Is a cash ISA right for you?

It can boost your mental health too. 74% of consistent savers report feeling happy, compared to just 36% of non-savers. Even the UK's Financial Conduct Authority has come out saying that "savings are an important source of financial resilience".

But what kind of savings account is right for you? Here are some of the most important things to consider as you research your options.

Although this article is intended to be helpful, it is not advice. When it comes to your finances, look at your whole situation, and if needed, talk to a financial advisor. You can find an advisor through Unbiased. You may also find useful support at Money Helper, which provides government-backed financial guidance.

Also keep in mind that tax and ISA rules can change, and that any benefits will depend on your circumstances.

What is a cash ISA?

A cash ISA is a type of savings account. Literally, ISA stands for Individual Savings Account. Cash ISAs are for storing money and generating interest, while Stocks and Shares ISAs or Innovative Finance ISAs are for investing wealth over the long term. Generally speaking, cash ISAs are better suited for people who want to build an emergency fund, buy something within the next five years, or who don’t want to take the investment risk. 

You'll usually find cash ISAs offered by banks and building societies alongside other types of savings accounts. But the difference is that cash ISAs come with special tax perks. Each tax year (from April 6 to April 5), you can put up to £20,000 into your ISAs and you won't need to pay any Capital Gains or Income Tax on the interest in the account. As of April 2027, this will change and under 65s will not be able to put more than £12,000 in their cash ISAs. For over 65s, the rules remain the same and they can continue to use their full £20,000 ISA allowance on cash ISAs, if they choose to.  

Who should consider a cash ISA?

Cash ISAs are usually a good option for anyone who pays tax, especially people in higher tax brackets, because of the favourable tax treatment. From April 2027, tax on interest is going to increase, but interest on cash ISAs will not be taxed. This is generally good for savers. Even if you’re not a taxpayer now, you might still consider using cash ISAs in case you pay tax in the future. 

Cash ISAs could be also valuable for anyone who saves regularly or might be about to receive a lump sum of money. 

A good example of this is someone who has recently come into an inheritance. After any inheritance tax has been paid, up to £20,000 (or £12,000 from April 6 2027) could be stored in a cash ISA. This way it would earn interest, while saving Income Tax. 

If you are planning to spend a chunk of your savings over the next five years, for example on a wedding, new car or home renovation, a cash ISA could be a good option too. 

Many people will have a mix of ISAs, so that they can maximise their chances of generating wealth for the long term while also meeting their short-term financial goals. If this sounds like something you are interested in, you can split your £20,000 tax-free allowance across ISAs. For example, in the 2026/2027 tax year, you could put £5,000 each year into a cash ISA and £15,000 each year into a Stocks and Shares ISA.

What else can you do with your ISA? 

You can only open an ISA if you are a UK resident, and over the age of 18. 16 and 17 year olds used to be able to open cash ISAs too, but that changed on 6 April 2024. You have to be 18 to open a new cash ISA, but 16 and 17 year olds can still pay into existing adult ISAs – or open a Junior ISA (Triodos do not currently offer Junior ISAs). 

What is the difference between an Online Cash ISA and a Fixed Rate Cash ISA? 

If you think that a cash ISA could be the right option for you, you can delve into the different types available. Triodos offers two choices. 

Triodos' Online Cash ISA gives you easy access to your tax-free savings. You can take out the money whenever you like. What’s more, if you replace it during the same tax year, you keep all of your tax benefits, without it taking up more of your annual allowance. Savers can get started with as little as £10, and benefit from tax-free interest.  

If you feel that you'd like to get an even higher rate, and feel comfortable locking your savings for some time, the Triodos Fixed Rate Cash ISA could be a good match. You can open an account from as little as £1. Please be aware that with this option, withdrawals are not allowed, but you do have a 30 day cancellation period.  

Best of all, thanks to the new ISA rules that came into effect from April 6 2024, you can open multiple types of ISAs in the same tax year. 

Keep in mind that this is not financial advice or a personal recommendation. As you make your own financial decisions, research all the options available to find the best solution for you. 

How do Triodos Cash ISAs help the planet? 

When banks accept deposits and savings from customers, the money does not sit in a big vault underground. Usually, it is lent out by the bank to businesses or individuals, and sometimes it is used to make investments. This is one of the ways that banks make money. 

Some banks lend out the cash to oil conglomerates, plastic polluters or fast fashion. Over the past nine years, 65 of the world's biggest banks have handed a whopping $7,900,000,000,000 (seven trillion and nine hundred billion dollars) to fossil fuel companies. This amount of money is so overwhelming that most people cannot imagine it. For context, it is more than double (2.2 x) what every business in the whole of the UK makes in a year. Disturbingly, this has led to a rapid acceleration of the climate crisis and destruction of our planet. 79% of savers simply sign-up with the same bank that they hold their current account in, and probably do not even realise what their money is going towards. 

At Triodos, we've been committed to planet-friendly banking for 30 years. We never deal with oil companies, and we only put money into companies that are doing good.