How does a Cash ISA work?
An ISA is an ‘individual savings account’. You can open one if you’re over 16 (18 for some products, including stocks and shares ISAs) and live in the UK.
A Barclays cash ISA works in a similar way to a savings account – with one important difference. Any interest that you earn on your savings through the ISA will be tax free up to your yearly allowance. There’s also an annual allowance of how much you can put into an ISA, which changes every financial year. For 2017/2018, it’s £20,000.
Standard savings accounts, on the other hand, are liable to tax. If you’re a lower-rate taxpayer, you can earn up to £1,000 interest tax free; any interest you earn after that is subject to tax. For higher-rate taxpayers, the allowance is £500. If you earn £17,000 or less each year, you won’t pay any tax on your savings interest at all.