What is a Cash ISA?

Cash ISAs are tax-free savings accounts available to UK residents over the age of 16. Various types of cash ISA are available, and if a better rate is available elsewhere, its possible to transfer ISAs to other providers. The 2019/20 ISA allowance allows you to save up to £20,000 tax-free.


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Still not sure?

Read all Savings and ISAs guides
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2019-20 ISA allowance guide

A short guide detailing the 2019-20 ISA allowances.

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A guide to variable rate ISAs

This guide explains more about ISAs with variable rate interest rates.

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Should I invest in an ISA or my pension?

This guide outlines the pros and cons of investing in an ISA or pension.

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Six things you need to know about ISA transfers

Six things you need to know about ISA transfers.

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Cash vs investment ISA

Here we look at the differences between cash and investment ISAs

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How to transfer a cash ISA

This guide explains how to transfer Cash ISAs.

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Six things you need to know about ISA transfers

Six things you need to know about ISA transfers.

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Stocks & shares ISA

A guide to stocks and shares ISAs.

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A Guide to Cash ISAs

Leanne Macardle

Leanne Macardle

Published: 30/01/2019

At a glance


  • The ability of Cash ISAs to accumulate tax-free benefits and the hope that interest rates will rise means cash ISAs remain an important savings option, despite the introduction of the Personal Savings Allowance.

Cash ISAs are one of the most popular ways to save, and with the interest that you earn in these accounts paid tax-free, it is easy to see why.

Who can open a cash ISA?

That ISAs are accessible to almost all has also played a key part in their success. Anyone who is resident in the UK for tax purposes and aged 16 or over is entitled to open a cash ISA. The age rises to 18 for a stocks & shares ISA. Crown employees, such as diplomats or members of the armed forces, are eligible too, along with their spouses or civil partners.

Moneyfacts tip

Moneyfacts tip Leanne Macardle

If you are looking to save for a child, Junior ISAs are available that also pay interest tax-free.

What are the advantages of cash ISAs?

The main advantage of a cash ISA is its tax-free status, with returns and capital growth free from income and capital gains tax. This is important because the interest you earn from a traditional savings account may be subject to income tax; so, depending on how much savings interest you earn, up to 45% of this may be taxable.

The Personal Savings Allowance and cash ISAs

Since the introduction of the Personal Savings Allowance in April 2016, which allows basic rate taxpayers to earn £1,000 of savings income tax-free (£500 for higher rate taxpayers), questions have been raised over the value of using an ISA for savings.

However, for the vast majority of savers, making use of their ISA allowance still makes sense. This is because:

  1. The tax benefits in an ISA are cumulative, meaning you can shelter ever larger sums from tax year-on-year.
  2. While the Personal Savings Allowance is currently adequate for most savers to avoid paying tax on their savings without using an ISA, savings rates will not have to rise too much further before tax may become an issue. For instance, if rates were to reach 5%, non-ISA balances of £20,000 and over would become taxable for basic rate taxpayers (£10,000 and over for high rate taxpayers).
  3. If the Government were to review the way savings are taxed in the future, the Personal Savings Allowance seems far more vulnerable to change than the more established ISA regime. It would be extremely difficult to justify the removal of tax advantages from money already held in ISAs compared to lowering or even scrapping the Personal Savings Allowance.

Find out more about:

How cash ISAs work

Cash ISAs tend to work in the same way as any other savings account. However, there are a few important rules to be aware of.

How much can I put into a cash ISA?

Because of their tax advantages, the Government limits the amount that one person can pay into an ISA each tax year. A tax year runs from 6 April to 5 April the following year.

2019/20 ISA allowance

In the 2019/20 tax year, the ISA allowance is £20,000. You can choose to use your ISA allowance in a cash ISA, a stocks & shares ISA, an innovative finance ISA, a lifetime ISA (which has a lower limit of £4,000) or any combination of the four, as long as you don't exceed the annual allowance. This means that the most you can pay into a cash ISA in any tax year is £20,000; if you do this, you will not be able to put any money into any of the other types of ISA. 

You must pay your money in before 5 April 2020 if it is to count towards the annual ISA limit for the 2019/20 tax year. 

Can I have more than one ISA?

You can hold a cash ISA, a stocks & shares ISA, an innovative finance ISA and a lifetime ISA all in the same tax year.

However, what you can’t do is put new money into more than one of the same type of ISA in the same tax year. So, if you have already opened a cash ISA after 6 April of the current year, and have made contributions into it, you cannot open another cash ISA and pay into it until the next tax year.

Can I withdraw cash whenever I like?

This is likely to depend on the type of cash ISA you have and any rules that your ISA provider has for making withdrawals. With easy access cash ISAs, you can usually withdraw your money when you want to. However, with fixed rate cash ISAs, your funds are supposed to be tied up until the end of the fixed term.

In reality, most fixed rate ISAs will allow early access to funds, but an interest penalty will have to be paid. Similarly, while a notice period is meant to be observed if you have a notice ISA, some providers will allow earlier withdrawals on an interest penalty.

