High Interest ISA
Technically, since there is no tax deductible on the interest gained in Individual Savings Accounts, each ISA can be considered a high interest ISA. However, certain ISAs have much higher interests than others.
These ISAs allow for a much greater return on investment regardless of the investment type, that is cash, stocks or shares. A high-interest ISA is one that has a high-interest rate throughout the entire term and mostly, these rates are fixed, as is the term of the investment.
There are different types of high-interest isa accounts:
In this account, the interest rate is pre-determined and fixed. Therefore the deposit made on this account gains a steady interest per the set interest rate.
The set term for investment is annual. The deposit or investment is made once in the fixed rate ISA, arguably the highest interest ISA. At the beginning of the term, the individual makes a single deposit or investment and cannot add more to the account. This ISA is, therefore, best for an individual with a relatively large sum of money who wishes to invest it all at once.
After the deposit is made, depending on provider criteria, the individual usually cannot withdraw from the account and has to wait until the end of the set term, which will depend on how long the term is. Fixed-rate ISA terms can vary typically from 1 year to 5 years. The interest gained is, therefore, greatly dependent on the initial deposit.
An individual can deposit as much as possible as long as it does not exceed the allowance limit, which is £20,000 for the 2022/2023 tax year.
Easy Access or Instant Access ISAs
These types of isa accounts can be instant access, easy access or notice accounts where it is possible to make regular deposits. Individuals also have more flexibility with these accounts than with a fixed-rate ISA.
With these isa accounts, the interest available may vary and may not provide the higher interest you can achieve through a fixed rate isa.