Do I need a Cash ISA?

A Cash ISA is a savings account where interest is never taxed, regardless of how much you earn elsewhere. For 2026/27 you can pay in up to £20,000 across all your adult ISAs combined, and you can hold more than one Cash ISA in the same tax year as long as you stay within that overall limit.

Whether you need one depends on your tax position. Basic-rate taxpayers have a Personal Savings Allowance of £1,000 a year — meaning the first £1,000 of interest from ordinary savings accounts is tax-free. Higher-rate taxpayers get £500, and additional-rate taxpayers get nothing. If your expected interest is below your allowance, a competitive non-ISA account may pay a similar or better rate without using ISA allowance.

Cash ISAs still make sense if you are likely to exceed your Personal Savings Allowance, if you are a higher- or additional-rate taxpayer, or if you want to build a large tax-free pot over many years. Transfers between Cash ISAs are allowed and do not use up new allowance.

Compare the net return after tax, not just the headline rate. Also check access rules, bonus periods and whether you might need Stocks & Shares ISA allowance instead — once money is in an ISA, moving between cash and investments is straightforward, but you cannot replace allowance you have already used in a tax year.