What is a Cash ISA?
Let’s begin with ‘What is an ISA?’ - An ISA (Individual Savings Account) is a type of saving account which allows you to save money tax free. It has an allowance which is the maximum amount that can be saved and invested during a tax year. This allowance refreshes each year, allowing you to save or invest further funds.
Cash ISA accounts are similar to standard savings accounts except for the tax treatment. You won’t pay or be liable for any tax on interest earned in an ISA but you may pay tax on interest earned in non-ISA accounts*. Some banks and building societies offer the same product and interest rates regardless of whether they are an ISA or not whereas others may have different rates or specific accounts.
ISAs are popular in the UK as a tax-efficient way to save. Consumers are able to shop around for the best cash ISA rates, and providers that they feel offer them the best service. ISAs offered by The Cumberland come in the form of Instant Access, 1, 2 or 5 Year Fixed, and we also currently offer a Junior ISA for under 18s. Lifetime ISAs or Stocks and Shares ISAs may also be available from other providers. At The Cumberland, our kinder banking philosophy means that you’ll be able to speak to a real person when discussing your ISA with us, either in one of our high street branches, or over the phone.
How Does a Cash ISA Work?
The maximum amount that can be saved and invested during a tax year is referred to as your ISA allowance. This allowance refreshes each year, allowing you to save or invest further funds into an ISA account. For the tax year 2024/25 (and the same for 2025/26)**, the ISA allowance is £20,000, or £9,000 for Junior ISAs.
You may only contribute new money to one Cumberland Cash ISA in a tax year. This does not restrict your ability to open/pay into another Cash ISA (or any other form of ISA) with another provider, but you will still need to remain within the annual ISA allowance across all providers.
As mentioned above, The Cumberland offer Instant Access, Fixed Rate and Junior ISAs. Each account comes with its own terms and conditions but some of the main ones are outlined below so that you can make a quick Cash ISA comparison:
- Our Cumberland Instant Cash ISA offers a variable interest rate but allows the flexibility to withdraw funds.*** This account can be opened at any Cumberland branch, or on internet banking for customers that hold an internet enabled current account. New customers must live within our operating area.
- Our Fixed Rate ISA accounts guarantee you a fixed rate of interest for the duration of the account, however partial withdrawals are not allowed during the fixed term. These accounts can be opened at any Cumberland branch, by new or existing customers. New customers must live within our operating area.
- Our Cash Junior ISA is available to open for customers under 18 years of age who do not hold a Child Trust Fund. This can be opened at any Cumberland branch. Only parents or guardians with parental responsibility can open the account on behalf of the child. New customers must live within our operating area.
What Are the Benefits of a Cash ISA?
- The primary benefit is that you can receive tax free interest on savings held within an ISA account (limits apply as discussed above).
- ISAs encourage long-term saving because (providing you don’t withdraw your funds), they continue to gain tax-free interest for as long as they remain within an ISA. For example, the £20,000 that you save this tax year into an ISA, will continue to gain tax-free interest in the future for as long as it remains within a Cash ISA.
- At The Cumberland we offer different types of Cash ISA that may be better suited, depending on your savings goals. It’s always worth spending time to consider your options before deciding on the best cash ISA for you.
Our Cumberland Instant Cash ISA comes with a variable interest rate but allows withdrawals, useful if there is a possibility that you might need to access your savings. Our Fixed-Cash ISAs offer the security of a fixed interest rate over the term of the product, without the ability to make withdrawals (although the account can be closed at any time subject to an interest penalty on the closing balance), This makes our Fixed-Cash ISA products better suited to those confident that they will not require access during the term of the ISA product.
And some of the constraints…
- When considering an ISA as a way of saving, you must keep in mind the annual ISA allowance. If you have more than this available to save then you might need to open additional saving accounts.
- You may be able to find a more favourable interest rate by exploring other types of saving accounts.
- T&Cs for ISA accounts can vary and may include exit fees, withdrawal penalties etc.
- Savings in an ISA account are not guaranteed to keep up with inflation.
Who Should Open a Cash ISA?
If you have money available to save and are looking for a savings account, then a Cash ISA is one of the options available to you.
First-time savers
First time savers can benefit by earning tax-free interest on their savings. By selecting an ISA that allows withdrawals, they also have instant access to their savings should they need it.***
Further information about saving, including help with budgeting can be found at our savings hub where we also have an article on saving tips that first time savers may find useful.
