An individual saving account is a type of investment vehicle that let the investor save and invest their money without having to pay any tax on the generated returns.
A fixed-rate ISA is a type of investment that has a guaranteed rate of fixed returns over the entire term of the account. This type of investment is helpful for individuals looking for a secure, and low-risk option for their choice.
So, if you are looking for the best fixed-rate ISAs in the UK then this article is for you.
Here, in this article, we are going to discuss what is a fixed-rate ISA, Fixed rate ISA terms, how fixed-rate ISA works, and some of the best fixed-rate ISAs.
What is a Fixed rate ISA?
A fixed-rate ISA is a tax-advantageous savings account that locks your money for a set period. It is called the terms of the account.
You will be paid a fixed interest rate on your savings account for the term, also the money you will earn as interest will be tax-free.
Fixed-rate ISA terms:
- Short-term fixes:
Most providers will offer you fixed-rate ISAs that will be lasting for two to three years. These accounts will provide you comparatively low rates than the medium and long-term fixed rate ISAs. But in this case, you can access your money quicker.
You can go with this option if you are looking for a shorter term or if you think the interest rate will be higher within a few years. Also, if you searching for a savings account for emergencies, then you must consider an easily accessible saving account or an ISA if it allows you to get your money when required.
- Medium-term fixes:
If you are looking for a savings account for the medium term then you should consider two to three years fixed-rate ISAs. These options will offer you better interest rates than short-term fixed-rate ISAs. But these medium-term fixed rate is still less attractive than long-term fixed-rate ISAs.
- Long-term fixes:
If you are looking for saving for the long term then you must go with long-term fixed-rate ISAs. Some providers will offer you fixes for even seven years. The interest rate will be most acceptable, but you can’t touch your money for a long time of period.
That means if interest rate rise then also you will be locked into a less attractive option for that specific time. If you are searching for long-term fixed-rate iSAs then you must go forward with the items that can beat inflation.
How do fixed-rate ISAs work?
Fixed-rate long-term ISAs work by locking your money away for a particular set of times. Within these specific time frames, you can earn a fixed rate of interest.
The interest rates of fixed-rate ISAs vary from one year to seven years. The longer term of the account, the greater the interest rate will be. Some fixed-rate ISAs pay interest rates monthly or annually. Some also pay the amount when the bond will matured.
Presently, the UK government has set a £20,000 limit on the amount you can add to your ISAs for the year 2022/23 tax year.
You can also transfer your earning from an old ISA account to a new iSA provider without affecting this. But, some providers have restrictions on transferring, so you need to check the details of the provider before selecting your fixed rate ISA product.
You will be given a 14-day window to add as much as money you want. The maximum limit is £20,000. This window will start when you open your account and once it closes, your account will be receiving tax-free interest until the terms of the fixed-rate ISAs.
Some of the best fixed-rate ISAs in the UK are:
#1. Aldermore :
It is a 3 years fixed-rate ISAs. The application minimum age is 18 or more.
- Taxation: interest is paid tax-free
- The interest rate with a bonus: 4.15% AER
- Further additions allowed: Yes
- Transfer from existing ISA: transfer ISA forms within 10 working days.
- Investment start: £1,000
- Interest paid: Monthly
There are also variations of short-term, medium-term, and longer-term fixed-rate ISAs available.
#2. Virgin Money:
It offers a 3-year fixed rate E-ISA Issue 580
- The application minimum age is 16. Taxation: interest paid tax-free
- The interest rate with a bonus: 4.41% AER
- Further additions allowed: Yes
- Transfer from existing ISA: Allowed
- Investment start: £1
#3. Showbrook Bank:
It is a 2-year fixed rate ISA Bond Issue 71
- The application minimum age is 18
- Taxation: Interest is paid tax-free
- The interest rate with a bonus: 4.4% AER
- Further additions allowed: yes
- Transfer from existing ISA: Allowed
- Investment start: £1,000
#4. Newcastle Building Society:
It is a 2-year fixed-rate ISA (Issue 87)
- The application minimum age is 16.
- Taxation: interest is paid tax-free
- The interest rate with a bonus: 4.4% AER
- Further addition allowed: yes
- Transfer from existing ISA: Allowed
- Investment start: £500
#5. Paragon Bank:
It is a one-year Fixed rate ISA available in the UK.
- The application minimum age is 18.
- Taxation: interest is paid tax-free
- The interest rate with a bonus: 4.4% AER
- Further additions allowed: Yes
- Transfer from existing ISA: YES, will be transferred within 28 days from account opening.
FAQ:
Which is the best fixed-rate ISA in the UK?
Ans: Aldermore 1-year fixed rate ISA offers 4% AER fixed interest for 1 year. The minimum investment amount required is £1,000. The interest is paid to you tax-free. You can also transfer ISA from an existing ISA within 10 business days.
How many ISAs can I have?
Ans: Yes, you can acquire as many ISAs as you want, as long as you meet the eligibility criteria of each type. But you can only pay into one of each category of ISA in a single tax year. For example, one cash, one stock, one lifetime, and one innovative finance.
Wrap up:
Fixed-rate ISAs are a great way to save money for your future without having to pay tax on the interest or dividend that you earn within a set of times.
You will achieve a secure return on your investment and you will be offered potential for the long-term capital growth.
While choosing the fixed rate you need to consider various factors such as the rate of interest, term of the bond, any fees associated with the account, and whether you can access the account within the set of time.
Finally, it is also important to compare various providers and banks, and building societies to find the best one for you.
