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Cash ISAs explained

Your complete guide to tax-free saving

See our cash ISAs

What is a cash ISA?

A cash ISA is a savings account that lets you earn interest without paying tax on it. If you're looking for a low-risk, straightforward way to put money aside it could be an option for you. Whether you're saving for a special date or just building up a ‘broken boiler’ pot rainy-day fund.

Here’s our jargon-free guide ready to take you through everything you need to know about cash ISAs.

How does a cash ISA work?

Here’s how:

You deposit money – you can save up to £20,000 in the current tax year in ISAs – this is called your ISA allowance. Some finance providers allow you to split your ISA allowance across different ISA types. Please check with your provider if this is an option they offer.
You don’t pay tax on any earned interest – unlike standard savings accounts, where interest might be taxed if you go above your Personal Savings Allowance, all interest earned in a cash ISA is completely tax-free.
You can transfer ISAs – if you find a better rate, you can transfer your cash ISA to another provider without losing your tax-free benefits, as long as you follow the ISA transfer process. Be aware that depending on what ISA account you’re transferring, you might be charged a penalty. Chat to your provider for more information before you transfer.

How to open an ISA?

To open a cash ISA, you must:

Be a UK resident for tax purposes.
Be at least 18 years old or over (If you’re opening a Lifetime ISA you must also be under 40).
Have a National Insurance number. Find your National Insurance number online if you don’t know it.
Be a member of the armed forces or a Crown servant (for example diplomatic or overseas Civil Service) or their spouse or civil partner if you don’t live in the UK

Types of cash ISAs – should you consider putting money in a cash ISA?

There are different types of cash ISAs to suit different needs: Whether you want easy access to your money or are willing to lock away your money for a fixed term with an interest rate that won’t change.

Here’s a breakdown of the different types of cash ISAs available and the benefits and considerations to keep in mind for each.

Fixed rate cash ISA – lock in your rate for a set amount of time

If you're looking for certainty, fixed rate cash ISAs let you lock in a competitive interest rate for a set time. You’ll know exactly how much interest you’ll earn tax-free.

✓ Best for: savers who don't need instant access to their money.

✗ This may not be right if: savers want regular access to their savings.

✓ How it works: you agree to leave your money in an ISA for a fixed period (for example 1, 2 or 5 years) in return for a fixed rate of interest.

✓ Things to consider: if your current provider allows withdrawals or if you transfer your ISA to a new provider, you might lose interest or be subjected to paying an early withdrawal fee.

What happens when my fixed rate cash ISA matures?

Maturing meaning: When your cash ISA matures, this means that the fixed term for your account has come to an end.

When your fixed term is coming to an end, your provider will usually contact you with your maturity options. If you do nothing your savings might be moved into your providers default account.

At Nottingham Building Society if your account is maturing and you opened a fixed rate cash ISA:

In branch - We will send you a letter 14 days before your account matures providing you with all your account information and maturity options for you to decide what to do next.
Online – You’ll receive an email with your account details and maturity options 14 days before your account matures, so you can decide what to do next for your online savings.

Can I withdraw money from a fixed rate ISA early?

Fixed rate ISAs are designed for long-term saving; some providers will allow early withdrawals which may then be subject to a fee. Be sure you won’t need access to your money during the fixed rate period when considering opening a fixed rate ISA.

It’s best to check with your provider beforehand for any potential early withdrawal penalties.

How long should I fix my savings for?

This depends on how long you're comfortable setting your money aside without needing it. It's important to choose a term that fits your goals and circumstances.

View our fixed rate cash ISAs to help you decide which account best suits your financial goals.

Easy access ISA – flexible savings

Easy access cash ISAs offer flexibility and access while still helping your money grow.

✓ Best for: those who want to dip into their savings whilst still receiving tax-free benefits.

✗ This may not be right if: savers would like the security of a fixed return on their savings.

✓ How it works: you can deposit and withdraw whenever you like up to the annual ISA limit without penalties.

✓ Things to consider: interest rates for easy access ISAs are variable, so could change whilst you have the account open.

Compare our easy access ISAs to see what suits your savings needs.

Junior ISA (JISA) – tax-free savings for children

Give your little one a head-start with a Junior ISA.

✓ Best for: if you have parental responsibility for a child under 18 and want to build up tax-free savings for their future.

✗ This may not be right if: savers need access to the savings before the child is 18.

✓ How it works: you can save up to £9,000 per tax year in a Junior ISA and all interest earned is tax-free. The money belongs to the child and can't be accessed until they turn 18.

