In British deposit terminology, the term Cash ISA refers to a cash based Individual Savings Account available to U.K. residents. This type of Cash ISA savings account allows residents of the United Kingdom to earn tax free interest on their cash savings, but significant withdrawal penalties may apply.
For example, Cash ISAs are often offered with either a fixed term interest rate like certificates of deposit or they have a maximum monthly deposit. The fixed term interest rate Cash ISA is very much like a regular term or time deposit, with the main difference being that the Cash ISA accrues interest tax free for U.K. residents. While the maximum monthly deposit Cash ISA only allows the purchase of 1/12 of the ISA allowance each month, with the account paying a compound interest rate along with the principal at the end of the term. Many Cash ISAs penalize the depositor significantly for early withdrawals, sometimes by charging a fee or making them forfeit the interest earned at the end of the term.