What is a Cash ISA? | How does one work? | YBS
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At a glance:
A Cash ISA is a type of savings account that offers tax-free interest.
That means you’ll be able to keep all of the interest you earn, as long as you stick to the rules of the account.
If you are over the age of 18, you can open a Cash ISA with £1.
How does a Cash ISA work?
A Cash ISA works in a simple way:
- You open and pay into the account – this is called making a deposit. You can pay in up to £20,000 in a tax year
- Interest will be paid annually or monthly, depending on the Cash ISA you pick
- You won’t pay tax on the interest you earn
- The interest you earn won’t count towards your personal savings allowance.
Types of Cash ISA
There are two main types of Cash ISA to choose from:
- Fixed Rate Cash ISAs – your interest rate stays the same for the term of your Cash ISA. There might be limits on how often you take money out of a Fixed Rate Cash ISA.
- Variable Rate Cash ISAs – the interest rate can change during the term of your Cash ISA. You might be able to make more withdrawals from a Variable Rate Cash ISA.
How much can I save in a Cash ISA?
In the 2024/25 tax year, you can save up to £20,000 in Cash ISA. The tax year runs from 6 April 2024 to 5 April 2025.
This can be split across different types of ISA. For example, you could save £15,000 in a Cash ISA and £5,000 in a Stocks and Shares ISA.
How many Cash ISAs can I have with YBS?
You can only pay into to one Cash ISA with YBS per tax year, using your ISA allowance.
Since 6 April 2024, you can now save into more than one Cash ISA in the same tax year. Always check the rules of the ISA provider you plan to use.
Since 6 April 2024, you can now save into more than one Cash ISA in the same tax year. Always check the rules of the ISA provider you plan to use.
Can I transfer a Cash ISA?
You may want to transfer an ISA to a new provider to get a better rate. If you want to move a Cash ISA from a different provider, you can do this as many times as you like.
Withdrawals from some Cash ISA accounts are restricted. This may affect the time it takes to process your transfer and/or could result in charges being incurred.
Transferring is different to withdrawing money from a Cash ISA. Withdrawing from a Cash ISA to pay into another one could mean losing the tax-free status of your money.
Withdrawals from some Cash ISA accounts are restricted. This may affect the time it takes to process your transfer and/or could result in charges being incurred.
Transferring is different to withdrawing money from a Cash ISA. Withdrawing from a Cash ISA to pay into another one could mean losing the tax-free status of your money.
Is a Cash ISA safe?
If you save with a provider that is protected by the Financial Services Compensation Scheme (FSCS), your money will be protected up to a total of £85,000.
Cash ISA or savings account?
Choosing between a Cash ISA or savings account will depend on your circumstances or savings goals.
Savings account
- Can pay up to the account limit
- Pay tax on interest over your Personal Savings Allowance.
Cash ISA
- £20,000 limit on deposits
- Don’t pay tax on interest.
The content on this page is for reference. It is not financial advice.
For help with money issues, try MoneyHelper.
For help with money issues, try MoneyHelper.
