Savers Benefit from Rising Cash ISA Rates Amid Inflation Concerns

By the Editorial Team · Wednesday, September 23, 2026

Several UK banks have raised interest rates on fixed-term bonds and cash ISAs to around 5 percent in response to rising inflation, offering savers improved returns. With further Bank of England rate hikes expected and upcoming tax increases on savings interest, locking in these rates now may help protect purchasing power and maximize tax-efficient earnings.

Savers in the United Kingdom are seeing a notable increase in interest rates on cash Individual Savings Accounts (ISAs) and fixed-term bonds, with several providers offering returns of around 5 percent amid ongoing inflationary pressures. This development follows a period of moderate rates, offering new opportunities for individuals seeking to preserve the real value of their savings.

Last week, GB Bank raised its one-year bond rate to 5.05 percent, while Investec matched a 5 percent rate. Kent Reliance offers 5.06 percent on a 13-month term. Other providers with competitive fixed rates include Shawbrook Bank and Charter Savings Bank, both offering around 4.8 to 4.9 percent on one- and two-year terms. Longer-term fixed rates of up to 5.25 percent are available from providers such as Shawbrook and West Bromwich Building Society. All these accounts come with protection under the Financial Services Compensation Scheme up to £120,000.

These increases come despite the Bank of England’s decision to maintain the base interest rate at 3.75 percent last week. Market expectations, however, suggest further hikes may be on the horizon, with forecasts indicating as many as five base rate increases through the end of 2027. Fixed-rate savings products tend to reflect these anticipations more swiftly than easy-access accounts, explaining their recent upward trend.

The higher interest rates are a response to inflation, which rose to 3.1 percent for the year ending in August and is expected to increase further. To maintain purchasing power, savers need to earn interest rates at least matching inflation. For instance, locking in a 5 percent rate currently yields a real return of approximately 1.9 percent once inflation is accounted for.

Cash ISAs remain an attractive option due to their tax advantages, although their interest rates are generally slightly lower than standard fixed accounts. Basic-rate taxpayers have an annual tax-free interest allowance of £1,000, while higher-rate taxpayers have a £500 allowance and additional-rate taxpayers none. As a result, many savers may face tax liabilities on the interest earned above these thresholds, reducing effective returns. For example, a basic-rate taxpayer with £20,000 saved at 5 percent would exceed their allowance, effectively reducing the interest income after tax.

Tax changes set to take effect in April will increase the tax rates on savings interest, with basic-rate taxpayers moving from 20 to 22 percent, higher-rate from 40 to 42 percent, and additional-rate from 45 to 47 percent. Chancellor John Healey is reportedly unlikely to reverse these increases in his forthcoming Budget as the government seeks additional revenue.

Financial advisors are encouraging savers to compare rates and consider locking in current offers to protect against future inflation and expected rate rises. Prominent providers offering competitive rates include Spring, Oxbury Bank, Hargreaves Lansdown, Family Building Society, NS&I, Cambridge Building Society, Buckinghamshire Building Society, Yorkshire Building Society, and Skipton Building Society. With inflation concerns persisting, the opportunity to secure steady, tax-efficient returns has prompted a surge of interest in fixed-rate savings products.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.