✓ Things to consider: once the child has their 18th birthday, the Junior ISA automatically converts into an adult ISA in their name, giving them full access to the cash.

View our Junior cash ISA and start your child on their savings journey.

Who can open a junior cash ISA?

A junior cash ISA must be opened by someone with parental responsibility of the child.

Who controls the account?

The person(s) who have parental responsibility is the one who opens the junior cash ISA and controls the contributions to the account. They are entirely in charge of paying money into the account, choosing the provider and the type of junior ISA (cash or stocks and shares) until the child turns 16.
At 16, the child has the opportunity to take charge of these decisions if they want to, but the money is still untouchable until their 18th birthday.

What happens after your child turns 18?

When the child turns 18, the junior cash ISA becomes an adult cash ISA in the child’s name. At this point:

The child can access the funds and decide how to manage them.
The account continues to be tax-free, but the child will now have access to a wider range of adult ISAs, including being able to withdraw or transfer their money, once they’ve provided their National Insurance number.

There’s no penalty for accessing the funds when the child turns 18 and the money can be used for whatever they choose.

Lifetime ISA (LISA) – save for your first home or retirement

✓ Best for: first-time buyers and people who are looking to add to their retirement savings.

✗ This may not be right if: savers want to buy their home in the next 12 months.

✓ How it works: save up to £4,000 per year and the Government adds a 25% bonus (up to £1,000 per year) on top.

You can put in up to £4,000 (current ISA limit) each year until you’re 50. You must make your first payment into your LISA before you’re 40.
Once you turn 50 you will not be able to pay into your Lifetime ISA or earn the 25% bonus. Your account will however still stay open, and your savings will still earn interest or investment returns.

✓ Things to consider: you must be under 40 to open a LISA, and any withdrawals (except for buying your first home or retirement after 60) comes with a 25% government penalty.

Ready to start saving for your first home or retirement? Take a look at our Lifetime ISA.

How do you withdraw your Lifetime ISA (LISA) savings?

For a first home purchase

You can withdraw money from your LISA to buy your first home if:

You’ve had and funded the account for at least 12 months.
The property costs £450,000 or less.
You’re going to live at the house you buy.
The money, including the bonus, will be sent to your solicitor or conveyancer as part of the house buying process.

Please remember. If you’ve owned a house before, anywhere, you can’t use a LISA towards a home purchase.

For retirement

After age 60, you can withdraw the money at any time for any purpose, with no penalty or restrictions.

Flexible cash ISA – withdraw and replace funds

✓ Best for: savers who need access to their money but don't want to lose their tax-free benefits.

✗ This may not be right if: savers want a fixed rate of interest.

✓ How it works: withdraw and replace money within the same tax year without it affecting your annual ISA allowance, giving you peace of mind and extra flexibility.

✓ Things to consider: not all providers offer this ISA, so if you think this is a type of cash ISA that suits your savings needs, please speak with providers beforehand.

How does a flexible cash ISA work?

Let’s say you deposit £15,000 into a flexible ISA in a single tax year.

In the future you withdraw £5,000 from your account.
You can replace that same £5,000 later in the tax year and still have £5,000 remaining of your £20,000 ISA allowance.
However, if you withdraw the money and don’t replace it before the tax year ends (April 5), your ISA allowance resets, and you can’t replace the funds without using the current year’s allowance.

Notice cash ISA – tax-free savings with a notice for any withdrawals

✓ Best for: savers who don't need immediate access to their cash but still want some sort of flexibility.

✗ This may not be right if: savers are worried about potentially needing access to their money and cannot wait for the notice period for withdrawals.

A notice cash ISA lets you earn a rate whilst giving you the flexibility to withdraw funds after a set notice period. It's a great way to plan ahead while making the most of your savings.

✓ How it works: you need to give notice (for example 30, 60 or 90 days) before withdrawing your money.

✓ Things to consider: withdrawals without notice might result in an interest penalty.

What are the pros and cons of a cash ISA?

If you're considering opening a cash ISA, it's important to weigh up the benefits and draw backs before deciding if it’s the right savings option for you.

Advantages of opening a cash ISA

✓ Tax-free saving - One of the biggest advantages of a cash ISA is that you don’t pay any tax on the interest you earn - no matter how much interest your savings generate.

✓ Good for budgeting - The structure of ISA accounts can support better budgeting habits by encouraging you to separate short-term spending from long-term savings.

✓ Can benefit young adults starting out - Can be ideal for those beginning to save at an early age, as ISAs offer a safe, simple way to grow funds over time, whether that be a LISA (Lifetime ISA) to start saving for a first home or opening a Junior ISA to start saving for your child’s future.

