Choosing and ethical ISA
The distinctive thing about UK ISAs is that the interest is all tax-free. Other things that make ISAs unusual are that you can only open one type per tax year, and there is a limit to how much you can put into them each year.
This annual limit has risen from £3,000 in 1999, to £20,000 where it has remained since 2017, and includes any combination of ISAs you have, including Innovative Finance ISAs and Stocks and Shares ISAs.
Should I get an ISA?
If it’s the tax-free interest that’s enticing you, you may not actually need to open an ISA. Since the Personal Savings Allowance was launched in 2016, unless you are a higher-rate taxpayer or have very large savings, your interest payments in any savings account will be tax-free anyway. With low interest rates in general at the moment, you might even find a better interest rate in a normal savings account.
However, although you won’t earn much on your savings in a low-risk investment like a Cash ISA, if you do have an ethical ISA, you have a place to put money safely away, and know that it is doing good, until you need it. With large amounts of money often sitting in ISAs for many years, it really can make a big difference where you put it.
What is an ethical Cash ISA?
You may find financial products out there being promoted as ethical ISAs, or green ISAs because they exclude investments in tobacco, alcohol, pornography, fur, armaments, and some oil investments. While these are all things we are glad to see excluded, they are often just one option offered by a provider that doesn’t maintain the same standards for all of its products.
Our Best Buy cash ISAs are from dedicated ethical providers, who not only exclude the most dodgy and damaging investments, but also are very clear about what they do proactively invest in.
It’s no surprise that the Best Buys in this guide mirror those in our guide to savings accounts. Although Charity Bank does not offer ISAs at the time of writing, it’s good to see that, alongside Triodos, the Ecology Building Society is again an option after recently re-starting their cash ISA offering. Both host multiple positive stories on their websites about projects they have funded and initiatives they are involved in. In each case, the money held in savings accounts makes this work possible.
This is in contrast to the big five high-street banking groups who have the advantage of appealing to their huge numbers of existing customers, and hold around two thirds of ISA accounts. Dig a bit deeper into what they do with their money and you may well want to avoid them or transfer to a more ethical provider.
Both of our Best Buys get a positive Company Ethos mark on our rankings table for offering an innovative alternative to the mainstream banking industry. They also get an extra Product Sustainability point for having an ethical lending policy.
Both are members of the Global Alliance for Banking on Values (GABV), a network of banking leaders from around the world committed to advancing positive change in the banking sector.
All of our Best Buys and Recommendations are protected by the FSCS (Financial Services Compensation Scheme), which means up to £85,000 (or £170,000 for joint accounts) held per firm would be repaid to the saver if a firm should fail. You should be aware that some banks or building societies are linked and therefore share one lot of £85,000 protection. You can check which ones are linked using this tool.
Mutuals / Building Society ISAs
Mutually owned entities, in the form of building societies, are also a good option for cash ISAs. They are seen as a more ethical option due to the fact they lend mainly in the housing market and don't invest in fossil fuels and other unethical sectors.
All the mutuals featured on the table pick up an additional mark in our scoring system for Company Ethos due to their more democratic structures. You can read more about mutuals and building societies in our guide to savings accounts.