Here at Plum, we regularly check in with our customers to make sure we understand the product they want us to build.

Savers are currently benefiting from a sharp rise in interest rates over the past year. And while this can help protect cash from the effects of inflation, many people are now looking for a way to avoid paying tax on the increased interest they can earn on their savings.

The UK Personal Savings Allowance allows basic-rate taxpayers to save £1,000 a year in tax-free interest (just £500 for those in the higher tax bracket). So we wanted to provide our customers with a way to save tax-free.

Introducing The Plum Cash ISA, which offers a special rate of up to 5.17%* AER (including a 0.88% bonus for the first 12 months) for customers who open a new ISA with us.

*Rate as at 26/03/24. Terms & Conditions apply.

What is a Cash ISA?

A Cash ISA is a type of savings account that offers tax-free interest.

The ISA bit stands for Individual Savings Account. This name relates to the fact that each adult in the UK is entitled to a personal allowance of up to £20,000 each year, which allows them to save or invest in a tax-efficient way.

There are 5 types of ISA available:

1. Cash ISA

2. Stocks and Shares ISA

3. Lifetime ISA

4. Innovative Finance ISA

5. Junior ISA

Please note that your capital is at risk if you pick a Stocks and Shares ISA (sometimes called an investment ISA) and you could lose money.

We’ll look at the differences between these ISA types later in the article, but what they all have in common is the fact that they offer tax relief on any earnings (according to ISA rules). For that reason, you may sometimes hear an ISA referred to as a ‘tax wrapper’.

How does a Cash ISA work?

Although there are many different Cash ISAs available, they broadly fall into 2 distinct categories, with both offering tax-free savings:

Fixed-rate Cash ISAs

With a fixed rate Cash ISA, your interest rate stays the same for the ISA term. A fixed-rate Cash ISA may typically mature within 1–2 years, and there will usually be restrictions or penalties if you withdraw money early.

Variable-rate Cash ISAs

The interest offered on a variable rate Cash ISA fluctuates with the BoE base rate. Whilst there are no guarantees about the rate you’ll get in the future, access to your money will normally be more flexible (vs. fixed rate).

The Plum Cash ISA has a variable rate so it’s subject to change, but we’ll always give our customers as much notice as possible when this happens.

Individuals can currently only open one Cash ISA in a given tax year, though this will change for 2024/25) and ISAs can also be transferred between different providers.

Important to remember 💡

Any money you withdraw from an ISA (within your personal allowance limit) will not be credited back onto your allowance for that tax year.

For example, if you contribute your full allowance of £20,000 into a Cash ISA and then withdraw £1,000, you can’t then top up that money again immediately, so you’ll need to wait for the next tax year.

If you don't use your annual ISA allowance before the end of each tax year it’ll be lost and will reset again in the new tax year, on 6th April.

Any money you’ve contributed will maintain its tax-free status as long as you keep the money in your ISA account.

What are the Cash ISA limits?

You can put up to £20,000 into a Cash ISA for the 2023/24 tax year. This annual allowance will also remain frozen for the 2024/25 tax year.

Note that according to Cash ISA rules, any unused allowance is lost at the end of the year and can’t be reclaimed or backdated for previous tax years.

Except for a Lifetime ISA (which has a maximum annual contribution of £4,000), you can contribute your full ISA allowance into a Cash ISA, Stocks & Shares ISA or Innovative Finance ISA. Alternatively, you can split your allowance between some combination of them all!

Should I get a Cash ISA or Stocks & Shares ISA?

A Cash ISA is like a traditional Financial Services Compensation Scheme (FSCS) protected savings account, with interest paid on the balance.

The difference between Cash ISA and Stocks & Shares ISA is that with the latter, your money is invested, so your capital is at risk.

A Stocks & Shares ISA can potentially provide greater returns than a Cash ISA. And any returns you make (either through dividends or an increase in the market value of your investments) are free of Capital Gains Tax (CGT).

How can I open a Plum Cash ISA?

Our Cash ISA is available for UK residents. It’s quick and easy to either open a new ISA or transfer your existing Cash ISA into Plum through the app.

