What Is a Cash ISA? Allowance, Types, and Transfers

A Cash ISA is a UK savings account that shelters all the interest you earn from income tax, no matter your tax bracket or how much interest the account pays. Every tax year you can put up to £20,000 into ISAs in total, and a Cash ISA is one of the account types that allowance covers. You need to be 18 or older and a UK resident to open one, and most providers handle the whole application online.

Why the Tax-Free Wrapper Matters

Every UK saver already gets some tax-free interest through the Personal Savings Allowance: £1,000 a year for basic-rate taxpayers, £500 for higher-rate taxpayers, and nothing for additional-rate taxpayers. So it’s fair to ask whether a Cash ISA adds anything.

It does, for two reasons. First, interest earned inside a Cash ISA doesn’t count toward your Personal Savings Allowance at all, so the two protections stack.¹ Second, the shelter compounds year after year. At a 4% interest rate, a basic-rate taxpayer holding £25,000 in ordinary savings would already burn through the £1,000 PSA; anything above that gets taxed at the marginal rate. Money held inside a Cash ISA never hits your tax return, no matter how large the balance grows over time.

Who Can Open a Cash ISA

Three conditions apply. You need to be 18 or older, resident in the UK for tax purposes, and applying as an individual. UK residency here covers England, Scotland, Wales, and Northern Ireland, but not the Channel Islands or the Isle of Man.²

The minimum age was raised from 16 to 18 on 6 April 2024. A transitional arrangement let existing 16- and 17-year-old Cash ISA holders keep contributing, but that ends on 5 April 2026. From the 2026/27 tax year, no one under 18 can subscribe to a Cash ISA.²

Crown employees working overseas and paid from UK public revenue, along with their spouses and civil partners, remain eligible even when living abroad.²

How the £20,000 Allowance Works

The tax year runs from 6 April to 5 April. During that window you can pay up to £20,000 into ISAs, and this limit applies across all your ISA accounts combined. Put £12,000 in a Cash ISA and you have £8,000 left for a Stocks and Shares ISA, a Lifetime ISA, or any other type.³

Since April 2024, you can also open more than one Cash ISA in the same tax year, which used to be forbidden. Splitting money between two providers to chase different rates is fine, provided your total stays under £20,000.⁴

Unused allowance disappears on 5 April. It doesn’t roll over. If you only pay in £5,000 this year, the other £15,000 is gone.

Types of Cash ISA

Easy Access

Easy access accounts let you withdraw whenever you want with no penalty. The rate is variable and can drop without warning. Right choice if you might need the money at short notice.

Fixed Rate

Fixed-rate Cash ISAs lock your money away for a set term, usually one, two, three, or five years, in exchange for a guaranteed rate. Early withdrawal generally costs you a chunk of interest. Losing 90 days’ interest on a one-year product and 180 to 360 days’ interest on longer terms is common.³

Notice Accounts

A middle option. You earn more than easy access but have to give the provider advance warning, often 30, 60, or 90 days, before you can take money out.

One other product worth flagging: the Lifetime ISA sits in the same £20,000 pot but is a separate account type designed for buying a first home or for retirement after 60, with a 25% government bonus on contributions up to £4,000 a year and a 25% penalty for withdrawals outside those two purposes. You must open one before turning 40.⁵

Flexible vs Non-Flexible ISAs

Whether your Cash ISA is “flexible” changes what happens if you withdraw money mid-year. With a flexible ISA, cash you take out and replace within the same tax year doesn’t count against your annual allowance. With a non-flexible one, a withdrawal permanently reduces the room you have to contribute that year.³

Say you pay £10,000 into a Cash ISA and then withdraw £3,000. If the ISA is flexible, you can still put in £13,000 more this year: the untouched £10,000 of allowance plus the £3,000 you’re replacing. If it isn’t flexible, you can only add £10,000, because the withdrawal freed up nothing.³

Not every provider offers the flexible feature and they don’t always advertise it clearly. Ask before you open the account if there’s any chance you’ll dip in.

How to Open a Cash ISA

Most providers accept online applications through their website or app; some still take paper forms at branches. You’ll need:

Your National Insurance number, which links the account to your tax record. From 6 April 2027, every ISA receiving contributions will require either a National Insurance number or a declaration that you aren’t eligible for one.⁶
Photo identification such as a current passport or full driving licence.
Proof of a UK address, typically a recent utility bill or bank statement.
A tax residency declaration confirming you’re a UK resident.²

Have your opening deposit ready to transfer. Once the provider verifies your identity, the account opens and starts earning tax-free interest.

Transferring an Existing Cash ISA

If you spot a better rate elsewhere, you can move your ISA without losing its tax-free status, but you have to use the formal ISA transfer process. Ask the new provider for a transfer form. Never withdraw the money and redeposit it yourself: that counts as a new subscription against your allowance, and the withdrawn amount permanently loses its tax-free protection.⁷

Cash ISA to Cash ISA transfers must complete within 15 working days. Other types, such as moving from a Cash ISA to a Stocks and Shares ISA, can take up to 30 calendar days.⁷

Partial transfers are now allowed. You can move part of your balance and leave the rest with the old provider, regardless of when the money was originally paid in. Previously, current-year contributions had to be transferred in full or not at all. Check that your new provider accepts partial transfers before starting.⁴

FSCS Protection

Cash in a Cash ISA is protected by the Financial Services Compensation Scheme in the same way as any other bank deposit. Since 1 December 2025, the FSCS covers up to £120,000 per eligible person per banking institution.⁸ The previous limit was £85,000.⁹

The £120,000 covers all deposits you hold with a single banking institution combined, not each account separately. If you hold a Cash ISA and a current account with the same bank, both share the limit. Some brands that look independent share a banking licence, so check the FSCS site if you’re spreading a large balance.

Edge Cases Worth Knowing

If you accidentally pay in more than £20,000 across your ISAs, contact your provider to remove the excess if it’s the same tax year; if the over-subscription was in a previous year, HMRC will get in touch, and the excess loses its tax-free treatment.¹⁰

If you move abroad, your existing Cash ISA keeps its tax-free status and continues earning interest, but you can’t pay in any more unless you qualify under the Crown employee rule. Tell your provider as soon as you stop being UK resident. You can still transfer between providers while overseas, and contributions can resume if you return.¹¹

If the account holder dies, the Cash ISA keeps its tax-free status until the provider closes it, which happens at the earlier of three years and one day after death, the completion of estate administration, or the executor closing the account. A surviving spouse or civil partner also inherits an Additional Permitted Subscription allowance equal to the ISA’s value, on top of their own £20,000.¹²

1
GOV.UK. Individual Savings Accounts (ISAs) – How ISAs Work
2
GOV.UK. Who Can Invest in an ISA if You’re an ISA Manager
3
GOV.UK. Individual Savings Accounts (ISAs) – Withdrawing Your Money
4
MoneyHelper. Understanding the New ISA Rules for 2025/26
5
GOV.UK. Lifetime ISAs
6
GOV.UK. Information You Need From Investors When They Apply for an ISA
7
GOV.UK. Individual Savings Accounts (ISAs) – Transferring Your ISA
8
FSCS. What We Cover
9
Bank of England. PRA Confirms FSCS Deposit Limit to Be Increased to £120,000 From 1 December
10
GOV.UK. How to Close, Void or Repair an ISA
11
GOV.UK. Individual Savings Accounts (ISAs) – If You Move Abroad
12
GOV.UK. Individual Savings Accounts (ISAs) – If You Die