What is a cash ISA?

A cash ISA is an individual savings account that pays tax-free interest on your savings. Everyone receives an annual ISA allowance and for the 2019/20 tax year, the maximum amount you can pay in is £20,000.

You can choose to invest your full ISA allowance into a cash ISA, or distribute your allowance across several different types of ISA ‘wrappers’. For example, you may choose to invest £15,000 into a stocks and shares ISA and the remaining £5,000 of your allowance into a cash ISA. Equally, you do not have to invest any money into a cash ISA. How you diversify your allowance is up to you, our financial advisers will be able to discuss suitable options with you.

Transfers and withdrawals

You can only have an ISA with one provider each tax year; however, it's possible to transfer your ISA to either a cash ISA, or a stocks and shares ISA with another provider. You can withdraw your money from a cash ISA, but a withdrawal will not increase your annual allowance, although some ISAs allow for flexible rules, which may permit funds to be reinvested (providing it's in the same tax year as the withdrawal).

Cash ISAs can provide valuable benefits for those who are paying tax on the interest paid, especially where the investor is paying higher rates of tax. Speak to an independent financial adviser at AFH to learn more about cash ISAs and how they can benefit you.

The value of investments and the income derived from them may go down as well as up.

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