A Cash ISA is a type of savings account where you don’t pay any tax on the interest you earn. It’s one of the most popular types of ISA because it's simple, low-risk, and easy to open.

How a Cash ISA Works

Cash ISAs work much like normal savings accounts — but the interest is always tax-free, regardless of how much you earn. You can deposit up to your annual ISA allowance into one each tax year.

2025/26 ISA Allowance

You can save up to £20,000 in ISAs during the 2025/26 tax year. That total can be spread across different ISA types, but you can only pay into one Cash ISA per year.

Types of Cash ISAs

• Easy Access: Withdraw your money anytime, but interest rates may be lower.
• Fixed Rate: Lock your money away for a set time (e.g. 1–5 years) in exchange for higher interest.
• Regular Saver: Some providers offer monthly deposits with fixed terms and rates.
• Flexible ISAs: Withdraw and replace funds within the same tax year without affecting your allowance (check with the provider).

Cash ISA vs. Normal Savings Account

Cash ISAs used to be the go-to savings option, but things have changed:

• Most people now get a Personal Savings Allowance (£1,000 for basic-rate taxpayers), meaning many don't pay tax on savings interest anyway.
• Regular savings accounts often offer higher interest rates than Cash ISAs.

Still, if you're a higher earner or want to protect future interest from tax, a Cash ISA could be worth it.

Who Can Open a Cash ISA?

You must be:

• A UK resident for tax purposes
• Aged 16 or over

Can You Switch Providers?

Yes — you can transfer your Cash ISA to another provider for a better interest rate. Always request a formal ISA transfer to keep your tax-free status intact.

Should You Use a Cash ISA?

A Cash ISA may be a good option if:

• You’re likely to exceed your Personal Savings Allowance
• You want a tax-free home for long-term savings
• You’re risk-averse and prefer guaranteed returns

Explore Other ISA Options

If you're considering alternatives to Cash ISAs, check out our other ISA guides:

• Stocks & Shares ISA – Invest in the markets with no capital gains or dividend tax.
• Lifetime ISA – Save for your first home or retirement with a 25% bonus.
• Innovative Finance ISA – Peer-to-peer lending with higher risk and potential return.
• Junior ISA – Save tax-free for a child under 18.