Cash ISA or savings account?
For the 2026/27 tax year · checked 22 Sep 2026 against GOV.UK
If your interest is covered by your tax-free allowances, the higher headline rate wins, ISA or not. Once you're paying tax on interest, a 4% Cash ISA beats a savings account unless the savings account pays more than 5% (basic rate) or 6.67% (higher rate).
What a savings account needs to pay to beat a 4% ISA
This applies to interest above your tax-free allowance.
| Tax band | 2026/27 | From April 2027 |
|---|---|---|
| Basic rate | 5.00% | 5.13% |
| Higher rate | 6.67% | 6.90% |
| Additional rate | 7.27% | 7.55% |
To work it out for any ISA rate, divide the ISA rate by (1 minus your tax rate). For example, a 4% ISA for a higher-rate taxpayer: 4% ÷ 0.6 = 6.67%.
When a savings account is better
- Your interest fits inside your Personal Savings Allowance and the savings account pays more.
- You have low other income and can use the starting rate for savings.
- You need a type of account that ISAs don't offer, such as a regular saver with a high rate.
When an ISA is better
- You're already paying tax on interest, or will soon.
- You're a higher or additional-rate taxpayer with meaningful savings.
- You expect rates or your savings to grow. ISA money stays tax-free every year, while the allowance is only per year.
From April 2027, under-65s can put a maximum of £12,000 a year into a Cash ISA. Read about the 2027 changes.
Compare your own accountsTick "ISA" on an account in the calculator to see the break-even rate for your situation. Source: GOV.UK: ISAs.