Can I take money out of a cash ISA and put it back in?

If your ISA is ‘flexible’, you can take out money then replace it during the same tax year without reducing your current year’s allowance. It should be noted, however, that ISA providers do not have to offer the ‘flexible ISA’ option, so you should always check with your provider first.

Inheriting cash ISAs

It is now possible for a surviving spouse or civil partner to inherit the ISA savings of a loved one when they die and continue to benefit from the tax-free benefits built up. This can be done using an additional, one-off ISA allowance, equal to the value of the deceased’s ISA holdings.

The ‘additional permitted subscription’ allows the survivor to re-shelter the assets in an ISA in their own name, without encroaching on their own ISA allowance for that tax year. Although inheritance tax (IHT) will still apply, transfers between spouses on death are IHT free.

Is my money safe in a cash ISA?

As long as the ISA is provided by a UK regulated bank or building society account, it is protected under the Financial Services Compensation Scheme (FSCS). This means that the first £85,000 of money saved with a particular financial institution is covered should the ISA provider fail.

Moneyfacts tip

Moneyfacts tip Leanne Macardle

If you have built up a total cash ISA fund in excess of £85,000, you may want to think about spreading the money between different providers.

What types of cash ISA are available?

There is a wide variety of cash ISAs on offer, which mainly mirror the types of account on offer in the traditional savings market.

Easy access cash ISAs

Easy access cash ISAs are probably the simplest type of cash ISA, as they allow instant access to your funds. While most easy access ISAs allow unlimited withdrawals, it’s worth noting that some restrict the number of withdrawals that are allowed.

Some easy access ISAs also include a short-term bonus which boosts their rate, usually for 12 months. Once the bonus period expires, it is important to check whether the ISA remains competitive, and potentially transfer your ISA if it does not.

See the top easy access ISAs

Fixed rate ISAs

Fixed rate ISAs tend to pay the best interest rates because providers are happy to pay more in return for knowing they will have the funds for a set amount of time. Terms usually range from one to five years, with the longer the term agreed, the higher the rate of interest that is paid. However, if you want to access your fixed rate ISA funds before the term expires, an interest penalty will normally have to be paid and the ISA may be closed.

See the top fixed rate ISAs

Regular savings ISAs

If you want to put a smaller amount away each month, a regular saving ISA may be for you. In return for promising to put a minimum amount of money away on a regular basis, these accounts often pay a higher amount of interest. It should be noted, however, that missing a month or withdrawing the cash usually means the better rate will be lost.

Moneyfacts tip

Moneyfacts tip Leanne Macardle

At the moment, there are a limited number of regular savings ISAs available. Use the savings search to find accounts that allow you to put cash away on a monthly basis, which includes regular savings ISAs.

Notice ISAs

If you are happy to give notice before accessing your ISA funds, notice ISAs tend to pay a higher rate of interest than easy access ISAs. Notice periods vary, but typically range between 30 and 180 days. Interest penalties for earlier withdrawals usually fall in line with the notice period.

How to transfer a cash ISA

You can transfer your existing cash ISA without losing its tax-free privileges. The two main reasons you are likely to do this are:

  1. To get a more competitive interest rate
  2. To bring all your cash ISA funds together in one place.

How the ISA transfer process works

  1. Check if your existing cash ISA charges any penalties for transferring to a new provider. If it does, weigh up whether the transfer will be worthwhile.
  2. Research the best ISA rates.
  3. Make sure you find a new cash ISA that accepts ‘transfers in’, as not all ISA providers do. Remember, however, that you can only open one new cash ISA per tax year.
  4. Tell your new cash ISA provider that you wish to transfer an ISA and they will send you a transfer form.
  5. Complete the form and return it to your new provider.
  6. Your new ISA provider will then coordinate the transfer with your existing provider and inform you once the money has been transferred.

ISA transfer rules

If you are thinking of transferring your ISA, make sure you consider the following first:

  • When transferring a cash ISA, do not withdraw your money yourself to invest it into a new cash ISA. If you withdraw cash from an ISA it loses its tax-free status and you may have to use up more of your annual ISA allowance if you want to put it back.
  • While it is possible to transfer your ISA funds between cash and stocks & shares ISAs, you should check with your new ISA provider if they allow it. It is also important to consider the additional risks that are apparent with a stocks & shares ISA.
  • You are free to transfer your current tax year cash ISA and your ISAs from previous tax years. However, if you want to transfer your current tax year ISA, you must transfer all of it. If you are thinking of transferring your funds from previous tax years, you can choose to transfer all or part of your savings, and split the money between different providers.

How long does it take to transfer a cash ISA to another provider?

Under current rules, cash ISA transfers should take no longer than 15 working days. If your transfer takes longer than this, you should contact your new ISA provider.

isa on scrabble board and coins

At a glance


  • The ability of Cash ISAs to accumulate tax-free benefits and the hope that interest rates will rise means cash ISAs remain an important savings option, despite the introduction of the Personal Savings Allowance.

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