What is a cash ISA?
The term ISA stands for Individual Savings Account. A cash ISA is a type of savings account that allows you to earn tax-free interest on the money you save. Find out how cash ISAs work, how to open one and if they are right for you in this guide.
Changes to ISAs from 6 April 2024/2025
As part of its Autumn Statement, the Government announced a number of changes to simplify ISAs, from 6 April 2024.
Mandatory changes in place with all ISA providers from 6 April 2024
- The age for opening cash ISAs has increased from 16 to 18 years old and over.
Non-mandatory changes, which will not be in place with The Co-operative Bank from 6 April 2024
- Customers are able to subscribe to more than one ISA provider in each tax year but no more than the annual ISA allowance for the tax year.
- Customers can transfer part of their current years ISA subscription between providers.
- Customers no longer have to make a fresh ISA application where an existing ISA has received no subscription in the previous year.
Find out more about the changes to ISAs from 6 April 2024/2025
How does a cash ISA work?
If you’re interested in opening a cash ISA, it’s important to understand how these accounts work.
Cash ISAs allow you to save up to £20,000 each tax year. You can earn interest on what you save and this interest will be tax-free, meaning you can keep all of it. Whereas, with a regular savings account you will pay tax on any interest above your Personal Savings Allowance.
Typically, interest is paid monthly or yearly depending on the type of cash ISA you select. At The Co-operative Bank, we offer cash ISAs that pay interest annually.
You must be 18 or over to apply for a cash ISA, and you can pay into multiple cash ISAs with any number of providers per tax year. However, you can only deposit a total of up to £20,000 across all your cash ISAs. Whilst The Co-operative Bank does not allow customers to pay into multiple cash ISAs with them in the same tax year, customers are able to subscribe with The Co-operative Bank as well as other providers in the same tax year.
You can open a cash ISA with The Co-operative Bank online, through a telephone appointment or by visiting your local bank branch. Depending on who you open your cash ISA with and the type of cash ISA you select, there may be different terms when it comes to depositing or withdrawing your money.
Fixed rate cash ISA
With these accounts, you’ll need to lock your money away for a period of time, but the interest rate will remain the same throughout your account’s entire term. There may be restrictions around deposits and withdrawals with a fixed rate cash ISA.
Variable rate cash ISA
With a variable rate cash ISA, the interest rate may change. However, you may have the chance to deposit and withdraw money more frequently from this type of ISA.
What to consider before opening a cash ISA
Before you open a cash ISA, there are a few important points to consider.
Account type
Decide whether a fixed or variable rate cash ISA will suit you best. It’s worth thinking about whether you want lock your money away for a period of time and earn a higher rate of interest or whether you prefer easy access to your funds.
Interest rate
This will determine the interest you receive whilst saving in a cash ISA. Watch out for introductory rates that decrease after a certain time.
Different types of ISA
There are four types of ISAs: cash, stocks and shares, innovative finance, and lifetime. There are differences between them, so consider which types of ISA best suit your needs. You can open each type of ISA and multiple ISAs of the same type, but remember that your maximum deposit across all your ISAs cannot exceed £20,000 for the tax year. At The Co-operative Bank, we only offer cash ISAs.
ISA allowance
The current annual ISA allowance is £20,000 per tax year. This means that across the tax year, the maximum amount you can deposit into a cash ISA is £20,000. The amount you can put into a cash ISA also depends on how much you deposit into any other types of ISA: the combined deposits cannot exceed £20,000.
If you do not use your full annual ISA allowance within a tax year, the allowance that you do not use cannot be carried forward into the next tax year.
Cash ISA transfers
Can I transfer a cash ISA?
You can transfer some or all of the money you’ve deposited in a cash ISA to another provider, regardless of which tax year the deposit was made. However, it is essential that you do not withdraw and transfer your money yourself, or it will lose its tax-free status. Instead, you should ask your provider to transfer the cash ISA for you.
Cash ISA transfer rules
If you wish to change your cash ISA provider, there are some rules you should be aware of.
When attempting to change providers, your new provider has to make the transfer in order to keep your tax-free savings. Withdrawing the money yourself will cause you to lose the tax-free status, even if you transfer it directly into a new cash ISA. If you have a flexible ISA, you may be able to withdraw the money and pay it in to the new ISA yourself without losing the tax-free benefit. However, you should check with your provider before doing so.
If you wish to transfer to another cash ISA provider, your current provider has to allow this. However, your current provider may charge you a penalty for transferring, so it’s important to check for any transfer penalties before you make this decision. You should also check that the provider you want to transfer to accepts ISA transfers.
Remember, you can transfer some or all of the money that you’ve deposited in a cash ISA, regardless of the tax year that you made the deposit. The Co-operative Bank will continue to follow existing rules where current years’ subscriptions must be transferred in full or not at all.
Cash ISA or savings account?
Whether a cash ISA or a standard savings account is the right option for you will depend on your individual circumstances.
