Saving into a cash ISA means that you’ll never have to pay any income tax on the interest you earn on that account. You can pay up to £20,000 into an ISA each tax year and, just like standard savings accounts, there are several types of cash ISAs to choose from.
This guide takes a detailed look at how 2-year fixed rate cash ISAs work.
Is my money safe?
The Financial Services Compensation Scheme (FSCS) guarantees that it will step in to compensate the first £85,000 (£170,000 for a joint account) you have saved with a UK-authorised bank, building society or credit union in the event that the business goes bust.
Compare 2-year fixed rate cash ISAs
Table: sorted by interest rate, promoted deals first
A 2-year fixed rate cash ISA is a cash ISA that requires you to lock away your savings for a term of 2 years. In return, you’ll receive a fixed rate of interest that will typically be higher than you’d get on an easy access account.
Most 2-year fixed rate cash ISAs won’t allow you to withdraw any funds from your account during the term. If you can take the money out, you will usually pay a penalty fee. This is often a set number of days’ interest. You also won’t usually be able to pay any additional funds into your account once you’ve made your initial deposit, so this type of account is best suited to those with a lump sum to invest.
When comparing 2-year fixed rate cash ISAs, you’ll need to check the minimum deposit requirement. In some cases, it can be a few hundred or a few thousand pounds, so you’ll need to make sure you can meet this requirement or find another option. If you want to transfer in funds from an existing ISA, you’ll also need to check whether your chosen provider permits this. Transfers do not count towards the current year’s ISA allowance.
At the end of the 2 years, your cash ISA will mature and you can usually choose to withdraw your cash or have the money transferred to another ISA.
Do I need a cash ISA?
The personal savings allowance was introduced in 2016 and means that all basic rate taxpayers can now earn up to £1,000 a year tax-free on any interest from savings and current accounts. Higher rate taxpayers can earn up to £500, while additional rate taxpayers have no personal savings allowance.
Because of this, you might be wondering if it’s worth putting your money in a cash ISA – particularly if you’re a basic rate taxpayer. However, keep in mind that at a time when interest rates are rising, if you have a decent amount in your savings pot, you could get closer to reaching your personal savings allowance, which means you’ll start paying tax on your savings interest. By contrast, if you save that money in an ISA, you’ll never pay tax on your savings, no matter how much interest you earn.
For this reason, you might want to put some of your savings in a cash ISA and some in a standard savings account.
How to open an ISA
You can usually open a cash ISA in the same way as any other savings account. Depending on the provider, you might be able to do this online, over the phone, by post or in branch. You will usually need to provide a few personal details such as your name, address and date of birth.
If you’re not an existing customer, you might also have to provide proof of ID, such as a passport or driving licence, and proof of address, such as a bank statement or utility bill. Some digital banks will be able to verify your identity electronically, so you won’t need to provide these documents.
If you want to transfer funds in from another ISA elsewhere, you’ll also need to fill in a cash ISA transfer form, providing details of the ISA you wish to be transferred.
Which are the best 2-year fixed-rate cash ISAs at the moment?
Our best fixed-rate 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.
State Bank of India – 2 Year Cash ISA Fixed Deposit - 4.5%
Bath BS – Two Year Fixed Rate ISA (Issue 6) - 4.4%
Shawbrook Bank – 2 Year Fixed Rate Cash ISA Bond Issue 88 - 4.27%
UBL UK – 2 Year Fixed Rate Cash ISA - 4.26%
Close Brothers Savings – 2 Year Fixed Rate Cash ISA - 4.25%
An overview of our 2-year fixed-rate cash ISA comparison
Rates up to
4.5% AER
Number of accounts
77
Minimum investment
£1
Opening options
Branch, website, mobile app, post, telephone
Pros and cons
Pros
Earn a fixed rate of interest for the term of the account
Interest rates are usually higher compared to easy access cash ISAs
Ideal if you have a lump sum to invest
No tax is payable on the interest earned
Cons
You won’t be usually able to withdraw cash during the term without penalty
It’s not always possible to top up funds during the term of the account
You won’t be able to pay in more than your annual ISA allowance
If overall interest rates rise, you won’t benefit
Bottom line
If you’ve got a lump sum to invest (that’s less than £20,000) and you are comfortable with leaving those funds untouched for 2 years, a 2-year fixed rate cash ISA is an option worth considering. As well as earning a fixed rate of interest for those 2 years, you won’t need to pay tax on any of the interest you earn.
Remember, you can now pay into more than 1 cash ISA during the tax year. So you may not want to tie up all your money in one fixed-rate product if there’s a potential to secure a better rate later on.
Frequently asked questions
Yes, as long as your provider is authorised by the Financial Conduct Authority (FCA) or the Prudential Regulation Authority (PRA), your money will be protected under the Financial Services Compensation Scheme (FSCS).
This means that up to £85,000 of your money will be protected per person, per banking institution in the event your bank went bust. If this happens, you'll be able to make a claim to the FSCS and get your money back.
You can hold several cash ISAs, but crucially, you can only open and deposit money into 1 cash ISA each tax year.
For the 2024/2025 tax year, you can pay up to £20,000 into an ISA. You can save this amount into one type of account or split it across some or all of the different types of ISA (cash, stocks and shares, lifetime and innovative finance ISA).
We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you. Most of the data in Finder's comparison tables has the source: Moneyfacts Group PLC. In other cases, Finder has sourced data directly from providers.
Hide
Boost your savings with FREE alerts on interest rates
FREE interest rate alerts
Sign up to receive the latest deals, expert tips, and a chance to win £800! (T&Cs)
Rachel Wait is a freelance journalist and has been writing about personal finance for more than a decade, covering everything from insurance to mortgages. She has written for a range of personal finance websites and national newspapers, including The Observer, The Mail on Sunday, The Sun and the Evening Standard. Rachel is a keen baker in her spare time. See full bio
Learn more about the pros and cons of 1-year fixed rate cash ISAs
How likely would you be to recommend Finder to a friend or colleague?
0
1
2
3
4
5
6
7
8
9
10
Very UnlikelyExtremely Likely
Required
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
Advertiser Disclosure
finder.com is an independent comparison platform and information service that aims to provide you with the tools you need to make better decisions. While we are independent, the offers that appear on this site are from companies from which finder.com receives compensation. We may receive compensation from our partners for placement of their products or services. We may also receive compensation if you click on certain links posted on our site. While compensation arrangements may affect the order, position or placement of product information, it doesn't influence our assessment of those products. Please don't interpret the order in which products appear on our Site as any endorsement or recommendation from us. finder.com compares a wide range of products, providers and services but we don't provide information on all available products, providers or services. Please appreciate that there may be other options available to you than the products, providers or services covered by our service.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.