The short answer
- Some do, many do not. CPI inflation was 3.5% in the 12 months to September 2026, the ONS said on 21 October 2026. The highest easy access and 1 year fixed rates in our Cash ISA tables pay more than that, and many accounts pay less.
- The figure looks back, the rate looks forward. A rate beats inflation over the next year only if it stays above the rise in prices over that year, and nobody knows what that will be.
- The real return is close to the gap. At 4% interest and 3.5% inflation, money gains about 0.48% in buying power over a year. At 2% it loses about 1.45%.
- Tax-free interest helps. Cash ISA interest is not taxed. Outside an ISA, interest above the Personal Savings Allowance (£1,000, £500 or £0) is taxed at 20%, 40% or 45% in 2026/27, rising to 24%, 44% and 49% from 6 April 2027, so it needs a higher rate to keep up.
- Cash does not fall in value with the markets, but when its rate is below inflation, what it buys shrinks.
Do Cash ISAs beat inflation right now?
Some do. The Office for National Statistics (ONS) said on 21 October 2026 that prices measured by the Consumer Prices Index (CPI) rose 3.5% in the 12 months to September 2026, up from 3.1% in August. A Cash ISA paying more than 3.5% is ahead of that figure. One paying less is behind it: the balance still grows in pounds, but it buys less.
At a glance
- CPI inflation, 12 months to September 2026
- 3.5%
- Up from 3.1% in August. ONS, 21 October 2026
- Highest easy access Cash ISA in our table
- 4.86% AER
- Checked 30 October 2026. Includes a bonus
- Highest 1 year fixed Cash ISA in our table
- 5.00% AER
- Checked 30 October 2026
- Bank Rate
- 3.75%
- Held on 17 September 2026. Next decision on 5 November 2026
The highest easy access Cash ISA rate in our table is 4.86% AER (variable), checked 30 October 2026, about 1.31% ahead of inflation at the latest figure. That rate includes a bonus, so check how long it lasts and what the account pays afterwards. The highest 1 year fixed rate is 5.00% AER, checked 30 October 2026, about 1.45% ahead of inflation. Of the 64 easy access Cash ISAs in our table, 28 pay more than 3.5%. Among 1 year fixes, all 34 do. Rates change, so check our Cash ISA rate tables for the latest.
One caution applies to every comparison like this. The CPI figure looks back over the last 12 months, while the rate on an account looks forward. A rate beats inflation over the next year only if it stays above the rise in prices over that year, and nobody knows what that will be. We do not forecast it.
What is the latest UK inflation figure?
The ONS publishes the figures every month. Its bulletin of 21 October 2026 gives 3.5% for CPI in the 12 months to September 2026, and 3.6% for CPIH, which also includes owner occupiers’ housing costs. It said transport, particularly motor fuels, made the largest upward contribution to the change in both rates. The next figures are due on 18 November 2026.
CPI is the measure the Bank of England targets, and the government has set the Bank a target of keeping inflation at 2%. The Bank explains how the figure is built: every month the ONS checks the prices of about 700 items, the overall price of that basket is the CPI, and the inflation rate compares it with a year earlier. So inflation of 3.5% means prices are, on average, 3.5% higher than a year ago. Because it is an average, the prices you pay may have risen by more or less.
How do you work out your real return?
The real return is what interest adds to your buying power once rising prices are allowed for. To work it out, write the rate and inflation as decimals and add 1 to each, divide the first by the second, then take away 1. At 4% interest and 3.5% inflation, 1.04 divided by 1.035 is about 1.0048, a real return of about 0.48%. Simply taking inflation away from the rate gives 0.5%, a quick estimate that stays close while both numbers are small.
An illustration. This is not a forecast, and the rates are not those of any account. The table shows £10,000 left for a year at round rates, if prices rise 3.5% over that year, as they did in the 12 months to September 2026. Buying power is the balance at the end of the year in start of year prices. It assumes the rate stays the same and nothing is taken out.
| Illustrative rate | Interest on £10,000 in a year | Buying power after a year | Against inflation |
|---|---|---|---|
| 2% AER | £200 | £9,855 | 1.45% behind |
| 3% AER | £300 | £9,952 | 0.48% behind |
| 3.5% AER | £350 | £10,000 | Level |
| 4% AER | £400 | £10,048 | 0.48% ahead |
| 5% AER | £500 | £10,145 | 1.45% ahead |
At 3.5% the money only keeps level: £350 of interest matches the rise in prices. Below that, the balance grows in pounds but buys less than it did. The Cash ISA interest calculator shows what a rate is worth in pounds over any term.
