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What is an cash ISA - ISA facts explained by uSwitch

Top tips for getting the most from your cash ISA

Read our top tips for getting the most from your cash ISA and learn more about stocks and shares ISAs

Cash ISAs are a great way to save – they work just like a normal savings account, but they have the added bonus that the interest you earn is all tax free.

Keep reading for our tips on how to choose the right cash ISA for you and making the most out of your cash ISA savings. Use the table below to compare ISAs:

Pay as much as you can into your cash ISA early in the tax year

It’s a good idea to use up as much of your cash ISA allowance as you can early on in the tax year. If you put your full £15,240 cash ISA allowance of  into an account paying 2.5% AER at the start of the financial year, over 12 months you would earn £381 in interest.

A simple, tax-efficient way to invest the full ISA allowance each year is through a stocks and shares ISA. Use the below table to compare stocks and shares ISAs.

Saving monthly? Set up a standing order to your cash ISA

If you are planning to save monthly rather than pay a lump sum into your cash ISA at the beginning of the tax year, it’s a good idea to set up a standing order every month from your current account to your cash ISA.

You should also look for a cash ISA with a low starting balance of £1 or £10 and the best interest rate you can find to make sure you make the most of your savings.

Getting the most from your cash ISA

Look for an online cash ISA

Cash ISAs that you run over the internet tend to come with the best interest rates, because they are cheaper for the bank or building society to run, so they can pass this saving on to their customers in the form of higher interest rates.

They also offer the convenience of being able to run your cash ISA account from home.

Check for introductory rates

Check to see if your cash ISA has an introductory rate. This headline rate might be a good deal and look appealing, but it’s important to check that the standard rate you receive is competitive too, unless you’re happy to transfer your cash ISA when the introductory period expires.

Consider a fixed rate cash ISA

If you don’t need to have access to your money straight away, you could consider a fixed rate cash ISA. Fixed rate accounts can often offer better interest rates than instant access cash ISAs, in return for committing your money for a set period.

Already got a cash ISA? Check you’re getting the best rate

If you already have a cash ISA, make sure that it’s paying a competitive rate. The interest rates on many cash ISA accounts have been cut dramatically in recent months, so you could be earning much less interest than you think.

Switching can make a big difference, for example if you had £3,600 in a cash ISA paying the average rate of 2.05% AER, you would earn just £73.80 in interest over a year, but if you transferred your savings to one of the better accounts on the market, paying 4.25% AER, your interest could more than double to £153. Find out how to transfer your cash ISA.