Published: 14 October 2024
Updated on: 24 April 2026
If you're looking for a place to grow your savings, a cash ISA might provide a solution.
But why are cash ISAs so popular? How does a cash ISA work? And what’s important to know before you open one? To clear things up, we've put together this short guide.
What is a cash ISA?
A cash ISA is a form of Individual Savings Account (ISA) that works much the same as a normal savings account but with one key difference, your ISA allowance, which allows you to earn tax-free interest on your savings.
You can get cash ISAs that offer fixed or variable interest rates and the level of access you have to your savings can also differ between different cash ISA products.
How much can I put in a cash ISA?
For the 2026/2027 tax year, the ISA allowance is £20,000. You can use your allowance across multiple cash ISAs. However, you can only pay into one cash ISA each tax year with us.
From 6 April 2027 there’s a change you need to know about. The ISA allowance remains at £20,000 but if you’re aged under 65, the amount you could save in a cash ISA will reduce to £12,000. But savers aged 65 and over aren’t affected – they’ll still be able to save their full £20,000 allowance in a cash ISA.
What about the personal savings allowance?
If you're a basic or higher-rate taxpayer, you also have a personal savings allowance (PSA) that allows you to earn up to £1,000 (basic rate) or £500 (higher rate) in interest without having to pay tax on it. Additional-rate taxpayers don't get any PSA. The tax-free interest from your ISA doesn't count towards your PSA.
Is my money safe in a cash ISA?
Savings in a cash ISA are covered by the Financial Services Compensation Scheme (FSCS), the UK's deposit guarantee scheme.
Eligible deposits up to a total of £120,000 per building society, bank or credit union are protected. However, if you have multiple accounts with multiple banks that are part of the same banking group they'll be treated as one bank and the £120,000 limit will apply to all.
Can you have a stocks and shares ISA and a cash ISA?
Just as you can have more than one cash ISA open at once, you can also have a cash ISA and a stocks and shares ISA open at the same time.
Your 2026/2027 tax year ISA allowance of £20,000 applies to the different types of ISA available:
- Cash ISA
- Stocks and shares ISA
- Innovative finance ISA
- Lifetime ISA: You can put in £4,000 each tax year and this counts towards the overall ISA allowance
Find out more about the difference between a cash ISA and a stocks and shares ISA.
Who can get a cash ISA?
You can get a cash ISA if:
- You live in the UK or you're working abroad as a crown servant or their spouse or civil partner.
- You're 18 or over.
Depending on the type of cash ISA that you choose to suit your needs and circumstances, there will also be conditions on opening and maintaining the account, such as:
- A minimum opening and operating balance: with our cash ISAs, that can be from £1 to £5,000.
- Access: you can take out money from your ISA, however you need to check the terms of your account to see if a charge will be payable, for example during the fixed term of a fixed rate cash ISA.
- Account opening type: check if your account is operated online, in branch, or by post.
What are the different types of cash ISA?
Fixed rate cash ISAs
With a fixed rate cash ISA, you get a fixed rate of interest on your savings for a set term. You'll commit to putting away your money for that period - one, two or three years, for example. During that time, withdrawals may incur an interest charge and account closure, so you need to be ready to put your money away without touching it for the agreed duration of the fixed rate period.
With fixed rate cash ISAs, you'll typically get a higher interest rate on your savings compared to other types of cash ISA.
Variable rate cash ISAs
Variable rate cash ISAs offer a variable rate of interest on your savings. That means that your interest can go up or down while you hold the account.
While fixed rate cash ISAs may restrict withdrawals, variable rate cash ISAs may offer differing levels of access. Either:
- Unlimited/easy: you can make as many cash withdrawals as you need.
- Limited: you're allowed to make a pre-agreed number of withdrawals per year. If you exceed that number, you may face an interest charge or account closure.
What are the benefits of a cash ISA?
There are a few reasons why so many people put their savings into a cash ISA:
- You'll earn tax-free interest on up to £20,000 of savings for the 2026/2027 tax year.
- It's a place to earn tax-free interest if you've used up your personal savings allowance (PSA) or don't have one.
- There's a variation of account types to choose from.
- You can transfer money from previous tax-year ISAs, allowing you to consolidate your savings in one place.
Please also bear in mind:
- If you’ve not used your allowance for a tax year, it doesn't roll over to the next tax year.
What's the best cash ISA for me?
The best cash ISA for you depends entirely on what you need from a savings account. You'll want to think about:
- How long you want to save.
- Whether you want a fixed or variable rate of interest.
- What level of access you need to your money.
- If you can put your money away for a set amount of time.
If you have any questions about our range of cash ISAs, you can always get in touch with us and speak to a member of the team.
We only offer cash ISAs.
The tax treatment of savings depends on individual circumstances and may change.
This article is intended as a summary only and is not advice. You should seek independent financial or legal advice if needed.
