Cash ISAs

Cash ISAs are essentially tax-free savings accounts. They’re just like other savings accounts, except for that all-important tax benefit.

With a normal savings account, you can only earn tax-free interest up to your Personal Savings Allowance (PSA). But an ISA lets you earn beyond that without paying tax, up to the annual ISA limit.

For the 2026/27 tax year, the limit is £20,000. But this will be reduced to £12,000 a year from April 2027 if you’re aged 65 or under.

Cash ISA rates are influenced by the Bank of England base rate, which currently sits at 3.75%. But it’s still possible to find interest rates well above that.

At the time of writing, the top cash ISA rates are around 4.66% with easy access and around 4.81% with a five-year fixed-rate ISA.

While these numbers aren’t too far off each other, the interest rates on easy-access accounts are variable, meaning they can change at any time. But with a fixed-rate account, you’ll lock that rate in for the length of your term, so that could be the difference between which one you choose.

It depends on your personal circumstances and how much you want to save tax-free.

Basic-rate taxpayers can earn up to £1,000 a year in tax-free interest under the PSA. If that’s more than enough for you, you could widen the net to see if you can get better rates with other savings accounts.

Higher-rate taxpayers get a PSA of only £500, and additional-rate taxpayers don't have a PSA at all. However, a cash ISA means you can keep saving without paying tax.

But cash ISAs aren't just for savers nearing their PSA threshold. They can also be a good option for longer term savings or simply reaping the benefits of competitive interest rates. And if you max out your ISA allowance every year, that interest can really build up and remain tax-free for as long as it's in an ISA.

As long as the bank or building society that your cash ISA is with is authorised by the Financial Conduct Authority, up to £120,000 of your money will be protected by the Financial Services Compensation Scheme (FSCS).

If your savings have built up to more than this, in conjunction with any other money you have with the same bank or building society, it’s best to spread your money across different assets or ISAs from different financial institutions.

If you were to open an investment ISA, you take on more risk. The value of your investments could fall, leaving you with less than you initially invested.

Yes, you can transfer your cash ISA savings from one account provider to another at any time, as long as the new account accepts ISA transfers. You can also transfer your savings between different types of ISA, allowing you to benefit from the best rates or swap to another type of saving.

A like-for-like transfer should take no more than 15 working days. If you’re transferring to a different type of ISA, it can take up to one month.

Money deposited in previous years can be transferred in part or entirely. You can also make partial transfers of the current year’s subscription.

Check with your provider for any restrictions they may have on transferring ISAs.

In most cases, you can open an ISA online. You need to be at least 18 and a UK resident.

You’ll need to provide some personal details, such as your National Insurance (NI) number, address and ID to help prevent money laundering.

You may also need to deposit a minimum amount to open the ISA.