Make sure you get the best deal possible using our cash ISA comparison tables using your 2023 -2024 allowance.
What is a cash ISA?
A cash Individual Savings Account (ISA) is a tax-free savings account which allows you to save up to a set amount of money per financial year without paying any tax on it; you can check the current cash ISA limit by clicking here. To open an account, you must be a UK resident or Crown employee aged 16 or over. You can only have one cash ISA per tax year, but you can also simultaneously have a different type of ISA, known as a stocks and shares ISA.
Benefits of a Cash ISA
There are three key benefits to a cash ISA:
- No income tax - you don't pay tax on any interest you earn from the cash in your ISA.
- Easy access - if you choose an instant access cash ISA (rather than a fixed-rate cash ISA), it's a convenient way to save at a reasonable interest rate while retaining fast and easy access to your money, should you need it.
- Easy transfers - if you find an ISA provider that offers a better deal than your current provider, you can transfer your cash ISA to them.
How much tax can I save with a cash ISA?
The good news is that whatever your tax bracket, you'll pay 0% tax on any savings held in a cash ISA. Compare this to the usual tax rates on savings:
If you're a basic rate taxpayer...you would usually pay 20% tax on interest earned from savings.
If you're a higher-rate taxpayer...you would usually pay a 40% tax on interest earned from savings.
If you pay tax at the additional higher rate...you would usually pay 50% tax on interest earned from savings.
If you pay the 'savings rate' of tax for savings...you would usually pay a 10% tax on interest earned from savings.
Using your cash ISA allowance can save you money by allowing you to keep 100% of any interest you earn.
The above information gives you a general idea of what you could save - remember that it depends on your circumstances and may be subject to change.
Can I transfer a cash ISA?
It depends on your circumstances. If you've got some money saved as a lump sum from a previous tax year, you'll usually be permitted to transfer this from one cash ISA to another, or to a stocks and shares ISA. This transfer shouldn't affect your ISA investment allowance for the current tax year.
Which type of cash ISA is right for me?
An instant access cash ISA might be the right choice for you if...
- You want a good rate of interest, plus the ability to get hold of your money quickly if necessary.
- You want to take advantage of your annual tax-free savings allowance but only have a small amount to deposit - instant access ISAs can be opened from as little as £1.
- You want to be paid regular interest - instant access ISAs usually offer monthly or quarterly interest.
A fixed-rate cash ISA might be right for you if...
- You are happy to put your money aside for a set period - this usually allows you to accrue a higher interest rate than you might get with an instant access cash ISA.
- You want to take advantage of your tax-free savings allowance and have a lump sum to deposit.
Use our services to help you choose
Like any investment option or financial service, it's essential to research your options before committing to a cash ISA. You might find our services useful for the following:
Comparing cash ISAs, including instant access ISAs and fixed-rate ISAs
Comparing cash ISAs with other savings options
Top tips for making the most of your cash ISA
- You can only have one type of cash ISA in each financial year, so research your options carefully. Whether you choose a fixed-rate or instant access cash ISA, consider your savings goals beforehand to help you determine what's right for you.
- Remember that you can't carry your tax-free allowance from one financial year to the next - so if you've got enough cash to hit your limit, stash it in an ISA.
- Because a cash ISA operates on a year-long basis, it's an excellent way to try your hand at saving without committing yourself to anything long-term. It's also a great way to save for a specific event like a wedding, holiday, or starting a family.
- Once you've set up your cash ISA, ensure you still keep an eye on the interest rates available from other providers. You can usually switch cash ISA providers without incurring any charge.
- To make life easier, set up a direct transfer from your current account into your cash ISA to ensure that you put aside a certain amount each month without fail.
- Don't forget that you've got the option of opening a stocks and shares ISA. For more on this, see our page on stocks and shares ISAs.
Frequently Asked Questions