✓ No impact on other tax-free allowances - Using a cash ISA won’t affect your Personal Savings Allowance.

✓ Can complement other savings goals: A cash ISA can sit alongside other saving options, like a regular savings account or savings bond and give you another route to grow your money.

✓ Government protection - Your savings are protected up to £85,000 per provider by the Financial Services Compensation Scheme (FSCS).

Disadvantages of a cash ISA

✗ Limited annual allowance - You can only save up to £20,000 in the current tax year, whereas standard savings accounts don’t have limits.

✗ Restrictions on withdrawals - Some fixed rate ISAs charge penalties if you withdraw before the term ends.

✗ Not all accounts accept previous year transfers.

Is it better to have an ISA or a standard savings account?

If you're debating whether to open a cash ISA or stick with a standard savings account, here’s a side-by-side view of how they compare.

Feature	Cash ISA	Standard savings account
Tax-free interest	Yes	No - interest above the Personal Savings Allowance
Maximum amount you can save	£20,000 per tax year	No limit
Access to funds	Varies (easy access or fixed terms)	Varies (easy access or fixed terms)
Government bonus	Available with Lifetime ISAs only	Not available

How do I choose the right cash ISA for me?

Choosing the right cash ISA depends on your savings goals, how long you want to save for, and how much access you need to your money. Here are some key things to consider when picking the best ISA for you:

What are you saving for?

Short-term goals (e.g. holidays, emergencies): A cash ISA with easy access might be the best fit, so you can dip into your savings.

Long-term goals (e.g. buying a home or retirement): Consider a Lifetime ISA for the 25% government bonus — just make sure you’re eligible and aware of the rules.

Saving for a child: If you have parental responsibility for the child then a Junior ISA (JISA) helps you build a tax-free amount for their future, which they can access at 18.

Do you need instant access?

If you want flexibility, an easy access cash ISA lets you withdraw money whenever.

If you can lock your money away, a fixed rate ISA can offer you peace of mind knowing what tax-free interest you can earn in return for keeping your money locked away for a set time.

For a middle ground, a notice ISA could work for you – providing you more flexibility than a fixed-term saving accounts, as long as you give notice in order to access your money.

How to open a cash ISA

Opening a cash ISA is simple:

Choose the right cash ISA for you.
Compare our best cash ISA rates to find the savings account that suits you.
Pop into one of our branches or open an account online, to start your savings journey. Whether you prefer a face-to face experience or the convenience of online saving. We’ve got both.

Frequently asked questions

Are cash ISAs safe?

Opening a cash ISA with a building society or bank, you’re protected by the Financial Services Compensation Scheme (FSCS) up to £85,000.

How many cash ISAs can I have?

At Nottingham Building Society, currently you can open and pay into one cash ISA each tax year. Helping you stay on top of your savings and make the most of your tax-free allowance.

Due to the cash ISA rules changing in April 2024, some providers now allow you to open and pay into more than one cash ISA in the same tax year. Check with your provider.

Can I save up to £20,000 every year in a cash ISA?

Of course, your annual allowance resets each tax year. The tax year runs from 6th April to 5th April the following year.

You can’t carry over your ISA allowance to the next tax year, so if you do not use up your full allowance before the 5th April, you’ll lose any allowance you had remaining for that tax year.

Can I open a joint cash ISA?

Nope, sorry. You can’t open a joint ISA. By law (and name), ISAs are only available to individuals, meaning each person must open and manage their own account.

Can I transfer my cash ISA to another provider?

You can move your ISA to another provider without losing your tax-free benefits or ISA allowance - but make sure you follow the official ISA transfer process. If you withdraw the money yourself, it counts as new savings and could affect your allowance.

What happens to my cash ISA if I don’t use it?

Nothing changes - your money stays safe and your interest remains tax-free.

Please don’t use this guide as advice, you’ll need to consider and make your own decisions. If you have any further questions, we recommend seeking legal and/or financial advice. Cash ISAs are available to individuals ages 18 or over who are a resident in the UK for tax purposes. Deposits in any tax year are subject to the limits set by HM Revenue and Customs (HMRC) and may therefore be subject to change.

Free, impartial financial support

We believe that access to impartial guidance is important for your financial well-being. That's why we're thrilled to highlight the invaluable resource of free independent guidance available through MoneyHelper, who serves as a beacon of support for individuals seeking clarity and direction in their financial journey. Their wealth of resources and expertise aim to empower you as well as support you during difficult times.

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