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.
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.
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.
Unlike ISAs, where interest earned is completely tax-free, non-ISA savings account holders may exceed their PSA when interest rates are high.
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.
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
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:
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.
There are multiple reasons why you may want to transfer your Cash ISA, including:
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.
Here to support your savings goals
Recover lost pensions, savings and Premium Bonds effortlessly with Saga’s guide
Discover our 3-month fixed-term savings accounts, available from the Saga Savings Platform in partnership with Flagstone
Fixed-rate savings accounts offer steady growth and guaranteed interest rates
Find out more about the options we offer with Goldman Sachs International Bank and Flagstone.
