A Cash ISA is a type of savings account that works in much the same way as a regular savings account, with the key difference being that it offers tax-free interest.
A Cash ISA stands for a Cash Individual Savings Account. This is a tax-efficient savings account available to residents in the UK.
You can save up to £20,000 per tax year into a Cash ISA which is a limit set by the UK Government (known as your ISA allowance) and enjoy the tax-free benefit on any interest you earn.
Cash ISA Example:
Let’s say you have £20,000 that you want to save. Instead of using a regular savings account where you may be subject to income tax on the interest earned if you go over your personal savings allowance (subject to personal circumstances), you could open a cash ISA.
By depositing your £20,000 into a cash ISA every penny of interest you earn will be yours to keep with no income tax.
Chip does not provide tax advice. Tax treatment depends on individual circumstances and may be subject to change in the future. ISA limits apply.