What is a Cash ISA?
In the UK, you can take advantage of particularly convenient financial tools such as ISAs. These are individual savings accounts that are tax-free, as you do not pay tax on interest, gains or returns earned through an ISA.
In particular, a Cash ISA is a type of Individual Savings Account that lets you earn tax-free interest on your savings. For the 2025/2026 tax year, the annual ISA allowance is £20,000 (across all types of ISA). Let’s take a look at everything you need to know about Cash ISAs.
How does a Cash ISA work?
You open a Cash ISA account and pay money into it. You can deposit up to £20,000 in the 2025/2026 tax year. Interest will be paid annually or monthly, depending on the Cash ISA you choose.
When can you open a Cash ISA?
As of April 2024 you can open a Cash ISA from the age of 18. 16 and 17 year olds who already have an adult cash ISA can continue to pay into it. Each tax year runs from 6 April to 5 April of the following year. In the 2025/2026 tax year it is possible to open a Cash ISA from 6 April 2025 to 5 April 2026.
Types of Cash ISA
When looking at Cash ISA accounts, you’ll generally come across a few different types:
| Cash ISA Type | What It Offers | Why You Might Choose It |
Instant Access Cash ISA | – Gives you 24/7 access to your money, making it easy to deposit or withdraw anytime.– Typically has a variable interest rate that can go up or down. | You want flexibility and peace of mind knowing you can dip into your savings without penalties. |
Fixed-Rate Cash ISA | – Locks your money away for a set time (e.g., 1, 2, or 5 years).– Usually pays a higher, fixed interest rate, rewarding you for staying committed to the term. | You’re happy to commit your savings for a while in return for a predictable return you can count on. |
| Flexible ISA | Lets you take money out and replace it within the same tax year, without affecting your annual ISA allowance (if your provider offers this feature). | You like the idea of temporary withdrawals for life’s little surprises, while still making the most of your tax-free allowance. |
| Help to Buy / Other Specialist Cash ISAs | – Some (like Help to Buy) are closed to new applicants, but existing holders can still use them.– Lifetime ISAs help you save for a first home or retirement, although they have extra rules. | – You already hold a legacy ISA (like Help to Buy).– You have specific goals, such as purchasing your first home, and want to maximise government incentives. |
Moneyfarm offers a flexible instant access Cash ISA, which means you can withdraw money from your account up to three times a year without impacting your rate and top up anytime, without paying any fees.
How many Cash ISAs can I have?
A common question from savers is: Can you have more than one Cash ISA? The short answer is yes, but with important restrictions:
- You can hold multiple Cash ISAs from previous tax years.
- As of April 2024 there is no limit on the number of Cash ISAs you can open and pay new money into during each tax year (with the exception of Lifetime ISAs).
- All your ISA contributions, across all types of ISAs, must stay within your £20,000 total annual allowance.
- You can transfer old ISAs into a new Cash ISA without affecting your current year’s allowance. Just make sure you follow the official ISA transfer process so you don’t lose your tax-free benefits.
What are the new rules for Cash ISA in 2025/26?
Only a couple of things actually changed in April 2024, and therefore also apply to the 2025/26 tax year, so here’s what’s new:
- Minimum age to open a Cash ISA is now 18: Previously, you could open a Cash ISA at 16, but now you have to be at least 18 (for under 18s, there are Junior ISAs).
- Multiple Cash ISAs in one tax year: You’re no longer restricted to just one Cash ISA; you can open and pay into several during the same tax year, as long as your total deposits don’t exceed £20,000 across all ISAs.
How to choose the right Cash ISA?
There are many solutions available on the market for investing in a Cash ISA, so it is important to know what to look for when choosing the right Cash ISA. Here are some useful tips to help you make an informed choice:
· Daily interest: it is better to invest in a Cash ISA where interest is calculated daily, so that the savings deposited in the account start to grow immediately.
· Free ISA transfers: it is handy to be able to transfer money to your Cash ISA without paying fees, so you can manage your savings cheaply and get the best return.
· Security and protection: savings deposited in a Cash ISA must be held by reputable companies and protected by the FSCS up to £85,000.
· Flexibility and accessibility: it is worth choosing a flexible and accessible Cash ISA, for example one that allows you to make a few withdrawals during the year without compromising the interest rate.
· Easy to open and manage: a good Cash ISA should be quick and easy to open and should be easy to manage without any complications.
Is it worth investing in a Cash ISA?
Cash ISAs are useful tools for investing in the long term and getting tax-free returns on your savings. However, you should check that the Cash ISA is flexible and pay attention to the interest rate, as some Cash ISAs offer more attractive rates than others. If you find that your Cash ISA does not have a favourable rate, you can always look for a Cash ISA with a more competitive interest rate.
FAQ
With a cash ISA, your money grows at the applicable interest rate, which can be fixed or variable, without paying tax on the returns you earn. You can open a cash ISA from the age of 18, but you must be a UK resident.
Generally, the interest rate on a cash ISA is variable, so it can go up or down, and you can only deposit up to £20,000 per year in all individual savings accounts opened.
A cash ISA offers variable returns that may be lower than those offered by other financial instruments, such as investments in shares and bonds. However, as the returns are tax-free, it may be worthwhile investing in a cash ISA.
Yes, you can pay up to £20,000 each year into a cash ISA for the 2025/26 tax year, but this amount may change in future tax years. If you have more than one cash ISA, the total amount of £20,000 must be paid into a single cash ISA or spread across your cash ISAs.
Sources:
https://www.gov.uk/individual-savings-accounts/how-isas-work
https://www.moneyhelper.org.uk/en/savings/types-of-savings/cash-isas
*As with all investing, financial instruments involve inherent risks, including loss of capital, market fluctuations and liquidity risk. Past performance is no guarantee of future results. It is important to consider your risk tolerance and investment objectives before proceeding.
