Cash ISAs are tax-free savings accounts, meaning you will never pay tax on the interest you earn. However, with dismally low-interest rates, and rising inflation, are these really the best way to save and where can you find the best interest rates?
In truth, there are very few cases where saving into a cash ISA is the best way to grow your savings. Low-interest rates and high inflation will actually erode away at the value of your savings over time and since the introduction of the Personal Savings Allowance, basic rate taxpayers won’t pay tax on the first £1,000 of interest they earn anyway.
As an alternative, you may want to consider one of these recommended stocks and shares ISA providers below.
Top 4 ISA alternatives to cash ISAs in August 2025
Discover my top cash ISA alternatives below, be sure to read about each provider in detail before making a decision.
Top Cash ISA alternatives at a glance
- The number one choice for UK Investors
- ISA options available from £25 per month
If you are a DIY investor who plans to build a diversified portfolio from a range of individual stocks and funds, then interactive investor is the best platform to meet your needs.
Here, you can access more than 40,000 UK and international investment options, and the trading app provides plenty of functionality for managing your portfolio.
Important information - investment value can go up or down and you could get back less than you invest. If you're in any doubt about the suitability of a Stocks & Shares ISA, you should seek independent financial advice. The tax treatment of this product depends on your individual circumstances and may change in future. If you are uncertain about the tax treatment of the product you should contact HMRC or seek independent tax advice.
- 100% guarantee – Fees refunded if not satisfied.
- Pick your own investments or choose a ready-made portfolio.
With a Hargreaves Lansdown ISA, you have access to 2,500 different funds, shares, and trusts. You can also access shares in Europe, the United States, and Canada. The number of investment options is attractive to hands-on traders, but if you are new to the product or prefer to rely on Hargreaves Lansdown’s advice, you can also take advantage of their Portfolio Management Service with one of six ready-made investment portfolios.
As with any investment the value can go down as well as up. Past performance is no indicator of future performance. The tax treatment of ISAs depends on your individual circumstances and may be subject to change in the future.
If you are looking for a low-cost, simple way to invest, then look no further than InvestEngine. Here, you can invest in a choice of 500+ ETFs for as little as £1.
Exchange Traded Funds (ETFs) are actually a lot simpler than they sound. They are merely a mix of assets, including commodities and shares, that aim to track the performance of a stock market. They make investing a breeze and are diversified, which can help reduce your risk.
With investment, your capital is at risk. This could mean the value of your investments goes down as well as up.
- Best impact investing stocks and shares ISA for the ESG conscious investor
- Low £1 per month fee
The Circa5000 ISA provides you with the platform from which to invest in shares, funds and bonds, tax-free, in the United Kingdom, up to £20,000 per annum. There is no fee for using the Circa5000 ISA and it provides a tax-efficient way of holding your Circa5000 investment.
Capital at risk.
What is a cash ISA?
If you are resident in the UK and over the age of 16 then you are eligible to open a cash ISA.
In the UK, residents are charged tax on all income, and this includes interest earned on their savings. There are however exceptions to this, and everyone can avoid this tax as long as they are earning under a certain threshold, or, they have their savings in an ISA account. ISA stands for Individual Savings Account and within Cash ISAs, you can earn interest on your savings without having to pay any tax on that interest.
At the start of each tax year, everyone is entitled to a Cash ISA allowance. This is a sum of money, as stipulated by the government, that you are entitled to pay into an ISA in that financial year. For the year 2021/22 this amount is £20,000.
Should you fail to use your allowance in any one year, this amount is lost to you, there is no option to carry it forward into the next year. Anything over and above this amount will not be tax-free.
Who is a Cash ISA best suited to?
The group of people who would benefit the most from a cash ISA is additional-rate taxpayers (those who earn in excess of £150,000 a year) as this group are not entitled to any personal saving allowance.
In addition to this, anyone who is lucky enough to be earning over £1,000 (£500 for higher rate taxpayers) in savings interest each tax year would benefit from a cash ISA.
