Does an ISA Count Towards My Personal Savings Allowance?

Why they don't interact

Cash ISAs and Personal Savings Allowance are two independent UK tax shelters for savings interest:

• ISA: interest earned inside an ISA is exempt from income tax entirely. It doesn't appear on your tax return.
• PSA: a set amount of non-ISA savings interest (£1,000 / £500 / £0 by tax band) can be received tax-free.

You get both, in full, side by side. Filling one doesn't reduce the other.

Worked example

You're a basic-rate taxpayer. You have:

• £20,000 in a Cash ISA paying 4.5% → £900 interest, tax-free (ISA).
• £20,000 in an easy-access account paying 4.5% → £900 interest, tax-free (within your £1,000 PSA).

Total interest: £1,800. Tax paid: £0. The ISA interest didn't use any of your £1,000 PSA.

What this means in practice

1. You can (and should) use both allowances every year.
2. Once you're over your PSA on non-ISA savings, moving the excess into a Cash ISA saves you 20-45% tax on the interest going forward.
3. Additional-rate taxpayers (income over £125,140) get zero PSA — every non-ISA pound of interest is taxed at 45%. Using ISAs is essentially mandatory for meaningful cash balances.

Related pages

• PSA calculator — model your own figures
• PSA by tax band 2026/27
• Do I pay tax on savings interest?
• Best Cash ISAs UK
• ISA Hub