Cash Isas are one of the simplest ways to make your money work a bit harder for you. So how do they work – and what are the things to look out for when choosing a provider?

1 It’s all in the name
The most important thing to know about cash Isas, or any Isa for that matter, is what the acronym stands for: individual savings account. That’s all they are; somewhere sensible to stick any spare savings you might have. The only catch is that there is a maximum amount you can add into an Isa each year: £20,000. So if you have, say, £35,000 saved up in your regular bank account, you can pay £20,000 into a cash Isa this tax year, which ends on 5 April 2025, but you’ll have to wait to deposit the remainder until the next tax year into the same or any other Isas you have in your name. Everyone in the UK aged 18 or over gets an Isa allowance at the start of each tax year.

2 Tax free
Any interest you earn is tax-free. Forever. That’s right, provided you keep your savings in a cash Isa, they’re invisible to the taxman, making opening one a no-brainer. To be clear, the personal savings allowance (PSA), which was introduced in 2016, means almost everyone can earn some tax-free interest on any savings, but this is capped at £1,000 per year for basic 20% rate taxpayers and £500 per year for higher 40% taxpayers*.