With savings rates rising and inflation slowly easing, many savers are asking the question: Are Cash ISAs worth it in 2025?

As Independent Financial Advisers in the UK, we regularly speak to clients confused by the many savings options out there.

Cash ISAs used to be a no-brainer, but with the Personal Savings Allowance (PSA) and higher interest rates on regular savings accounts, their role has changed.

What Is a Cash ISA?

A Cash ISA (Individual Savings Account) allows you to earn interest on your savings without paying tax on it.

In the 2025/26 tax year, you can still save up to £20,000 per year into ISAs (across Cash, Stocks & Shares, Lifetime, and Innovative Finance ISAs combined).

So why the confusion?

The Rise of the Personal Savings Allowance

Since 2016, basic-rate taxpayers can earn £1,000 in savings interest each year without paying tax, thanks to the PSA.

Higher-rate taxpayers get a £500 allowance. For most people, this means you no longer need a Cash ISA to avoid tax.

“For the average saver, a Cash ISA might not provide any extra benefit over a high-interest savings account,” says Sarah Coles, head of personal finance at Hargreaves Lansdown.

But that doesn’t mean Cash ISAs are useless-far from it.

Read if you should go all out on ISA’s

When a Cash ISA Still Makes Sense

There are several situations where a Cash ISA remains a smart choice:

  • Larger savings pots: If you have over £50,000 in savings, your interest could exceed the PSA, especially with savings rates between 4–5%.
  • Future-proofing against rate cuts: If the PSA is reduced or scrapped (as has been rumoured), ISAs offer long-term tax sheltering.
  • Flexibility in inheritance planning: Cash ISAs can be passed to a spouse or civil partner via the Additional Permitted Subscription (APS), helping protect wealth.
  • Teen savers: Those aged 16 and 17 can hold a Cash ISA and earn interest tax-free before they even start paying income tax.

Alternatives Worth Considering

If you’re saving for the longer term, particularly for retirement or inflation-beating growth, you may be better off looking beyond Cash ISAs.

“Cash is safe but it rarely keeps up with inflation,” we often tell clients. “For long-term goals, Stocks & Shares ISAs or pensions are often more effective.”

The Verdict

So, are Cash ISAs worth it in 2025?

It depends. If you’re a higher-rate taxpayer, have substantial savings, or simply want peace of mind knowing your interest is always tax-free, then yes, they can still play a valuable role.

But if your savings interest is comfortably within your PSA and you’re chasing the best rates, a regular savings account may serve you better-at least for now.

Need help making the most of your savings in 2025?
We offer clear, impartial advice to help you choose the right savings and investment options for your financial goals. Get in touch today for a no-obligation chat.