For ISA transfers you can get a rate of 4.29% AER, but new Plum Cash ISAs are also eligible for a Plum Bonus of 0.88% that boosts it to 5.17% AER.

You can start with just £1, but you’ll need to make sure you maintain an account balance of at least £100 (excluding ISA transfers) and make no more than 3 withdrawals in a single year to qualify for your Plum Bonus.

Note that the Plum Bonus is calculated daily and paid after 12 months from the date you open your Cash ISA, if you meet the above conditions. For customers who don’t hold at least £100 in the account and/or who make more than 3 withdrawals in a year, the rate drops to 3.00% AER.

Here are the benefits of a Plum Cash ISA:

A great rate

A much better rate than you might expect to receive from a traditional high-street bank

Quick access

Withdraw in 1 business day, with no additional charges


Pay no tax on any interest you earn on deposits of up to £20,000

A safe option

Protected by the Financial Services Compensation Scheme up to £85,000

It’s free

The Plum Cash ISA is available without subscription fees


How many Cash ISAs can I have?

Eligible individuals can open as many new ISAs as they like.

Currently (for the 2023/24 tax year), you can only pay into 1 of each ISA type in a single tax year. But recently announced changes to ISA rules mean that from 6th April 2024 you’ll be able to open multiple ISAs of the same type (this excludes Lifetime ISAs and Junior ISAs).

Note that this change is not mandatory, so ISA managers may choose to limit subscriptions to only one ISA held with them in any tax year.

Can I transfer money from one ISA to another?

ISAs have strict rules about how much can be paid in each tax year.

An ISA ‘transfer’ is different from simply withdrawing money from one account and depositing it into another, as the transfer process means your money’s tax-free status is still protected.

Ultimately, your ability to transfer your ISA will depend on the ISA account type and the provider’s rules.

Can I open two Cash ISAs in the same year?

Historically, you’ve only been permitted to open one of each ISA type in a given tax year, but as of 6th April 2024, you’ll be allowed subscriptions to multiple Cash ISAs for 2024/25.

ISA limits reset at the end of each tax year, so if you’ve already opened a Cash ISA for the 2023/24 tax year, you’ll be able to open a new one on 6th April (tax-free contributions must still remain within the ISA limit of £20,000).

What happens if I pay into more than one of the same types of ISA in a tax year?

As per the change to ISA regulations for 2024/25 referenced above, you’ll be able to open multiple Cash ISAs in a given tax year.

If you believe you’ve paid into more than one of the same ISA type for the 2023/24 tax year (even if you didn’t go over the overall ISA limit), it’s best to contact your provider and also HMRC to explain the situation.

Note that you shouldn’t attempt to close one of your ISAs, or try to rectify the mistake yourself by withdrawing money until you’ve contacted HMRC using their ISA helpline (0300 200 3300). They’ll confirm what action you should take based on your individual circumstances.

If you don’t notice the mistake yourself, HMRC will pick it up when they consolidate their records at the end of the tax year.

Is a lifetime ISA a Cash ISA?

You may hear ISAs In general referred to as ‘tax wrappers’. And this isn’t just finance jargon, it’s actually a helpful way to think of them when distinguishing between a Cash ISA and a Lifetime ISA (LISA).

A lifetime ISA can actually contain a Cash ISA (or a Stocks & Shares ISA), but they have different rules and the tax treatment is quite different too.

LISAs are specifically designed to help you save for your first home or retirement, and there are penalties for withdrawing for other reasons. You can only open a LISA if you’re aged 18–40, and you can only pay in up to £4,000 per year for a LISA (versus £20,000 for a Cash ISA).

The tax relief on a LISA comes from a 25% income tax bonus from the Government on your contributions, whereas a Cash ISA offers an exemption from income tax on your earnings (within ISA limits).

Please remember that your capital is at risk if you invest your money in a Stocks & Shares ISA.

What happens to my Cash ISA when I die?

If an ISA holder dies, their assets are left to the beneficiaries of their estate named in their will (or if there isn't one, according to the laws of intestacy).

Plum does not provide tax advice or financial advice. Tax treatment depends on individual circumstances and may be subject to change in the future. Always do your own research.

To learn more about a Plum Cash ISA you can check out our website.

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