Cash ISA UK for Beginners. How does it work?

Are ISAs Worth it? Your Complete Guide to Tax-Free ISAs 2021

Cash ISAs UK
Cash ISA UK explained
Are ISAs tax-free
Are ISAs worth it

ISAs are savings or investment account you never pay tax on.

● Cash ISA is normal savings account The only difference is, you don't pay any tax on the interest you earn.
● There is no risk of you losing the money you put in a Cash ISA account.
● You have to be 16
● resident in the UK
● Can only contribute to 1 cash ISA per tax year

There are different types of cash ISA available on the market.

Easy-access cash ISAs. Simply put your cash in, and you can access it whenever you need it, with no penalty. Great for emergency funds savings.

Notice cash ISAs. This type is similar to an Easy-access account. You can put money into the account and when you want your money i.e. withdraw your money, you need to give the bank notice. ie tell them in advance that you intend to withdraw some or all your funds. The notice period depends on the account. So for example, if your cash ISA is a 7-day notice account, you need to tell your bank 7 days before you need to withdraw your money.

This type of account is great if you struggle to save and always withdraw on impulse to buy none essentials.

Fixed-rate cash ISAs.
You deposit your money for a fixed period. You cannot easily withdraw your money once it is deposited. The term will vary. It could be 6 months to 5 years. The longer the term the higher the rate.

If you do then need to access your cash, you'll usually have to pay an interest penalty.
Please do not put your emergency funds in a fixed-term account. We are all about making money, not paying penalties.

How much can I invest in a Cash ISA per tax year?

The full £20,000 if you want.

Useful links:

Remember:
This video is purely educational. It should not be taken as financial advice. Do your own research and seek advice from a financial adviser before making any kind of investment decision.

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[abbysotillo]

Can you also share how to calculate the interest that will earn for ISA??

[chrissutherby]

Hi abby, a wanted to ask a question about what happens with your isa saving in the second year. For instance, say you put the full £20000 in the first year, then you put say £5000 the next year. How is the interest payed? Do you only get interest on the £5000 in the second year or do you get interest on the full £25000 as its a seperate tax year? Thanks