The best cash Isas for the 2024-25 new tax year
Providers compete hard for new Isa customers at the start of the new tax year in April, with rates often higher than in other months. But it's not the only reason why now is a good time to invest in a cash Isa.
Opening an account this spring means you’ll have the full financial year to use up your £20,000 tax-free allowance. Plus a raft of changes which came into force from 2024-25 are making Isas even easier for savers to use.
Here, Which? reveals the current top cash Isa deals and four reasons why Isas are worth investing in.
What are the top rates for cash Isas?
The table below shows the top rates for restriction-free fixed-term and instant-access cash Isas, ordered by term.
| Account type | Account | AER | Terms |
|---|---|---|---|
| Five-year fixed-term cash Isa | UBL UK 5-Year Fixed Rate Cash ISA | 4.16% | £2,000 minimum investment |
| Four-year fixed-term cash Isa | UBL UK 4-Year Fixed Rate Cash ISA | 4.05% | £2,000 minimum investment |
| Three-year fixed-term cash Isa | UBL UK 3-Year Fixed Rate Cash ISA | 4.39% | £2,000 minimum investment |
| Two-year fixed-term cash Isa | State Bank of India 2-Year Cash ISA Fixed Deposit | 4.65% | £1,000 minimum investment |
| One-year fixed-term cash Isa | Punjab National Bank (International) Limited | 4.8% | £1,000 minimum investment |
| Instant access cash Isa | Chip Cash Isa (powered by ClearBank) | 5.1% | £1 minimum investment |
Source: Moneyfacts. Correct as of 15 April 2024, but rates are subject to change.
The best available rate on the market is an impressive 5.1% AER. The fact that it's for an instant access Isa account is unusual though. So is the fact that the rate for a one-year fix is better than longer-term accounts.
Historically, interest on two to five-year products has been higher than short-term accounts. Moneyfacts data shows that hasn't been the case since 1 June 2023, when the average rate for a one-year fix was 3.96% AER, compared to 4.01% for a long-term account. By August 2023, however, the tables had turned and the average one-year deal was 5% and interest on a long-term Isa hit 4.91%.
One explanation for this trend is the Bank of England's decision to freeze the base rate at 5.25%. Instant access rates are variable and providers are more likely to pass on base rate changes. For fixed-term accounts, providers are probably hedging their bets that the base rate will start to fall at some point in the near future and are pricing their deals accordingly.
It's also worth noting that the top deals are offered by smaller providers or challenger banks, so make sure you look beyond the high street when shopping for an Isa this spring.
- Find out more: we update our best cash Isas guide every week
Why now is a good time to open a cash Isa
As already mentioned, you can pay in up to £20,000 in Isa accounts each tax year, and, unlike other types of savings accounts, any interest or investment growth will be tax-free.
While you can open an Isa any time of year, here are a few compelling reasons why you might want to do it this month:
1. More competitive returns
There are two periods of the year when Isa rates tend to get a boost. The first 'Isa season' is in March as we approach the end of the tax year and people rush to use the full tax-free allowance. The second is in April when the new financial year begins and allowances are renewed.
It's therefore a great time to shop around for the best deal. Even if you have an existing Isa, you should consider switching to a different provider offering more competitive returns.
But remember, competitive rates and their timings aren’t guaranteed – with the savings market so volatile, it's possible for providers to amend their offerings at other times of the year too.
2. Benefit from using up allowance early
If you have the cash to do so, you might want to consider maxing out your £20,000 allowance now rather than later.
Not only does investing earlier remove some of the pressure to make a hasty decision at the end of the tax year, it also means your hard-earned cash will be put to work for longer.
- Find out more: cash Isa rules and allowances
3. You can now open multiple Isas
New rules that came in from 6 April 2024 allow savers to open and pay into multiple Isas of the same type annually. Previously, you could only put money into one of each type of Isa every tax year.
It's now easier for savers than ever to move between different providers and get the best deal.
- Find out more: 5 ways Isas are changing this year
4. Transferring funds is easier
Another new rule that came into force in 2024-25 is a relaxation of transfer rules.
Before 6 April, you had to transfer your entire Isa of that type from the current tax year or nothing at all. Now you're be able to transfer part of your account balance from one Isa provider to another, no matter when the money was paid in.
The change means that you can keep some funds with your existing provider and retain that account.
