Finance glossary
Cash ISA
Also known as: Cash Individual Savings Account
In simple terms
A Cash ISA is a savings account where the interest is completely free of UK tax. It works like an ordinary savings account but sits inside your yearly ISA allowance.
On this page
What does Cash ISA mean?
A Cash ISA is a type of ISA that holds cash rather than investments. The interest you earn is free of UK income tax, and it does not count towards your Personal Savings Allowance.
Cash ISAs come in familiar shapes — easy-access, fixed-rate and notice versions — so you can choose between getting at your money quickly and locking it away for a higher rate.
How a Cash ISA works
Anything you pay in counts towards your overall £20,000 ISA allowance for the 2025/26 tax year. Interest is added tax-free and, on many accounts, compounds over time.
Some Cash ISAs are “flexible”, meaning you can withdraw and replace money in the same tax year without losing that part of your allowance. Others are not, so a withdrawal you pay back still eats into your allowance.
How could this affect me?
A Cash ISA is useful if you pay tax on your savings interest — for example, if you are a higher-rate taxpayer or have already used your Personal Savings Allowance. The tax saving builds up as your balance grows.
If you are a basic-rate taxpayer with modest savings, an ordinary account paying a higher rate might leave you better off, because your first slice of interest is already tax-free under the Personal Savings Allowance.
Things to watch out for
- Paying into a Cash ISA uses part of the same £20,000 allowance shared across all your ISAs.
- On a non-flexible ISA, money you take out and pay back still counts again towards your allowance.
- Fixed-rate Cash ISAs usually charge an interest penalty if you withdraw early.
- A headline rate may include a bonus that drops off after 12 months.
Know your rights
- Cash ISA rules and the annual allowance are set by HMRC and the government (GOV.UK).
- Money in a Cash ISA with an authorised bank or building society is protected up to £85,000 per person, per institution, by the FSCS.
- You have the right to transfer a Cash ISA to another provider without losing its tax-free status.
General information, not personal advice
Consumer Credit is an independent information service. We do not provide regulated financial advice or sell financial products. For advice on your own situation, speak to an appropriately authorised firm or a free service such as MoneyHelper. About Consumer Credit.
Sources
We checked this page against these official and authoritative sources.
- GOV.UK, Individual Savings Accounts (ISAs) — how ISAs work (opens in a new tab). Accessed 22 Aug 2026.
- MoneyHelper, Cash ISAs explained (opens in a new tab). Accessed 22 Aug 2026.