What rate do you need to beat inflation after tax?
In a Cash ISA, the rate you see is the rate you keep: gov.uk says you do not pay tax on interest on cash in an ISA. So any Cash ISA rate above 3.5% beats the latest figure.
Outside an ISA, interest counts towards the Personal Savings Allowance: £1,000 for a basic rate taxpayer, £500 for a higher rate taxpayer and £0 for an additional rate taxpayer. Above it, interest is taxed at 20%, 40% or 45% in 2026/27. HM Treasury’s Budget documents of 28 October 2026 say these rise to 24%, 44% and 49% from 6 April 2027.
Tax takes a share of every pound of interest above the allowance, so a taxable account needs a higher rate to keep up. The rate needed is inflation divided by what is left of each pound after tax. For a basic rate taxpayer this tax year, that is 3.5% divided by 0.80, about 4.38%. On interest inside the allowance there is no tax, so 3.5% is enough there too.
| Where the interest is | Rate needed, 2026/27 | Rate needed, from 6 April 2027 |
|---|---|---|
| Cash ISA, any taxpayer | 3.50% | 3.50% |
| Basic rate taxpayer, outside an ISA | 4.38% | 4.61% |
| Higher rate taxpayer, outside an ISA | 5.83% | 6.25% |
| Additional rate taxpayer, outside an ISA | 6.36% | 6.86% |
A worked example. Take the full £20,000 ISA allowance for 2026/27 at 5.00% AER, the highest 1 year fixed rate in our Cash ISA table, checked 30 October 2026. A year’s interest is £1,000.00. The table compares keeping it in a Cash ISA with a taxable account paying the same rate. It assumes no other savings interest, that other income sets the tax band, and no Personal Allowance or starting rate for savings left to cover the interest.
| Where the interest is | Kept after tax, 2026/27 | Against inflation | Kept after tax, from 6 April 2027 | Against inflation |
|---|---|---|---|---|
| Cash ISA, any taxpayer | £1,000.00 | 1.45% ahead | £1,000.00 | 1.45% ahead |
| Basic rate taxpayer, outside an ISA | £1,000.00 | 1.45% ahead | £1,000.00 | 1.45% ahead |
| Higher rate taxpayer, outside an ISA | £800.00 | 0.48% ahead | £780.00 | 0.39% ahead |
| Additional rate taxpayer, outside an ISA | £550.00 | 0.72% behind | £510.00 | 0.92% behind |
The Cash ISA keeps all £1,000.00, about 1.45% ahead of inflation. A basic rate taxpayer pays no tax on it in a taxable account either, because £1,000.00 is within the £1,000 allowance. A higher rate taxpayer keeps £800.00, about 0.48% ahead of inflation, and an additional rate taxpayer £550.00, about 0.72% behind inflation. The ISA vs savings account calculator compares two rates after tax at amounts you choose, and savings tax 2027 explains the new rates.
Can a Cash ISA lose value to inflation?
Not in pounds: inflation does not reduce the balance, and cash does not fall in value with the markets. Separately, some accounts charge for taking money out early, and gov.uk says to check an ISA’s terms for any rules or charges for making withdrawals. What inflation reduces is what the balance buys.
The lowest rate in our Cash ISA tables is 0.75% AER. £10,000 at that rate earns £75 in a year. If prices rose 3.5% over the same year, as they did in the 12 months to September 2026, the £10,075 at the end would have the buying power of about £9,734 at the start.
An ISA does not change this. It removes tax on the interest, not the effect of rising prices, so the real return inside a Cash ISA is its rate against inflation, and outside one it is the rate after tax against inflation.
Does a fixed rate protect you from inflation?
It fixes the interest, not the real return. A 1 year fix tells you what the money will earn over the term but not what prices will do: if inflation rises during the term, the real return falls, and if inflation falls, it rises. Taking money out before the term ends can carry a charge set by the account’s terms, and the fixed rate ISA penalty calculator works out what one could cost.
Every easy access rate in our table is variable, so it can move up or down during the year. The highest one includes a bonus. When a bonus ends the rate falls, so a rate that is ahead of inflation with its bonus can fall behind without it. For how the two compare, see fixed or easy access ISA, and compare 1 year fixed rates with easy access rates.
