The Ultimate Guide To Cash ISAs

Cash ISAs (Individual Savings Accounts) are gaining popularity with savers looking to maximise their returns. These accounts are offered by banks and building societies. They let you deposit your funds and earn interest, getting you closer to your savings goals.

Want to know more about Cash ISAs before opening your account? We’ve got you covered. In this guide, we’ll walk you through everything you need to know, including what Cash ISAs are, how many you can have and how much you can save.

What is a Cash ISA?

Cash ISAs are a type of savings account available to UK residents aged 18 and over. They’re a simple and secure way to save money, offering tax-free interest on your savings.

You can choose between fixed and variable Cash ISAs. Fixed accounts retain the interest rate offered at the start throughout a specific term. Interest rates can go up and down with variable accounts.

Before opening a Cash ISA, make sure you check the interest rate offered. The interest rate is key, as it determines how much of a return you get back from your savings.

Are Cash ISAs tax-free?

When you open a Saga Cash ISA or a Cash ISA with any other provider, you’ll get a savings account that’s completely tax-free. That means any interest you earn from your account is 100% yours, and you won’t pay income tax.

For example, you may find a Cash ISA with an interest rate of 4.75% AER (Annual Equivalent Rate). If you open an account and deposit £15,000 in the first year (and make no withdrawals), you earn £712.50 in interest. This is added to your balance tax-free.

Interest is paid monthly or annually, depending on the Cash ISA you choose.

Whether you’re saving for a dream getaway, a new car or a project in your home or garden, Cash ISAs are a fantastic option to help save money for your goals.

For non-ISA savings accounts, tax-free interest is determined by your Personal Savings Allowance (PSA). Your PSA represents the maximum amount of tax-free interest that these accounts can earn.

Basic rate taxpayers can earn up to £1,000 in tax-free interest.
Higher rate taxpayers can earn up to £500 in tax-free interest.

Unlike ISAs, where interest earned is completely tax-free, non-ISA savings account holders may exceed their PSA when interest rates are high.

How many Cash ISAs can I have?

Starting from the 2024/25 tax year, you can open and contribute to multiple Cash ISAs within the same year, as long as they’re with different providers.

However, this change doesn’t mean you can pay into multiple Cash ISAs with Saga per tax year. You can only have one Saga Cash ISA. The new rule means you can open another Cash ISA with a different bank or building society alongside your Saga account.

Keep in mind that these new rules apply to all types of ISA except for Lifetime ISAs.

How much can you put in a Cash ISA?

Cash ISAs have a savings allowance of £20,000 per tax year. That means between 6th April and 5th April, you can deposit a maximum of £20,000 into your Cash ISA.

Another option is to split your ISA allowance across the four different ISA types. These are:

Cash ISA

Stocks and Shares ISA

Innovative Finance ISA

Lifetime ISA

How to transfer a Cash ISA

Transferring your Cash ISA to another provider is simple, and it lets you keep your savings tax-free. Follow these steps to move your money:

Choose the provider you want to transfer your savings to.
Check the terms and conditions of your current and new Cash ISA providers, ensuring they accept transfers and that you’re aware of any potential fees.
Tell the new provider you want to transfer your Cash ISA to them.
Complete the ISA transfer form they provide. You can normally fill in an online form, but you may receive a paper version.
Submit the ISA transfer form and wait for the transfer to complete.

You can now part-transfer funds invested into a Cash ISA during the current tax year. Previously, the all-or-nothing rule meant you could only part-transfer money invested into Cash ISAs during previous years. Since the start of the 2024/25 tax year, you have the flexibility to choose the amount you want to move between ISAs.

Why transfer a Cash ISA?

There are multiple reasons why you may want to transfer your Cash ISA, including:

Combining Cash ISAs. You may have several Cash ISAs and want to combine them all into one easy-to-manage account.
Interest rates. Another provider may be offering a higher interest rate on their Cash ISA product.
ISA type. You might want to switch to a different type of ISA (e.g. a Lifetime ISA).

How long does it take to transfer a Cash ISA?

According to the Government website, it shouldn’t take longer than 15 working days to transfer between Cash ISAs. If you’re transferring between two different types of ISA, this can take up to 30 calendar days.