Published: 28 August 2024
A fixed rate cash ISA can be a great way to put money away for home improvements. But with various lengths of term available, knowing which one to choose isn’t always straightforward. We’ve put this guide together to help you work out which cash ISA term might be right for your savings goals.
Our homeowner example: For each type of cash ISA we’ve shown you how a typical homeowner could use it to save for the things they want to do around the home. How could different fixed rate cash ISA terms help you make those upgrades?
Before we get started, it’s worth knowing that although ISAs are a tax-free* way to save, there are limits for how much money you can pay into them. Some ISAs also have withdrawal restrictions.
Can you add money to a fixed rate cash ISA?
With most fixed rate cash ISA products, you can add money in up until a set date. After this you won’t be able to make any further deposits.
That’s because the purpose of using a fixed rate cash ISA is putting funds away so they can grow and build up tax-free* interest over a set amount of time. When the fixed term comes to an end, known as ‘maturity’, your money can be transferred to an account of your choosing.
Fixed rate cash ISA comparison
Good to know: Our fixed rate cash ISA terms begin the day after the account closes for further deposits. For example, if you open a 1 Year Fixed Rate Cash ISA and the final deposit date is 31 March, your 1 year fixed rate will begin on 1 April.
1 Year Fixed Rate Cash ISA
Lasting a single year, a 1 Year Fixed Rate Cash ISA could be just right for a short term savings goal. A 1 Year Fixed Rate Cash ISA is normally fixed for 12 months after the final date for any deposits. Currently, you can withdraw money from your LBS account; but, you will incur 90 days' loss of interest.
Homeowner example 1: You’ve just moved in. And you know that once you’ve settled in and worked out how to make your house a home, you’ll want to start making some improvements. You could put some funds aside knowing next year you’ll have access to some designated spending money that comes with the added plus of tax-free* interest.
2 Year Fixed Rate Cash ISA
You guessed it. A 2 Year Fixed Rate ISA is normally fixed for 24 months after the final date for any deposits, for your money to grow and earn tax free interest. Currently, you can withdraw money from your LBS account; but, you will incur 180 days' loss of interest.
Homeowner example 2: This one could be good for those big purchases. If you’ve got your sights set on that new sofa, or maybe that perfect media wall for the football or family film nights.
Of course, why and how you use an ISA is completely up to you, and that’s the great thing about the choice on offer. You can plan ahead for the things you want to enjoy in life whether they’re just around the corner or a few years down the line.
3 Year Fixed Rate Cash ISA
Our 3 Year Fixed Rate Cash ISA might be ideal for those longer-term savings goals. So, if you have a sizeable chunk of money to put aside and earn interest for around 36 months (depending on when you open the account), it might be worth looking at. Currently, you can withdraw money from your LBS account; but, you will incur 240 days' loss of interest.
Homeowner example 3: You’re loving your new home and you’ve made it your own, but you know in the future you’ll want more space. With a 3 Year Fixed Rate Cash ISA, you can put money away to help with those major renovations and earn around 36 months of interest on your savings (depending on when you open the account), whilst you live life in the meantime. After 3 years, you could have the money to get the ball rolling on that building work to unlock the potential in your home.
Can you transfer a fixed rate cash ISA before maturity?
Yes, but it could come with a loss of interest. It’s important to check the terms and conditions of any ISA you take out to find out if there are any restrictions on withdrawals. As an example, transferring before maturity with a Leeds Building Society 1 Year Fixed Rate Cash ISA would currently mean 90 days’ loss of interest on an equivalent amount to that transferred. This means you might get back less than you originally deposited.
We hope this guide has given you an idea on how different ISA terms might work for you. If you’re looking to start saving, visit our savings page. For more help working out how much you need to save for the things you want in life, you can use our handy savings calculator.
The important things to know
*Tax-free means that interest payable is exempt from income tax. The tax treatment depends on the individual circumstances of each customer and may be subject to change in the future.
This guide is intended as a summary only and does not constitute legal or financial advice given by Leeds Building Society. No reliance should be placed on this guide. We recommend that you seek independent legal advice and/or financial advice if you have any questions or queries.
Cash ISAs are available to individuals aged 18 or over who are resident in the UK for tax purposes.
Deposits in any tax year are subject to the limits set by HM Revenue and Customs (HMRC) and may therefore be subject to change.
