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Everything you need to know about easy access cash ISAs
3 minute read
Updated 10th October 2024 | Published 14th September 2023
From interest rates to access restrictions, there’s so much to consider when taking out a new savings account. Can I make withdrawals? Do I need to give notice on the account? Will I lose interest?
In this blog, we give you the lowdown on easy-access cash ISAs. Keep reading to find out if this type of savings account would suit your needs.
Individual Savings Accounts, known as ISAs, were first introduced in 1999 as a way to help people save tax-free, up to a certain level. Over the years the amount that you can save in an ISA annually has gradually increased and today it stands at £20,000 a year.
There are various different kinds of ISAs. This includes accounts where your money is invested in selected stocks and shares. Or accounts that are simply a home for your savings.
What’s an easy access cash ISA?
An easy access cash ISA is a tax-free savings account where you can withdraw as much of your money whenever you like. You’ll likely have times when you need access to extra funds, such as if you’re faced with an unexpected bill or expense. Or perhaps a friend or relative needs a financial helping hand. With an easy access cash ISA, you can easily dip into your savings, which makes this a simple process.
How does an easy access cash ISA work?
Each tax year, which runs from 6 April to 5 April, you’re allowed to open an ISA with a maximum investment limit of £20,000. You can make as many payments into the account over the year as you like, but you can’t exceed the limit. Once in the account, the money will earn interest at the advertised rate. This’ll be paid either monthly or annually depending on the particular account. With an easy access cash ISA the interest rate is likely to be variable. This means it can rise or fall (usually in line with the Bank of England base rate).
There’ll be no tax to pay on the interest you earn and you’re allowed to keep the account open for as long as you like, adding to it each tax year within the permitted allowance.
Can I withdraw money from an easy access cash ISA?
Yes, this is the whole point of an easy access cash ISA. You’re able to take out money from it whenever you like, although once you’ve taken the money out you won’t be able to replace it until the next tax year. This means that by withdrawing money you’ll be missing out on potential tax-free interest.
What’s the difference between a fixed and easy access cash ISA?
If you’re looking at longer-term savings then a fixed cash ISA could be a better alternative. In a fixed cash ISA you invest a lump sum for a fixed period, sometimes as long as five years. During this time no withdrawals* or extra deposits are allowed. And to compensate for this, the interest rate’s considerably higher than you’ll receive in an easy access account.
So choosing which ISA will be right for you is very much dependent on your personal circumstances and whether you feel you’ll need to have quick and easy access to your savings over the next few years.
Need a bit more guidance when searching for the right savings account? Why not read the reviews left by our Smart Money People community?
*There are some exceptions to this. Head to our blog on fixed cash ISAs to find out more.
Written by Errolyn
Senior Content and Social Media Executive
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