How do Bank Rate and inflation affect Cash ISA rates?
Rising prices do not change the rate on an account by themselves. Providers set Cash ISA rates. The Bank of England sets Bank Rate, which it calls the core interest rate in the UK, and it says that when it raises Bank Rate, banks will usually increase the interest they offer on savings.
The Bank held Bank Rate at 3.75% on 17 September 2026, and its next decision is due on 5 November 2026. The September figure for CPI is above the 2% target the government has set the Bank. What that could mean for rates would be a forecast, and we do not make one. Will Cash ISA rates go up or down? explains how rates move and what the Bank said in September.
Do all ISAs keep up with inflation?
An ISA changes the tax on what it holds, not what it earns. Whether one keeps up with inflation depends on what is inside it. A Cash ISA holds deposits, so the answer turns on its interest rate, as above. A Stocks and Shares ISA holds investments, whose value can fall as well as rise, and this page does not cover them: see Cash ISA vs Stocks and Shares ISA.
The amount you can pay into Cash ISAs each year is not changing. gov.uk says you can save up to £20,000 in ISAs every tax year, and the Cash ISA limit stays £20,000 after the Budget on 28 October 2026 cancelled a planned cut to £12,000 for savers under 65. See the Cash ISA limit.
Questions people ask
Does a Cash ISA beat inflation?
Some do and many do not. CPI inflation was 3.5% in the 12 months to September 2026, the ONS said on 21 October 2026, so a Cash ISA paying more than 3.5% is ahead of the latest figure and one paying less is behind it. A rate beats inflation over the next year only if it stays above the rise in prices over that year, which nobody knows. Compare current rates in our Cash ISA tables.
What interest rate do I need to beat inflation?
In a Cash ISA, any rate above inflation, because the interest is tax-free: more than 3.5% against the latest CPI figure. Outside an ISA, interest above the Personal Savings Allowance is taxed, so in 2026/27 that interest keeps up only at a rate of about 4.38% for a basic rate taxpayer, 5.83% for a higher rate taxpayer and 6.36% for an additional rate taxpayer. From 6 April 2027, when the tax rates on savings rise to 24%, 44% and 49%, those become about 4.61%, 6.25% and 6.86%.
Can you lose money in a Cash ISA because of inflation?
Inflation does not reduce the balance in pounds, but it can reduce what the balance buys. Cash does not fall in value with the markets, though some accounts charge for taking money out early. For example, £10,000 earning 2% for a year grows to £10,200, and if prices rise 3.5% over that year, it has the buying power of about £9,855 at the start.
Which inflation figure should I compare my Cash ISA rate with?
This page uses CPI, the measure in the 2% inflation target the government has set the Bank of England. It was 3.5% in the 12 months to September 2026. The ONS also publishes CPIH, which includes owner occupiers' housing costs and was 3.6%. The next figures are due on 18 November 2026.
Does a fixed rate Cash ISA protect against inflation?
It fixes the interest, not the real return. If inflation rises during the term the real return falls, and if inflation falls it rises. Taking money out early can carry a charge set by the account's terms. See fixed or easy access ISA.
Will Cash ISA rates rise because inflation has gone up?
Not automatically. Providers set Cash ISA rates, and the Bank of England says that when it raises Bank Rate, banks will usually increase the interest they offer on savings. Bank Rate is 3.75% as at 29 October 2026, and the next decision is due on 5 November 2026. We do not forecast: see will Cash ISA rates go up or down?
Sources
- 1 Consumer price inflation, UK: September 2026 (Office for National Statistics, 21 October 2026) (ons.gov.uk)
- 2 Inflation and the 2% target (Bank of England) (bankofengland.co.uk)
- 3 What is inflation? (Bank of England) (bankofengland.co.uk)
- 4 Interest rates and Bank Rate: our latest decision (Bank of England) (bankofengland.co.uk)
- 5 Individual Savings Accounts: how ISAs work (GOV.UK) (gov.uk)
- 6 Individual Savings Accounts: withdrawing your money (GOV.UK) (gov.uk)
- 7 Tax on savings interest: how much is tax free (GOV.UK) (gov.uk)
- 8 Income Tax rates and Personal Allowances (GOV.UK) (gov.uk)
- 9 Budget 2026: Overview of tax legislation and rates (HM Treasury) (gov.uk)
