skip to main content
Oct 2020

Interest & ISAs: How It All Works

Interest & ISAs: How It All Works

ISAs are known for being a particularly tax-efficient way of gaining returns from interest or investment, depending on the ISA type. But, having said that – what exactly does that mean? And how does it all work? We’ve got the information you need to know. 

What is an ISA?

An ISA (Individual Savings Account) is an account where the returns or interest you gain from the money within that account is protected from the taxman – specifically, this applies to capital gains tax and income tax.

This means that these types of accounts are an excellent way to ensure that your savings are tax-efficient. There is a yearly allowance that is put on

The ISA allowance for this year is £20,000 – this means that you are able to invest up to £20,000 each tax year into either an ISA or a variety of ISAs.

How do these gain returns?

The returns on ISA accounts depends on the type of account you have opened.

For example…

Cash ISAs:

Cash ISAs function like a savings account – the interest rate is offered by the provider and the money you put into this account will gain interest according to that interest rate.

Interest rates for Cash ISAs are at a historical low at the moment – which isn’t ideal – but that shouldn’t stop you from considering a Cash ISA; it isn’t all about interest rates, and there are some great upsides to Cash ISAs such as having instant access to your cash (which isn’t possible with most of the other types of ISAs).

You can also achieve slightly higher interest rates on Cash ISAs if you choose a longer term for a fixed term Cash ISA, so there is potential for slightly higher rates.

Investment ISAs:

An Investment ISA is a way to invest which keeps your investment returns within the ISA wrapper.

Depending on the ISA you choose, you could have access to higher returns or lower returns – this does tend to be linked to risk, but not necessarily. Different accounts will offer different returns – so you will select your predicted return rates when you select your account.

Lifetime ISAs:

The returns gained on a Lifetime ISA are through a government ‘boost’ – that is to say, the government will give a 25% boost to the amount of money you have put into the account, up to a ceiling of £4000.

That means that each year, you have the potential to receive a bonus of £1000 each year – which is very much not to be sniffed at.

You can choose between having a Cash LISA or an Investment LISA; so the money within your account may either be invested and gain further returns, or simply sit gaining interest like a savings account.


You can either open a Cash JISA or an Investment JISA; so, while your pennies are locked away for the long-term (they can only be accessed by the child in question once they turn 18) they will earn interest in the same way that Cash or Investment ISAs do – depending on which kind of ISA type you have opted for.

Why are Some Interest rates Higher than Others?

Interest rates will vary between account type and provider.

You can get some really attractive interest rates on certain accounts; however they do tend to come with a higher risk profile. So, since a Peer to Peer ISA (for example) is more suited to an investor who has more experience and a higher risk profile – but it does offer very attractive returns.

Read more about ISAs.

Read more about Cash ISAs.

Read more about Investment ISAs.

Read more about Lifetime ISAs.

Read more about Junior ISAs.

Important Risk Information:

The value of investments can go down in value as well as up, so you could get back less than you invest. It is therefore important that you understand the risks and commitments. This website aims to provide information to help you make your own informed decisions. It does not provide personal advice based on your circumstances. If you are unsure of how suitable an investment is for you, please seek personal advice.

High Income ISAs

High income ISA ideas:

ISAs Products

Cash ISAs

Fixed Rate & Instant Access ISAs:

Cash ISAs: 

Stocks & Shares ISAs

Types of Stocks and Shares ISA include: 

Stocks and Shares ISAs

Latest News

Our Top Picks for Technology Stocks and Shares ISAs

19th January 2021

The tech industry has been booming for the past fifteen years; and it seems to be a rollercoaster that only goes up. The tech bubble has yet to burst, with companies coming out with more and more technological developments and consumer demand is certainly not slowing down. So, for the tech-savvy investor who wants to put their pennies behind this strong growing industry, we’ve put together our top three picks for Technology Stocks and Shares ISAs. 

Newsletter Signup

Sign up to our Newsletter to get exclusive news and offers direct to your inbox.

About us is a trading style of Fair Investment Company.

We've been comparing and recommending ISAs for many years so you can trust you're in good hands.

About us

4.74 Average

23 Reviews


I found the way the different options are presented very clear - much more useful than some other comparison sites. I sent it to my daughter as well.


Very informative, find myself a good ISA account with best return in terms of interest.


Easy to use website and up to date. Saved the link on my tablet.

Rob Holden

The website was very useful and informative.

Andrew Johnson

ISA can be confusing at first and this site includes a useful and helpful introduction into the world of ISAs


Excellent website - clear and helpful information about different products - and a trustworthy partner.


Easy to use website and up to date. Saved the link on my tablet.


Really simple to use and all the information was clear with lots of products available. The interest calculator was really handy too. Have bookmarked and will definitely use again.

Hannah Gordon

This was a really user-friendly site, and was very helpful when it came to comparing accounts and choosing my 2016 ISA.


Easy to use website and up to date. Saved the link on my tablet.


If you wish to invest in an ISA this site has it all. A super comprehensive range of simply explained products from all the major companies.

Cristina Iacob

Very knowledgeble company with an extensive range of services, a great website with loads of useful information.


Nice graphics and easy to navigate

Dr Alan Rogan BSc PhD FCIOB FCABE Eur Ing

Good advice and professional approach


Very helpful for getting my annual ISA

Jonny Doulton

Clear, concise and very professional outfit with an excellent choice of market leading deals.

Paul Tissington not only helped narrow down my choices for a Junior ISA but also provided additional practical information that helped demystify the whole process.

Sunil Karadia

Just the site I needed, I have been looking for a suitable ISA for a while, but as there are so many to choose from, find it difficult to find the right one for me.

James Weatheritt

I found the information on very helpful and easy to understand. The site is easy to navigate and find what you're looking for.

Lisa Holden

I found very insightful and easy to navigate through. The content was useful and helped me make my ISA decision.

Neta Pourhosseini

I thought the information provided was easy to understand and very informative, I would recommend to friends for deffinite.

Robert Murray

Great selection of Isa products, useful information and a very user friendly site