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Cash ISAs
(Individual Savings Accounts)

An ISA is not a product on its own, but a tax wrapper around a savings or investment product, which protects your interest from being taxed.

You can invest in two separate ISAs in any one tax year: a cash ISA and an investment ISA. This can be with the same or different providers. For more on investment ISAs see Investment ISAs. You need to be 16 to start a cash ISA and 18 to start an investment ISA.

The current ISA limits for cash ISAs are:

  • £5,100 for those aged 50 and over – see Related information.
  • £3,600 for those under 50.

From 6 April 2010 the annual investment will be £5,100 for everyone.

Cash ISAs generally pay a higher interest rate than normal savings accounts, and the interest earned is free of income tax. You can compare savings accounts, including cash ISAs, using our online Comparison tables.

Transferring an ISA

You can transfer money saved in a cash ISA to:

  • another cash ISA (if the new provider agrees to the transfer); or
  • an investment ISA.

Not all providers accept transfers, so check before you sign up. If they do, you will need to ask the new ISA provider to arrange the transfer – see Related links. ISAs must always be transferred – you can’t close the old one and start a new one, otherwise you will lose the tax advantage.

You cannot transfer money from an investment ISA to a cash ISA, so think carefully before making a decision to move out of cash.

Consider switching an existing cash ISA if you feel the rate is not competitive. But if you have a fixed-rate cash ISA, check whether you will pay a penalty when transferring.

Shop around and look for a good home for your ISA allowances – you can compare cash ISAs on our online Comparison tables.

For more information on ISAs see the HM Revenue & Customs website – see Related links.

Things to consider

  • You might see marketing from firms encouraging you to make full use of your ISA limits, or transfer money from cash ISAs into investment ISAs. It is a competitive market, so make sure you understand what will happen to your money and what restrictions there might be.
  • If you decide to switch from cash to investments, make sure you are happy with the extra risk and the fact you could lose some of your money.
  • Some firms may offer very generous interest rates for cash ISAs, but beware of any strings attached. For example, getting that rate may depend on you buying another product or service from them, which you may not want or need, and which may carry some risk – so make sure you understand what this might be. Or the higher rate may only be for a fixed period of time, after which the interest rate drops to a less competitive level.

Make sure you read the information provided and:

  • know what you need to do to get the headline rate offered and make sure you're comfortable with it;
  • ask questions if anything is not clear;
  • check with your existing ISA provider for any costs of transferring out if you're thinking of switching;
  • check whether you'll lose interest if you transfer from a cash ISA (the notice period); and
  • don't sign anything until you're satisfied.