Want to bookmark your favourite articles and stories to read or reference later? Start your Independent Membership today.
Already a member?
Log in
Tax-free savings have hit a new milestone this week, with cash ISAs returning to 5 per cent rates for the first time in well over a year.
The higher interest rate environment is a double-edged sword in some ways, given it increases borrowing costs for businesses and consumers alike, with mortgage deals notably hitting an upturn again in September.
But it also provides savers with a chance to earn considerably more on their cash, allowing it to grow faster than prices are rising, highlighting the importance of ensuring money is not kept in a low- or no-interest account.
Inflation is running at more than 3 per cent as we head towards autumn and is expected to rise further, so news of two firms offering 5 per cent tax-free savings will come as a serious boost.
On Friday morning, both Plum and Trading 212 released updated interest rates for their flexible cash ISAs, hitting 5 per cent and 5.01 per cent respectively.
Moneyfacts data shows the last time variable rate Cash ISAs were paying 5 per cent or more was June 2025, 15 months ago.
It puts both providers well ahead of the nearest competition, which includes Hargreaves Lansdown and Chip offering around the 4.5 per cent range, and unusually puts tax-free savings on par with standard easy access savings accounts.
However, there are several factors to be aware of to ensure these accounts – or indeed any savings accounts – suit a consumer’s needs.
Get a free fractional share worth up to £100.
Capital at risk.
Terms and conditions apply.
ADVERTISEMENT
Get a free fractional share worth up to £100.
Capital at risk.
Terms and conditions apply.
ADVERTISEMENT
Plum’s offer is currently available for only five days, ending on 30 September, meaning prospective new customers don’t have long to arrange opening an account. There’s no date currently set for Trading 212’s rate offering, but as these firms have been in competition for top spot for some time, it wouldn’t be a wild surprise if it dropped accordingly once Plum’s offer ends. Their bonus is accessible through a code.
Both accounts are variable rates – so could change if the Bank of England base rate is altered – and include bonuses which last for one year. After that point the underlying rates are 2.54 per cent with Plum and 3.6 per cent with Trading 212.
Finally, it’s important to note that the 5 per cent rates are only applicable to new money: in other words, cash you send into your cash ISA for this tax year.
If you are transferring existing ISAs to either of these, Trading 212 will offer the bonus rate only on the amount you have put in this tax year, while with Plum, transfers in get a 3.75 per cent rate. To achieve the Plum bonus, you need to keep the account for 12 months and meet other conditions.
“Tax-savvy savers will need to act fast as this eye-catching return is only available to new customers who open a Cash ISA with Plum via its mobile app between 25 and 30 September 2026,” Adam French, head of consumer finance at Moneyfactscompare.co.uk, pointed out.
“Savers should be aware that this rate is variable, so the underlying rate is subject to change. Interest is paid monthly and you can open an account with as little as £1 to save.”
