What is a Cash ISA?

Discover our guide on Cash ISAs today! From what is a Cash ISA to understanding your personal allowance, find answers to all your Cash ISA questions here.


Cash ISAs with Newcastle Building Society

Whether you’re looking for a fixed rate or help with buying your first home, there’s a range of cash ISAs to suit you and your savings goals. Whether you’re a serial saver or a nest-egg novice, you’ll find all you need to know about cash ISAs in our comprehensive guide.

  • What is a cash ISA?
  • Features and benefits at a glance
  • What is the cash ISA allowance?
  • Who can open a cash ISA?
  • Can I withdraw from my cash ISA?
  • What is ISA flexibility?
  • What are the different types of cash ISA?
  • Can I transfer my cash ISA?

What is a cash ISA?

Just like a savings account, a cash ISA (Individual Savings Account) is a safe, secure way to store your money. The only difference is that any interest you earn on your savings is tax-free.

ISAs are in addition to the updated Personal Savings Allowance (PSA) that came into effect in 2016. All basic-rate taxpayers can now earn £1,000 of savings interest a year, without having to pay tax on it. To qualify as a basic rate taxpayer, your income can’t exceed £45,000.

If you’re a higher rate taxpayer, paying tax at the 40% rate on an income between £45,001 and £150,000, you’re entitled to a lower personal savings allowance of £500 per year. Additional taxpayers who earn £150,001 or more aren’t eligible for an allowance..

The only time when a cash ISA isn’t exempt from tax is if you are aged 16 or 17 years old, and the money in your account is a gift from a parent. If this is the case, your parents may have to pay tax if parental settlement rules apply.

Find out more

Cash ISAs at a glance

The key features of a cash ISA are:

  • They’re a tax-efficient way of saving
  • You can open a cash ISA if you’re 16 or over and a UK resident
  • The maximum amount you can save into a cash ISA for the tax year 2018/2019 is £20,000
  • You can only open one cash ISA per year (however, you can open multiple cash ISAs with the Society using our custom ISA facility).
  • There are a range of cash ISAs available, including accounts designed to help you save for your first home, retirement and more

What is a cash ISA allowance?

Each tax year runs from 6th April to 5th April. Within this period, there is a limit on how much you can save into a cash ISA. For the 2018/2019 tax year, the ISA allowance is £20,000.

Every UK resident over the age of 16 has the same cash ISA allowance, however young adults aged 16 and 17 have an additional Junior ISA limit of £4,260, on top of their adult allowance.

Any interest that your savings earn throughout each tax year doesn’t count towards your allowance.

Can I withdraw from my cash ISA?

You can take money out of your ISA at any time. However, please check your product terms as some cash ISAs will permit withdrawals subject to a period of loss of interest on your savings. If you think you’re going to need access to your savings quickly, such as in case of an emergency, then you may be better suited to an ISA that doesn’t penalise withdrawals made without notice.

What is ISA flexibility?

From April 2016, you can withdraw and replace money into your ISA without it counting towards your annual allowance. Before this, any money paid into your ISA counted towards your allowance.

However, flexibility is only available where the terms and conditions of your ISA allow it.

An example of flexibility is if you were to put £10,000 into your ISA during the 2018/2019 tax year, only to then take out £4,000. The amount you can put back in during the same tax year is:

  • £14,000 if your ISA is flexible, as you can replace the £4,000 and add up to £10,00 as per the £20,000 allowance
  • £10,000 if your ISA isn’t flexible. This is because the original deposit of £4,000, though it’s been withdrawn, has taken up some of your allowance

Are there different types of cash ISA?

Regardless of your financial circumstances, you’ll find several types of cash ISAs with unique features that will help you reach your savings goals as quickly as possible. Find out more about the different cash ISAs available from Newcastle Building Society here.

Variable rate cash ISAs offer competitive rates of interest and often allow access to your savings without penalty, should you need it. Alternatively, if you aren’t going to need access to your savings, you may prefer to opt for a Fixed Rate Cash ISA. These types of ISAs usually run for a set period, such as one or two years.

Many first-time buyers opt for Help to Buy: ISAs as, thanks to the government’s scheme, you can earn an additional bonus of up to £3,000 on top of your savings. If you go on to complete a mortgage with Newcastle Building Society, we offer an extra bonus of £1,000.

Can I transfer my cash ISA?

Yes, you can transfer your ISA to a different provider. You may choose to do this if you’ve come across a provider with better interest rates.

However, you should always check whether your new provider accepts transfers and whether your current provider charges penalties for moving your money.

You can also choose to switch from a cash ISA to a stocks and shares ISA. 

If you’re still questioning what is a cash ISA and how one could help you on your savings journey, get in touch with a member of our Savings team today on 0345 734 4345 or pop into your nearest Newcastle Building Society branch.