Different Types of Cash ISA
There are a variety of Cash ISAs on offer to suit your individual needs including
Easy Access cash ISAs
With Easy Access Cash ISAs, you can withdraw your money whenever you want without incurring any kind of charge or penalty.
They offer full flexibility which is great if you need regular access to your tax-free savings, however, the flip side is that you will often get a lower interest rate with Easy Access ISAs. This is often referred to as an Instant Access ISA.
Regular Saver cash ISAs
A Regular Saver ISA will usually reward savers with a higher interest rate in exchange for a commitment to deposit a fixed sum of money into your ISA account each month.
Regular saver ISAs will usually restrict access to your account for 12 months.
Also consider: Will ISA rates go up?
Junior cash ISAs
A Junior ISA allows you to save for your child with a maximum deposit of £9,000 in any one tax year.
Every child under the age of 18 is entitled to one Junior ISA account as long as they are resident in the UK.
Notice cash ISAs
A Notice ISA can have an attractive tax-free interest rate however, they require advance notice should you wish to withdraw your money.
Fixed Term cash ISAs
A Fixed Term ISA can offer some of the best interest rates available, however, you will not be able to access your money for the duration of the term.
You can choose to keep your money in a one-year fixed rate ISA, however, the interest rate for a two-year fixed rate ISA is often more lucrative and if you are able to commit to a five-year fixed rate ISA then you can enjoy an even higher interest rate.
Lifetime ISA
Lifetime ISAs are products designed to help savers put money aside for their first home.
You have the option of depositing up to £4,000 per tax year and the Government will add an additional 25% of what you deposit up to the value of £1,000 per year.
There is limited access to this account and you will only have the option to withdraw on the purchase of your first home, or when you turn 60 years old. Outside of these reasons any withdrawals will incur a 25% charge.
Help to Buy ISA
Help to Buy ISAs are now only available to existing account holders.
Like the Lifetime ISAs, they receive a 25% bonus from the government and are designed to help savers buy their first property.
Best easy-access Cash ISAs
An Easy Access Cash ISA is the perfect saving vehicle for additional rate taxpayers who may need to dip in and out of their savings, providing flexibility without incurring any penalties that will ultimately eat into gains.
You should take the time to check whether your bank or building society have an ISA on offer and what rate they are currently offering.
Please note: Rates correct at 08/09/2022. Please check the latest rates with individual providers.
| Provider | AER | Account Opening | Min. Opening Balance | Transfer In? |
|---|---|---|---|---|
| Cynergy Bank | 1.65% | Online | £1 | Yes |
| Teachers BS | 1.65% | Online or by Post | £100 | Yes |
| Skipton Building Society | 1.60% | Online | £1 | Yes |
| Tipton & Coseley | 1.45% | Branch or by Post | £1000 | Yes |
Best one-year and two-year fixed rate cash ISAs
When considering whether to put your money into a Fixed Rate Cash ISA you should first be aware that should the interest rate increase, you won’t benefit until the end of the term of the ISA. Therefore, if the interest rate is at an all-time low (such as they currently are) then you won’t be able to take advantage of any increase that may occur. Also, a one or two-year fixed rate Cash ISA will also carry penalties should you need to withdraw your money before the end of the term. Therefore you will need to be sure you are comfortable with your money being tied up.
Best one-year fixed rate cash ISA
| Provider | AER | Min. Opening Balance | Transfer In? |
|---|---|---|---|
| Virgin Money | 2.62% | £1 | Yes |
| Darlington BS | 2.6% | £1,000 | Yes |
| Hodge Bank | 2.56% | £1,000 | Yes |
Best two-year fixed rate cash ISA
| Provider | AER | Min. Opening Balance | Transfer In? |
|---|---|---|---|
| Virgin Money | 3.02% | £1 | Yes |
| Darlington BS | 3% | £1,000 | Yes |
| Loughborough BS | 3% | £20,000 | Yes |