Cash ISAs offer tax-free interest as long as your deposits do not exceed the cash ISA limit of £20,000 in the tax year. Unlike other ISAs, such as a stocks and shares ISA, there is not a risk of your savings decreasing in value.
Furthermore, you’re able to transfer savings to an ISA with a better rate, while retaining the tax advantages, as long as you do not withdraw and transfer the money yourself. However, in some cases, the high interest rates of a cash ISA may fall after one year. Or, in the case of a fixed-rate ISA, your money may be locked away until the end of the term.
Savings accounts, on the other hand, don’t offer the same tax benefits of a cash ISA. You’ll be required to pay tax on any interest over the Personal Savings Allowance. However, you can deposit as much as the designated limit of the savings account allows. Plus, unlike cash ISAs, you’re not limited to the number of accounts you can pay into during a tax year.
How many cash ISAs can I have?
You can open and pay into multiple cash ISAs per tax year. You can also keep cash ISAs from previous years open and pay into them.
Please note: while The Co-operative Bank does not allow customers to pay into multiple cash ISAs with them in the same tax year, customers are able to subscribe with The Co-operative Bank as well as other providers in the same tax year.
If you wish to transfer a cash ISA from the current or previous tax year your current provider must allow this. It’s important to read any terms and conditions before deciding to transfer or open a new cash ISA.
How much can I put in a cash ISA?
You can deposit up to £20,000 into your cash ISA per tax year. You’re not required to deposit this much, but you will not be able to deposit more than £20,000. You may be able to withdraw and reinvest as much money as you’d like below £20,000. However, any withdrawals that you want to replace may count towards your ISA allowance for the current tax year, so you should check your account’s terms and conditions before withdrawing.
Do I have to withdraw the interest my ISA earns if I deposit the maximum allowance?
Once the money has been deposited in your cash ISA, you can leave it there so that the interest it earns makes it grow. You do not have to withdraw the interest to prevent the balance going over £20,000.
Changes to ISAs from 6 April 2024/2025
Mandatory change, which will be in place with all ISA providers from 6 April 2024
The age for opening cash ISAs has increased from 16 to 18 years old and over
The age to open a cash ISA has increased from 16 to 18 years old and over. However, until 5 April 2026, providers can choose to offer a cash ISA to anyone who is 16 or 17 on 5 April 2024 as long as they do not have an existing cash ISA. The Co-operative Bank will not be offering this transitional arrangement which is non-mandatory.
Where an existing customer, aged 16 or 17, already holds a cash ISA, they may continue to subscribe to it after 6 April 2024 and when a fixed rate product ends, a new product will be offered.
Non-mandatory changes, which will not be in place with The Co-operative Bank from 6 April 2024
Customers are able to subscribe to more than one ISA provider in each tax year
If you are aged 18 years or over, you will be able to subscribe to an ISA with more than one ISA provider in a tax year. All subscriptions, however, must remain within the overall ISA subscription limit of £20,000.
Whilst The Co-operative Bank does not allow customers to pay into multiple cash ISAs with them in the same tax year, customers are still able to subscribe with The Co-operative bank as well as other providers in the same tax year.
Customers can transfer part of their current years ISA subscription between providers
From 6 April, ISA customers are able to transfer part of their current subscriptions from one ISA provider to another, subject to individual providers allowing this. The Co-operative Bank continues to follow existing rules where current years’ subscriptions must be transferred in full or not at all.
Customers no longer have to make a fresh ISA application where an existing ISA has received no subscription in the previous year
It is currently a requirement where a customer holds an existing ISA, and does not pay into it during a tax year, that they must make a fresh application before they can continue to pay into it. From 6 April, some providers will no longer request this, however The Co-operative Bank continues to require a fresh application.
Other ways you can save with us
If a cash ISA is not right for you, there are plenty of other ways to save with us.
Savings terms explained
AER stands for Annual Equivalent Rate and shows what the interest rate would be if interest were paid and added to your account each year.
Business day is usually Monday to Friday excluding bank holidays.
Calendar month means from midnight on the first day of a month to 11.59:59pm on the last day of the month.
Fixed interest means the rate stays the same until the account matures.
Gross is the rate of interest payable before any tax is taken off.
Tax-free means you will not pay any tax on your interest.
Tax year runs from 6 April to 5 April.
Variable interest means that it could go up or down.
Please note: any reference to tax is based on our understanding of current tax regulations which may change in the future and depend on the customer's individual financial circumstances.
The Co-operative Bank reserves the right to decline or accept any application and/or deposit.
Financial Services Compensation Scheme
Your eligible deposits held by a UK establishment of The Co-operative Bank plc are protected up to a total of £85,000 by the Financial Services Compensation Scheme, the UK's deposit guarantee scheme. This limit is applied to the total of any deposits you have with the following: The Co-operative Bank, Britannia and smile. Any total deposits you hold above the limit between these brands are unlikely to be covered.
Please read further information on the FSCS scheme here or visit their website.
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