Cash ISAs are simply savings accounts where the interest is NEVER taxed. You can deposit money into the account, the value will be held in pounds sterling and you will earn interest on the money held in the account.
What does a cash ISA do?
These accounts are usually called easy access cash ISA, which means you have quick easy access to the money if you need to withdraw the money. Putting money into the cash ISA means your money is in a tax wrapper of the £20,000 limit (note £20,000 is the amount deposited into the account/accounts).
Types of cash ISAs:
Just like normal savings accounts, there are a variety of cash ISAs available, including instant access (access money whenever needed), regular savers (may reduce interest rate if to many withdrawals are made) and fixed-rate deals. You don't have to pay to open a cash ISA.
How to set up a cash ISA?
These are normally offered by banks and building societies but investment firms can also offer them. To find out you can inquire at your bank or go onto a comparison site to try and find the best interest rates being offered.
It is mandatory that money held in a cash ISA be made available on request within 15 days but it is permitted to have a loss of interest penalty for this and this is how term deposits are typically made available. Usually deposits of £85,000 have Financial Services Compensation Scheme (FSCS) protection but client money with £50,000 protection or unprotected money is also permitted; the providers are required to make the protection clear.