What is a Fixed Rate Cash ISA?

Reading time 4 minutes

At a glance:

A fixed rate Cash ISA locks your money away for a set amount of time.

Your interest rate is guaranteed to stay the same during this time.

Your savings are tax-free which means you do not pay income tax on the interest you earn.

How does a fixed rate cash ISA work?

Like all ISAs, your savings are tax-free, which means you do not pay income tax on the interest you earn. You can save up to

£20,000

in the

2024/25

tax year. A tax year runs from 6 April one year to 5 April the following year.

A fixed rate Cash ISA is designed for lump sum savings that you can lock away for a set amount of time. That means you can’t take any money out, usually for 1 to 5 years. Your interest rate is guaranteed to stay the same during that time.

Can you add money to a fixed rate cash ISA?

Fixed rate Cash ISAs are designed for a lump sum of money you’ve already saved up. Some providers may let you add more money for a short amount of time when you first open the account. The account is then locked down and you cannot add any more.

At YBS, you can add money for at least 30 days after you open a fixed rate cash ISA.

What’s the difference between a fixed rate and an easy access cash ISA?

Fixed rate cash ISAs and easy access cash ISAs are both tax-free. Which means you don’t have to pay income tax on the interest you earn.

The difference is that fixed rate cash ISAs lock your money away, so you cannot take money out during the term. With easy access cash ISAs, you can add or take out money whenever you like.

What’s the difference between a fixed rate cash ISA and a fixed rate bond?

Fixed rate cash ISAs and fixed rate bonds both have a guaranteed interest rate that stays the same for a set amount of time. During the term, your money is locked away and you cannot take money out.

The difference is that fixed rate cash ISAs are tax-free and don’t count towards your personal savings allowance.

You may need to pay tax on the interest you earn from a bond.

What happens when a fixed rate cash ISA ends?

When your fixed rate cash ISA ends, your savings are ‘unlocked’ and you’ll have access to your money again. You can usually add to your savings, take money out, transfer to another ISA or close your account. Your provider will let you know what your options are.

Can you transfer a fixed rate ISA before it ends?

When you open a fixed rate cash ISA, you agree to keep your savings there until the end of the term. If you decide to transfer your savings to another ISA earlier than planned, there’s usually a penalty for doing this. You could end up with less than you paid in.