Cash ISA

Cash ISAs are an efficient savings instrument, allowing owners to receive interest on cash without being subject to income tax. Cash ISA returns can be fixed rate where a predetermined interest rate is paid over a period of time, or variable rate where the interest rate is typically lower and can change up/down (the benefit being that investors can withdraw cash at any time). In the short term there is a perceived lower level of risk attached to Cash ISAs. However, capital within a Cash ISA is susceptible to the effects of inflation, which refers to the depreciation or decrease in value of a currency, this should be a consideration for anyone considering this ISA format. The annual deposit limit for the Cash ISA is £20,000 with interest rates varying across different providers. It is also worth noting that the UK government provides various savings and tax on interest exemptions, which if applicable could render Cash ISA use ineffective.