Cash ISA or Easy-Access Savings Account: Which Wins in 2026/27?

For most savers with spare cash, the real choice isn’t complicated products versus simple ones — it’s a Cash ISA versus an ordinary easy-access savings account. The answer depends almost entirely on whether you’d pay tax on the interest in a taxable account, and current rates make that calculation more important than it’s been in years.

The current rate backdrop

The Bank of England base rate has been held at 3.75% since December 2025, most recently confirmed at the 18 June 2026 meeting, with the next decision due 30 July 2026. As of May 2026, the average easy-access savings rate stood at around 2.12%, average variable Cash ISA rates around 2.06%, and average 1-year fixed-rate ISAs around 4.41% — but top best-buy rates run considerably higher than these averages, so it’s worth shopping around rather than assuming your existing bank’s rate is competitive.

The Personal Savings Allowance changes the maths

Interest from an ordinary savings account isn’t automatically tax-free — but most people don’t pay tax on it anyway, thanks to the Personal Savings Allowance (PSA):

• Basic-rate taxpayers: £1,000 of savings interest a year tax-free
• Higher-rate taxpayers: £500 a year tax-free
• Additional-rate taxpayers: no allowance at all — every pound of interest is taxable

See our dedicated article on how the Personal Savings Allowance works for the full detail. In short: a basic-rate taxpayer with a fairly typical savings balance may never actually breach their PSA in an easy-access account, making the ‘tax-free’ label on a Cash ISA less valuable to them in practice than it sounds.

When an easy-access account wins

• You’re a basic-rate taxpayer with a modest balance. If your total interest across all accounts stays under £1,000 a year, you’re not losing anything to tax by using an ordinary account — and ordinary savings accounts sometimes offer better headline rates than cash ISAs, since ISA providers can afford to pay slightly less given the tax wrapper.
• You want the absolute best rate available, since the very top easy-access deals in the market can sometimes beat top Cash ISA rates.

When a Cash ISA wins

• You’re a higher or additional-rate taxpayer, where the £500 or £0 PSA is easily exceeded by realistic savings balances at current rates.
• Your total savings interest (across all accounts) is likely to exceed your PSA, regardless of your tax band — increasingly common as rates and balances have both risen in recent years.
• You want to protect future flexibility. Money in a Cash ISA stays permanently shielded from tax as balances grow, whereas interest in an ordinary account is taxable every year, indefinitely.

The 2027 change makes deciding now more relevant

From 6 April 2027, the amount most people under 65 can put into a Cash ISA falls from the full £20,000 ISA allowance to £12,000. This doesn’t affect the 2026/27 tax year, but it’s a reason not to assume the current generous Cash ISA allowance will always be there if you’re deciding whether to prioritise it now.

A practical way to decide

• Add up your total likely savings interest this year across every account you hold, using current rates.
• Compare that total to your Personal Savings Allowance based on your tax band.
• If you’re likely to exceed it, prioritise your Cash ISA allowance first — interest inside it never counts toward the PSA calculation at all.
• If you’re comfortably under it, compare the actual best-buy rates on both types of account, since the tax wrapper alone doesn’t guarantee the better return.

The bottom line

There’s no single right answer — it depends on your tax band and how much interest you’re likely to earn at current rates. Higher and additional-rate taxpayers should generally prioritise their Cash ISA allowance; basic-rate taxpayers with smaller balances have more genuine freedom to simply chase the best available rate, ISA or not.