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Cash ISAs: Everything you need to know

Olly McConnell

If you want to earn interest on your savings without paying tax, a cash ISA could be a good option. Here, we explain a bit about how they work, the benefits of a cash ISA and how to transfer your savings to a new provider if you find a better deal.

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An ISA could be a good place to keep your money
A cash ISA is a savings account that lets you earn interest without paying tax.

What is a cash ISA?

A cash ISA is a savings account that lets you earn interest without paying tax. It works in a similar way to a standard savings account – you just don’t need to declare any interest made on your savings to HMRC. 

You can currently save up to £20,000 in ISAs each tax year, and you can put all of that into a cash ISA if you want to. This applies until the end of the 2026/27 tax year.

Cash ISA changes

From April 2027, the cash ISA limit will change. You’ll be able to save up to £12,000 a year in a cash ISA if you are under 65, or still up to £20,000 a year if you are 65 or over. 

The overall ISA allowance will still stay at £20,000.

That means, depending on your age, you may need to split your ISA allowance across different types of ISAs - for example between a cash ISA and a stocks and shares ISA - from the 2027/28 tax year onwards.

What are the benefits of a cash ISA?

Let’s dive into some of the key benefits of a cash ISA:

  • Tax-free interest - you don’t pay tax on the interest you earn in a cash ISA, which can make a real difference if you have a large amount to save, or if you’ve used up your personal savings allowance.

  • Protection for your savings – The Financial Services Compensation Scheme (FSCS) protects most cash ISAs in the UK. This covers up to £120,000 per person, per financial institution, if the provider fails.

  • A range of account types - you can choose from easy access, notice and fixed-rate cash ISAs depending on how you want to manage your savings and how quickly you need access to your cash.

  • The option to move to a better rate - You can transfer your cash ISA to another provider if you find a better deal without losing your tax-free status.

How do I access my money from a cash ISA?

How you access your money depends on the type of cash ISA you have.

With an easy access cash ISA, you can usually withdraw money whenever you need to. Some providers may limit the number of withdrawals you can make each year though.

With a notice cash ISA, you need to give advance notice before you withdraw money. The notice period varies depending on the account and the provider.

With a fixed-rate cash ISA, you normally need to keep your money in the account for a set period. You may have to pay a penalty if you withdraw any funds before the term ends.

Check the specific terms of your cash ISA so you aren’t caught out.

How do I transfer my existing cash ISA?

If you have one or more cash ISAs and want to move your savings, you have several options. You can transfer your money to:

  • A new cash ISA with a different provider

  • An existing ISA with another provider

  • An existing ISA with the same provider (often called ISA consolidation)

  • A new or existing stocks and shares ISA

  • A new or existing innovative finance ISA (IFISA)

  • A lifetime ISA

To keep your tax-free status, always arrange the transfer through your new provider – don’t withdraw the money yourself and move it manually.

Transferring to a stocks and shares ISA or innovative finance ISA is usually free, but you may face management fees, exit fees or other investment charges so be sure to check before making a decision.