A Cash ISA is a tax-free savings account available to UK residents aged 16 and over. Any interest you earn inside a Cash ISA is completely free from UK income tax — you never pay tax on it and never need to declare it on your tax return. The annual ISA allowance for 2026/27 is £20,000, which is the maximum you can contribute across all your ISAs in a single tax year.
How does a Cash ISA work?
A Cash ISA works in much the same way as a standard savings account. You deposit money, the provider pays you interest, and you can access your money depending on the type of account you choose. The key difference is the tax wrapper — inside a Cash ISA, all that interest is completely sheltered from HMRC.
Cash ISAs come in several forms — easy access, fixed rate, and notice — each with different levels of flexibility and different interest rates. The rules that apply to each mirror those of standard savings accounts, but with the added benefit of tax-free interest.
Types of Cash ISA
Easy access Cash ISA
You can deposit and withdraw freely without restriction. Rates are variable, meaning the provider can change them at any time. This is the most popular type for emergency funds and short-term savings. For more, see our guide to easy access savings accounts.
Fixed rate Cash ISA
Your money is locked away for a set term — typically one to five years — in exchange for a guaranteed interest rate. You can’t usually access the money early without paying a penalty. Rates are typically higher than easy access. See our guide to fixed rate savings accounts for more detail.
Notice Cash ISA
You give advance notice — typically 30, 60, or 90 days — before making a withdrawal. Rates sit between easy access and fixed rate. Our notice savings account guide explains how these work in full.
Flexible Cash ISA
A newer type that allows you to withdraw and replace money within the same tax year without it counting toward your annual allowance. If you put in £20,000, withdraw £5,000, and then replace the £5,000 before 5 April — the replacement doesn’t use up more of your allowance. Not all providers offer this feature, so check before opening.
Do I need a Cash ISA if I have a Personal Savings Allowance?
The Personal Savings Allowance (PSA) lets basic-rate taxpayers earn up to £1,000 in savings interest tax-free outside an ISA (£500 for higher-rate taxpayers; £0 for additional-rate taxpayers). For many people with modest savings, the PSA covers their interest without needing an ISA.
However, with interest rates higher than they’ve been for many years, more savers are finding their PSA isn’t enough. Anyone with a savings balance over roughly £20,000–£30,000 at current rates risks breaching their PSA — at which point a Cash ISA becomes genuinely valuable. For a detailed comparison, see our guide to Cash ISA vs savings account.
What is the Cash ISA allowance?
For 2026/27, you can put up to £20,000 into a Cash ISA — the full annual ISA allowance. However, this is changing. From April 2027, the Cash ISA limit for under-65s will reduce to £12,000. Savers aged 65 and over retain the full £20,000 limit. For the full picture, see our guide to the Cash ISA allowance cut 2027.
Is my money safe in a Cash ISA?
Yes — provided your provider is covered by the Financial Services Compensation Scheme (FSCS), which protects up to £85,000 per person, per institution. This is the same protection as standard savings accounts. Always check that your Cash ISA provider is FSCS-protected before opening an account.
Can I transfer a Cash ISA?
Yes. You can transfer a Cash ISA to a new provider to get a better rate, or to a different ISA type (such as a Stocks and Shares ISA), without losing your tax-free status. Transfers don’t count toward your annual ISA allowance. Always use the official transfer process rather than withdrawing and redepositing — withdrawing loses your tax-free wrapper on that money.
Frequently asked questions
What is a Cash ISA?
A Cash ISA is a tax-free savings account for UK residents aged 16 and over. Interest earned inside a Cash ISA is completely free from income tax. The annual allowance for 2026/27 is £20,000.
How is a Cash ISA different from a regular savings account?
The interest earned in a Cash ISA is completely tax-free. Interest earned in a standard savings account may be taxable once it exceeds your Personal Savings Allowance (£1,000 for basic-rate taxpayers, £500 for higher-rate).
Can I have more than one Cash ISA?
Yes. Since April 2024, you can pay into multiple Cash ISAs with different providers in the same tax year, as long as your total contributions across all ISAs don’t exceed £20,000.
What happens if I withdraw from a Cash ISA?
In a standard Cash ISA, withdrawing money means that allowance is used up for the tax year — you can’t replace it. In a flexible Cash ISA, you can withdraw and replace within the same tax year without using additional allowance.
Is a Cash ISA worth it in 2026?
For most savers with balances over £20,000–£30,000, yes — the tax-free interest is genuinely valuable at current rates. For smaller balances, the Personal Savings Allowance may already cover your interest, making a Cash ISA less urgent but still worth having for future-proofing.