How to choose a cash ISA that suits you

A cash ISA lets you earn interest on your savings without paying tax. So understanding when you pay tax on your savings can help you decide if an ISA is the right choice for you.

Not all ISAs work the same way. From easy access to fixed rate - choosing the right type of ISA for you can help you make the most of your 2025/2026 allowance. 

This guide covers what you should consider. So you can find a cash ISA that fits your goals, whether you're saving for the short or long term.

What is a cash ISA?

If you're new to ISAs, check out our beginners guide to cash ISAs. A cash ISA is a tax-free savings account available to UK residents aged 18 or over.

Opening an ISA is a way to save money and earn interet without paying income tax on the interest you earn.

Why choose an ISA?

• The interest you earn is tax-free and doesn't count towards your Personal Savings Allowance.
• You can save up to £20,000 in the 2025/2026.
• With Principality, you can pay into one cash ISA per tax year. Other providers may let you split your allowance, as long as you stay within the £20,000 limit.

Cash ISAs can be particularly useful if you're saving larger amounts, or already earning a lot of interest in other accounts.

Types of cash ISA

There are different types of cash ISA to suit different savings habits and financial goals. The right option for you will depend on how often you need access to your money and whether you're able to lock funds away.

Each of these types of cash ISA offer tax-free interest. But access rules and interest rates vary.

Before you choose an ISA, think about how often you'll want access to your money, and whether you're happy to lock it away.

You can transfer your ISA to another provider at any time. Just be aware that some accounts have conditions. You might lose interest or need to pay a fee if you transfer early, especially with fixed rate ISAs. Always check the terms before making a move.

How to compare cash ISAs

Before choosing a cash ISA compare these key features:

• Interest rate: Is it fixed or variable? Higher fixed rates can mean locking your money in for a set time.
• Access rules: Can you make withdrawals or close the account early? Will you pay fees or lose interest if you do?
• Deposit limits: How much do you need to open the account? Can you top it up later?
• Term length: If it's a fixed ISA, how long is your money locked in for?
• FSCS protection: For peace of mind, make sure your provider is regulated by the Financial Conduct Authority (FCA) and covered by the Financial Services Compensation Scheme (FSCS).

Always check terms and conditions before applying for any savings account. 

Using your ISA allowance

The ISA limit for 2025/2026 is £20,000. You can use your allowance by:

• Opening a new cash ISA.
• Saving in regular payments or larger lump sums; whichever suits you.

Important to know:

• With Principality, you can only pay into one cash ISA each tax year. Other providers may allow you to open multiple ISAs in the same tax year.
• The deadline to use your 2025/2026 allowance is 5 April.
• Unused allowance is lost at the end of the tax year. 

If you want to move money from one ISA to another, ask your new provider to arrange an ISA transfer. Don't withdraw the money to move it yourself; this will mean you'll lose your tax-free benefits.

Your savings are protected

Cash ISAs from UK regulated banks and building societies are covered by the Financial Services Compensation Scheme (FSCS). This protects eligible savings up to £85,000 per person, per provider.

If you have more than £85,000 in savings think about spreading it across different providers. This can help maximise your protection. 

Explore our ISAs

Ready to explore your options? See our latest cash ISAs and find one that fits your savings goals.