A fixed rate cash ISA locks your money away for a set term, during which you earn a fixed rate of interest on your tax-free savings. This simply means the rate won’t change - it’s fixed and guaranteed for the duration set out in the account terms.

The terms on fixed rate cash ISAs can vary from three months to seven years and the interest rate will vary depending on the term of the bond. Some fixed rate ISAs pay interest monthly or annually, while others pay when the account matures.

Currently, the government has set a £20,000 limit on the amount you can add to your ISAs for the {{current-tax-year}} tax year, which runs from {{current-tax-year-full}}. But you can transfer an old ISA balance to a new ISA provider without affecting this. Not all providers allow transfers, and some have restrictions, so check the details carefully before choosing your fixed rate product.

How long do I have to make transfers?

When you open the account, you're given a window to add as much money as you like - up to the maximum ISA limit of £20,000.

Some providers will allow you to make multiple deposits, so if you plan to use your full ISA allowance for the year but don’t have all the cash up front, it’s worth checking the rules before signing up to a fixed rate ISA.

As of the 2025/2026 tax year, you can open and pay into multiple cash ISAs and you can split your £20,000 allowance between them. For example, you might put £5,000 into an easy access cash ISA and £15,000 into a fixed rate cash ISA.

From April 2027, the rules will change. If you’re under 65, your cash ISA allowance will drop to £12,000, and you won’t be able to transfer money from a stocks and shares ISA into a cash ISA.

Growth on ISAs is tax-free, which means that you don’t have to pay income or capital gains tax on any of the interest you earn. You also don’t have to pay any tax when you withdraw the money, making it a good way to save.

The maximum you can save into all your ISAs collectively is £20,000 per year. Most providers will stop you from paying more than the ISA limit each year, but if you have several ISAs, for instance, a stocks and shares ISA, a Lifetime ISA, and a cash ISA, you’ll need to ensure you don’t breach the limit.

If you have overpaid, you should call HMRC immediately on the income tax support helpline on 0300 200 3300. Any money saved above the limit is not eligible for the tax exemption and HMRC will take steps to “repair” the ISA and claim any tax owed.

If your ISA allows withdrawals, you may be able to remove the money before the end of the tax year. If HMRC contacts you, you’ll need to prove that you’ve fixed the error.

Instant access cash ISAs allow you to withdraw money whenever you want. Fixed-term ISAs lock your money away for a set period and may give you better rates. Fixed rate ISAs will allow you to withdraw the cash early, but you may need to close the account. Either way, you’d typically face a penalty to do this.

Fixed rate ISAs are a good idea if you know you won’t need the cash over a set period. For instance, because it is money earmarked for a specific goal and you have other savings. If you’re building an emergency fund or think you might need to access the cash, you’re better off with an easy access account, even though the rates might be lower overall.

Generally, fixed rate ISAs don’t tend to pay as much interest as an equivalent traditional savings account.

And while ISAs have tax advantages, the personal savings allowance (currently up to £1,000 a year) means that most people don’t have to pay tax on their savings anyway, so there’s little benefit in choosing an ISA over other more competitive accounts.

However, if you’re a higher-rate taxpayer, or the interest you earn across all your savings exceeds your allowance then ISAs can be useful tools.

There are currently many savings accounts, including cash ISAs, paying more than inflation, but if you’re putting money away for the long-term you might still want to consider investing in a stocks and shares ISA instead.

When the term on your fixed rate cash ISA ends, it is said to have “matured”.

Typically, your bank or building society will contact you long before your ISA reaches maturity to ask you what you want to do with your money and give you some options.

These could include:

• Reinvesting the money in a new fixed rate ISA

If your fixed rate cash ISA has matured and you've chosen to cash in your money, follow these three steps.

• Go online or phone your bank or building society to close the account. In some cases you may have to do this in person at a branch

• Wait for your provider to transfer the money into your nominated account

• Decide what you want to do with your money

If you decide to reinvest your money, comparing the latest rates on offer for a new fixed rate cash ISA is a good idea. You should also consider whether other types of savings accounts or investment products might be a better fit for your savings goals.

Bear in mind that the money will lose its tax-free status if you cash it in, so if you want to reinvest it into another ISA apply directly with the new provider to transfer the money instead.

If in doubt, you can speak to a financial adviser for further guidance on what to do.

The annual equivalent rate (or AER) is the rate used for most savings accounts in the UK. It’s designed to make it as easy as possible to compare one product with another and is calculated to show how much interest you’d earn if you put money into your account and left it there for 12 months. 

If your ISA pays interest annually, then the AER will be the same as the gross savings rate. That’s because your interest is only added at the end of the year.

However, if your account pays monthly, then the interest you earn will compound. For instance, if you put £100 in an account paying 5% gross monthly, then the first month you’d make £5 in interest. The second month, you’d earn 5% of £105, which is £5.25. And over the year, you’d earn more and more interest each month as your savings grow. The AER takes this into account to give you an overall savings rate over a year. So, while the gross rate is 5%, the AER will be higher.

This means that you can compare the interest for monthly and annually paying savings accounts to see what’s best.

Some savings accounts offer higher rates over a short introductory period. For instance, they might pay 7% for the first six months, and 4% thereafter. For these accounts, the AER calculates how much interest you’ll get over the first year. In this case, the AER will be lower than the initial gross rate, as it includes the lower interest once the introductory rate has ended.

Fixed rate ISA FAQs