What is a cash ISA?

  • A cash ISA is a savings ISA (as opposed to an investment ISA).
  • Similar to a savings account but allows interest to grow tax-free.
  • Generally considered a safe place for your money.

How do cash ISAs work?

  • You can contribute to the limit of £20,000 per year.
  • Anyone over 16 can open their own cash ISA.
  • Interest rates tend to be lower than most other ISA types, but they are the most secure.

Cash ISA rules

  • Can pay all £20,000 into a cash ISA or split them between the various ISA types.
  • Withdrawal depends on whether you have an easy access or fixed term ISA.
  • Once you have withdrawn money, you cannot top up your ISA again if you’ve already paid the full amount.
  • The only exception to this is if you hold a flexible ISA.

Cash ISA interest rates

  • Cash ISA rates are often lower than other ISA types, as they are less volatile places for your money.
  • Rates can be under 1% for instant access cash ISAs and up to around 2% for long-term fixed-term ISAs.
  • The cash ISA market is very competitive, rates are not the only thing to consider.
  • Some providers pay monthly and some annually.

Types of cash ISA

Fixed rate ISA:

  • As the name suggests, these cash ISAs have fixed interest rates throughout the term of the ISA.
  • To access the fixed interest rates most providers prevent you from withdrawing for a set period.
  • This often means fixed rate ISAs have better interest rates.

Instant access ISA:

  • Allow you to access money instantly/much quicker than fixed rate/term.
  • Also known as easy access ISAs.