27.

For example, at 4.5%, a basic-rate taxpayer with about £22,000 in a taxable savings account would earn around £1,000 in interest, the limit of their allowance. Interest on money in a cash ISA doesn't count towards the allowance.

Fixed-rate cash ISAs and access to your money

Fixed-rate cash ISAs pay a set rate for a set term. Most allow you to withdraw or transfer your money before the term ends, but usually charge an interest penalty, for example a number of days' interest on the amount withdrawn. Some fixed-rate savings accounts outside an ISA don't allow early access at all. Check the terms before you open an account.

Protection

Cash ISAs with UK-authorised banks and building societies are protected by the FSCS up to £120,000 per person, per authorised firm. Brands that share a banking licence share one limit.

This article is for general information and isn't tax or financial advice. Tax treatment depends on your individual circumstances and may change in future. Read more: savings accounts guide; cash ISAs vs stocks and shares ISAs.