what is a cash isa?

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A Cash ISA is a type of savings account that offers tax-free interest. That means you’ll be able to keep all of the interest you earn, as long as you stick to the conditions of the account. If you are over the age of 16, you can open a Cash ISA with £1.

How does a Cash ISA work?

£20,000 deposit limit
per tax year
Tax year starts 6th April
Tax-free interest
Cash ISAs offer fixed or variable interest
Fixed: interest rate stays the same
Variable: interest rate can go up or down
Interest paid monthly or annually
Open with £1 if you’re 16 or older
Open one Cash ISA per tax year
A Cash ISA works in a simple way:
 
  • You open and pay into the account – this is called making a deposit. You can pay in up to £20,000 in a tax year
  • Interest will be paid annually or monthly, depending on the Cash ISA you pick
  • You won’t pay tax on the interest you earn 
  • At the end of the tax year, you can save into another Cash ISA.
Watch our short video that explains how ISAs work.

Types of Cash ISA

There are two main types of Cash ISA to choose from:
 
  • Fixed Rate Cash ISAs – your interest rate stays the same for the term of your Cash ISA. There might be limits on how often you take money out of a Fixed Rate Cash ISA.
  • Variable Rate Cash ISAs – the interest rate can change during the term of your Cash ISA. You might be able to make more withdrawals from a Variable Rate Cash ISA.

How much can I save in a Cash ISA?

In the
2023/24
tax year, you can save up to £20,000 in a Cash ISA. The tax year runs from 6 April to 5 April.

How many Cash ISAs can I have?

You can only save into one Cash ISA at a time. You can also only open one Cash ISA in a year. You can transfer a Stocks and Shares ISA to a Cash ISA, or a Cash ISA to a Cash ISA with another provider.

While you can only open one new Cash ISA in a tax year, you can keep Cash ISAs from past years – as long as you don’t pay into them.

Can I transfer a Cash ISA?

You may want to transfer an ISA to a new provider to get a better rate. If you want to move a Cash ISA from a different provider, you can do this as many times as you like. Some providers might charge a fee to transfer your Cash ISA.

Transferring is different to withdrawing money from a Cash ISA. Withdrawing from a Cash ISA to pay into another one could mean losing the tax-free status of your money.

Is a Cash ISA safe?

If you save with a provider that is protected by the Financial Services Compensation Scheme (FSCS), your money will be protected up to a total of £85,000.

Cash ISA or savings account?

Choosing between a Cash ISA or savings account will depend on your circumstances or savings goals.

Cash ISA

  • £20,000 limit on deposits
  • Don’t pay tax on interest
  • Can only open one Cash ISA per year.

Savings account

  • Can pay up to the account limit
  • Pay tax on interest over £1,000 Personal Savings Allowance
  • No limit on how many accounts you can open.
The content on this page is for reference and does not constitute financial advice.
For impartial financial advice, try MoneyHelper