Cash ISA or Savings Account: Understanding the differences

Before we compare Cash ISAs vs Savings Accounts, we’ll run through a quick overview of each. 

ISA is an acronym that stands for Individual Savings Account. There are six types of ISA available. They are: 

1. Cash ISAs 
2. Stocks and Shares ISAs 
3. Innovative Finance ISAs 
4. Lifetime ISAs 
5. Help to Buy ISAs 
6. Junior ISAs 

At Shawbrook, we have Cash ISAs available as Easy Access Cash ISAs when you can withdraw at any time, and as Fixed Rate Cash ISAs when you can’t access your money until a certain date, unless you pay a fee. 

There are various types of Savings Accounts. All of them help people save money and pay a level of interest based on the amount you have in the account. 

There are different types of Savings Accounts, including: 

• Easy Access Savings - These allow you to save and access your money at any time so you can earn interest without locking your funds away.  
• Notice Accounts - These require you to give notice before withdrawing your money. 
• Fixed Rate Savings Accounts - Also known as a Fixed Term Savings account. For non-ISA accounts like a Fixed Rate Bond, you are prevented from accessing your money unless you pay a fee. Otherwise, you will have to wait until it reaches maturity (the end of your agreement). 
• Regular Savings Account - Sometimes called a Regular Saver, this account usually pays a higher rate of interest but restricts the amount you can save monthly. Shawbrook doesn’t currently offer this type of Savings Account.  

When deciding between accounts, you should consider the different characteristics such as flexibility and interest rates. In general, you are more likely to earn a higher rate of interest when you lock your money away for a set period. 

For more information about Savings Accounts, visit our Savings main page.  

There are three key components that distinguish an ISA from other types of Savings Accounts. 

1. Tax Benefits 

Tax-efficiency is one the biggest and most obvious difference between an ISA and other Savings Accounts.

ISAs are advantageous for tax purposes because they offer tax-efficiency, allowing you to save up to your annual allowance without paying tax on the interest earned.

This is different to other Savings Accounts where interest can be subject to taxation based on your Personal Savings Allowance (PSA), your Personal Allowance, and your starting rate for savings.

For more visit our What is a Personal Savings Allowance? page. 

Cash ISA Tax-Allowance

In the 2024/2025 tax year, you can save a total of £20,000 into multiple Cash ISAs with different providers at the same time. 

While you can open and save in several Cash ISAs in one tax year, at Shawbrook we only allow you to open one Cash ISA each tax year. 

If you don't use the £20,000 allowance by 5 April 2025, it will be forfeited.

For more in-depth information, visit our Cash ISA Allowance for 2024/2025 page. 

2. Deposit and Balance Limits

With an ISA, you can only pay a maximum of £20,000 per tax year. This limit applies across all the ISAs you hold. However, if you transfer previous years’ ISA funds into a new Cash or Investment ISA, this won’t count towards the current year’s allowance.

For more information, visit our Transferring an ISA to Shawbrook Bank page. 

In addition, Savings Accounts (ISA and non-ISA) will have a maximum balance limit. This will differ across providers and their accounts.

For example, you can deposit a maximum of £85,000 in our Easy Access Account, £250,000 in our Easy Access Cash ISA or £2,000,000 into our 1 Year Fixed Rate Bond.  

3. Opening Multiple Accounts 

You can open as many Savings Accounts as you like. 

You can hold multiple ISAs, of the same type, except for Lifetime ISA and Junior ISA. As mentioned above, in 2024/2025, you can save £20,000 into as many Cash ISAs as you like at one time with different providers, whether it’s new or existing ISAs.   

Although you can now open and save in two or more cash ISAs in the same tax year, providers do not have to allow you to open more than one account with them per tax year. 

Whether a Cash ISA or a Standard Savings Account is best for you will depend on your circumstances. In general, ISAs offer the benefit of being tax-efficient, while Standard Savings Accounts allow you deposit more than £20,000 in a tax year. In addition, there are typically no restrictions on the number of Standard Savings Account you can open with the same provider in the same tax year.  

However, you should make the decision based on your unique needs and budget. There are a variety of options on offer. You should consider every element of an account, including flexibility, interest rate, tax-free benefits and the service of the bank or building society.