What is a Cash ISA?
A Cash ISA is an individual savings account that lets you earn interest on the money you deposit into it. Any interest you earn will be free from tax, and you can deposit up to £20,000 each tax year – which is shared with other ISAs you might have, like a Stocks & Shares ISA.
Usually, lower rate taxpayers can earn £1,000 in tax-free interest each year, and higher rate taxpayers can earn £500. You’d then pay tax on any interest you earn above that number. With a Cash ISA – that doesn’t apply. You don’t pay any tax on the interest you earn, even if you earn more than your annual tax-free interest cap.
What’s the difference between a Cash ISA and savings accounts?
At its core, a Cash ISA is a savings account – you’ll earn interest on the money you deposit into it. The main benefit of using a Cash ISA over a more traditional savings account is that you won’t pay any tax on the interest you earn.
Just like regular savings accounts, Cash ISAs can come with different interest rates and conditions. For example, some Cash ISAs will be easy access, while others will require a certain number of days’ notice before you can withdraw your money.
The important thing to remember is to choose the Cash ISA that works best for you. For example, if you’re trying to create good saving habits, you might find it beneficial to ‘lock’ your money behind a notice period – or at least, to put it into a Cash ISA that has some restrictions in place to encourage you to build your long-term savings.
What is my Cash ISA allowance?
Your Cash ISA allowance is shared with any other ISAs you have. Every tax year, you get an allowance of £20,000 to save or invest into your ISAs. These can be a Cash ISA, a Stocks & Shares ISA, or a Lifetime ISA. There are other types of ISA, like Innovative Finance ISAs – but we don’t offer those at Moneybox.
While these ISAs share an annual £20,000 allowance, each type of ISA has different annual deposit limits. Here’s a breakdown.
- Cash ISA and Stocks & Shares ISA: maximum £20,000 each tax year
- Lifetime ISA: maximum £4,000 each tax year
- Junior ISA: £9,000 each tax year (this £9,000 is in your child’s name, and does not come out of your personal £20,000 annual ISA allowance)
So, if you maxed out your Lifetime ISA with £4,000 in a tax year, you’d have £16,000 remaining to split between your other ISAs. You could put £10,000 of that into a Cash ISA, and £6,000 into a Stocks & Shares ISA. Or, if you paid £20,000 into your Stocks & Shares ISA, you’d have no remaining annual allowance for your Cash ISA or Lifetime ISA until your allowance resets next tax year.
The most important thing to remember with ISAs is that you can’t pay into two of the same type of ISA in a tax year. Here’s how that works.
- Lifetime ISA and Cash ISA ✅
- Lifetime ISA and Stocks & Shares ISA ✅
- Cash ISA and Stocks & Shares ISA ✅
- Lifetime ISA, Cash ISA, Stocks & Shares ISA and Junior ISA ✅
- Cash ISA and Cash ISA ⛔
How to open a Cash ISA
It’s easy to open a Cash ISA with Moneybox. Just log in or download the app, and head to Accounts, scroll down to Available Accounts, and select Cash ISA to get started.
With the Moneybox Cash ISA you’ll earn a market-leading 4.75%* AER (variable) on balances of £500 or more, which includes a bonus rate of 0.85% for the first 12 months – starting on the date you open your Cash ISA. You can deposit up to £20,000 each tax year, and the interest you earn is completely tax-free.
A lower interest rate of 0.75% AER (variable) applies whenever your account balance is less than £500. It also applies for the rest of your current 12-month period from your fourth withdrawal. The number of withdrawals you can make without impacting your rate will reset each year on the date you opened your Cash ISA.
If you have other ISAs elsewhere, you can transfer them to a Moneybox Cash ISA easily. Just go to Settings > Transfer > Transfer in to get started.
*4.75% AER (variable) includes a bonus rate of 0.85%. A lower rate of 0.75% AER (variable) applies if account conditions aren’t met.
Interest is accrued daily and paid into your account yearly on the date you opened your Cash ISA. The rate is variable, and we’ll inform you if it changes.