What is a Cash ISA?
A Cash ISA is an individual savings account that you can use to earn interest on your savings. A Cash ISA is different to other savings accounts because any interest you earn is completely tax-free.
Unlike a Lifetime ISA, there aren’t any penalties for withdrawing your money from a Cash ISA, but that money will still count towards your annual ISA allowance – which stands at £20,000 each tax year. Cash ISAs are a great way to build your savings over the long term, not least because your money won’t be hit by taxes that you might otherwise have to pay. Over time, these can add up.
You can open a Cash ISA in minutes with Moneybox. Simply download the app and deposit a minimum of £500 to get started. You can also transfer any ISAs you hold with other providers into a Moneybox Cash ISA, entirely in-app.
With our Cash ISA you’ll earn 5.17%* AER (variable) on balances of £500 or more, which includes a bonus rate of 0.47% for the first 12 months – starting on the date you open your Cash ISA.
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.
What is a Lifetime ISA?
A Lifetime ISA is an individual savings account that’s designed to help you buy your first home, faster. You can deposit up to £4,000 from your annual £20,000 ISA allowance into a Lifetime ISA each tax year, and the government will give you a 25% bonus on anything you put in. That means you could earn up to £1,000 each year, totally for free.
So, if you’re looking to buy your first home a Lifetime ISA is a better option to start off than a Cash ISA. But, once you’ve maxed out your Lifetime ISA in a tax year, a Cash ISA is a great account to use to keep building the deposit for your first home.
A 25% government penalty applies if you withdraw money from your Lifetime ISA for a reason other than buying your first home or for retirement, and so you might get back less than you paid into your Lifetime ISA.
If you’d like to earn interest on your money, a Cash Lifetime ISA is a great option. You can use a Cash Lifetime ISA to buy your first house up to the value of £450,000 – anywhere in the UK – and it needs to be open for 12 months before you can use it to buy a house.
Keep in mind, your Cash LISA isn’t ‘open’ until you’ve made your first deposit – so it’s best to deposit even just £1 into it straight away to get the clock ticking. There’s also a Stocks & Shares Lifetime ISA if you’d prefer to invest the money for the deposit on your first home.
Cash Lifetime ISA vs Stocks & Shares Lifetime ISA
Can I use a Cash ISA to save for a house?
You can use a Cash ISA to save for many things, and some people will use a Cash ISA to keep working on the deposit for their first home after they’re already maxed out their Lifetime ISA in a tax year. A Cash ISA is a great account to use to keep working on the deposit for your first home after you’ve maxed out your Lifetime ISA in the current tax year.
That’s because you’ll still have £16,000 left of your annual ISA allowance – assuming you haven’t got any other types of ISA except for your Lifetime ISA (because the £4,000 Lifetime ISA allowance counts towards your total £20,000 annual ISA allowance).
With the Moneybox Cash ISA you’ll earn 5.17%* AER (variable) on balances of £500 or more, which includes a bonus rate of 0.47% 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. Plus, if you have a Cash ISA elsewhere and you’d like to bring it over to Moneybox, you can start the transfer process by going to Settings > Transfer > Transfer in in the app.
*New customer rate as of 05/11/2024. 5.17% AER (variable) includes a bonus rate of 0.47% for the first 12 months. 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. Tax treatment depends on individual circumstances and may be subject to change in the future.
