The revised rate took effect on February 24 and applies to the bank’s popular easy-access product. With the annual ISA allowance set at £20,000, and growing attention on future changes to limits, providers are competing for deposits at a time of heightened consumer scrutiny.
Cash ISAs allow individuals to save up to £20,000 each tax year without paying tax on the interest earned. Many accounts, including this one, can be opened with as little as £1, making them accessible to a broad range of savers.
According to reports, the increase from 3.91% to 3.97% is available to both new and existing customers, a detail likely to appeal to current account holders who might otherwise consider switching.
Tesco Bank Adjusts Rate as Demand for Better Returns Rises
The new 3.97% rate on the Tesco Bank Instant Access Cash ISA includes a guaranteed fixed bonus of 2.92% for the first 12 months, combined with a standard variable rate of 1.05%. After the first year, customers will continue to receive the standard variable rate.
Tesco Bank states that this structure ensures customers benefit from a competitive return from the day they open the account. Instant access means funds can be withdrawn at any time, an option that remains important for savers seeking flexibility.
According to research commissioned by the bank and carried out by Opinium between January 27 and January 30, 2026, 41% of ISA savers are actively searching for better rates to grow their savings over the next year. The survey questioned 2,200 UK adults, of whom 1,304 held at least one Cash ISA.
The same research found that 80% of Cash ISA holders have not yet used their full allowance for the current financial year. With the tax year ending in April, this gap suggests scope for additional deposits in the coming weeks.
Chris Henderson, Save and Pay Director at Tesco Bank, said Cash ISAs are “a savvy way to build up your savings over time, while benefitting from the tax advantages they offer”. He added that, at a time when people are shopping around before April, the bank was pleased to increase the rate for both new and existing customers.
How the Offer Compares with Other Cash ISA Providers
The announcement places Tesco Bank among several providers currently offering rates close to or above 4%. According to the information provided, Charter Savings Bank is offering 4.11% on its Cash ISA. The account can be opened online from £1, allows transfers in, pays interest monthly and is not flexible.
Leeds Building Society pays 3.96% on a two-year Cash ISA with a variable rate. The account requires a minimum deposit of £1,000, allows transfers in and pays interest annually, though it is also not flexible. Bank of Ireland UK offers 3.95%, made up of a 0.9% variable rate and a one-year 3.05% bonus. The rate falls after the first year. The account can be opened online with a £100 minimum deposit and pays interest annually.
Meanwhile, Skipton Building Society pays 3.92% and offers one of the few flexible ISAs available. It can be opened with £1 through multiple channels and pays interest annually. Tesco Bank, established in 1997 and now serving around 3.8 million customers, delivers its products through a long-term strategic partnership with Barclays. As the tax year draws to a close, competition across the Cash ISA market appears firmly focused on attracting savers who have yet to use their full allowance.