Individuals looking for a low-risk savings option
Cash ISAs may be appealing to those looking for low risk saving options. You pay your money in and at the end of the term, your provider will add the amount of interest associated with the terms of the account. In comparison, Stocks & Shares ISAs involve the investment of monies into investment funds, shares or bonds which could lead to higher gains, but also have the possibility of giving less back than you put in. Over 60s with money to save may find the tax-free interest and low-risk of a Cash ISA especially useful.
In the UK, your eligible deposits into Cash ISA accounts are protected by the Financial Services Compensations Scheme(FSCS) up to £85,000 per UK regulated financial institution. The Cumberland Building Society is covered by this scheme.
Those who have used up the entirety of their Personal Savings Allowance
As ISAs are completely independent of your Personal Savings Allowance, you can still invest in a Cash ISA up to the allowed limit each year, and this will not count towards your Personal Savings Allowance.
People planning for medium-to-long-term savings goals
Cash ISAs can be used as a way of creating an emergency fund, or saving for an expensive holiday, wedding, or home. They can be used to build up your savings over a longer term as you receive a new allowance each tax year while money saved into previous ISAs continues to offer tax-free interest. They provide a way of saving over multiple years without the risks associated with investing in stock, shares or other projects.
How Can I Open a Cash ISA with Cumberland?
- Each of our Cash ISA accounts has its own terms and conditions covering such things as eligibility requirements, minimum and maximum balance, interest rates, withdrawals, and how the account can be opened and managed. Information for the accounts that we offer can be found on our main ISA pages.
- Providing that you meet the eligibility requirements, our ISAs are available to open at any Cumberland branch via an appointment which can be booked here.
Cash ISA FAQs
There is no real difference between the two except for the tax treatment. You won’t pay or be liable for any tax on interest earned in an ISA but you may pay tax on interest earned in non-ISA accounts. Some banks and building societies offer the same product and interest rates regardless of whether they are an ISA or not whereas others may have different rates or specific accounts.
An ISA allowance is the maximum amount that can be saved and invested during a tax year. This allowance refreshes each year, allowing you to save or invest further funds into an ISA account.
- For the current tax year (2024/25), the ISA allowance is £20,000.
- For Junior ISAs, the allowance (for 2024/25) is £9,000.
A common question is ‘how many ISAs can I have?’ You may only contribute new money to one Cumberland Cash ISA in a tax year. This does not restrict your ability to open/pay into multiple ISAs across more than one provider, but you will still need to remain within the annual ISA allowance across all providers for the current tax year.
Our Instant Cash ISA is an instant access account; this means you can withdraw money if you need to. Any withdrawals you may make from our ISAs are not added back to your annual allowance meaning if you withdraw money after using your full annual ISA allowance, you will not be able to add more money to your ISA account for the rest of the tax year.
No withdrawals are permitted from the Junior ISA.
Partial withdrawals are not permitted on our Fixed Rate ISA accounts, but you can close the account at any time subject to an interest penalty on the closing balance.
Everyone has their own savings goals and requirements. You should consider your reason for saving, the amount of money that you have available to place in savings, and whether this is likely to remain similar for the short and longer term.
Our team are available to answer your questions and discuss the ISA options that we can offer. We believe that support is best when it comes from real people and you can make an appointment to speak with us in branch, or for us to call you if that’s more convenient.
Whether or not a Cash ISA is the best option for you will depend on your circumstances, but they remain a valid method of saving in 2025.
Basic rate taxpayers saving smaller amounts may find that they don’t use up their Personal Savings Allowance so won’t pay tax anyway. In this case a regular savings account is worth considering, depending on the rate of interest being offered. It’s always worth researching the best ISA rates and/or best bank or building interest rates to ensure that you are getting a good offer. All of The Cumberland’s current offerings can be viewed on our savings accounts page.
Higher rate tax payers who are at risk of exceeding their Personal Savings Allowance limit might find that a Cash ISA is a good way to save additional funds without having to worry about paying tax on them.
* Tax treatment depends on individual circumstances of each customer and may be subject to change in the future.
** The UK tax year runs from 6th April to 5th April.
*** Any amount withdrawn remains as ‘used’ under your saving allowance for the tax year. For example, if you have £20,000 in your ISA and you withdraw £1,000, you would still have used up your £20,000 allowance for the year i.e. you cannot re-invest that £1,000 into a cash ISA later in the same tax year.