Individual Savings Accounts (ISAs)

Introduction

Individual Savings Accounts (ISAs) let you save or invest up to £20,000 each tax year completely free from income tax and capital gains tax. You don't pay tax on interest, dividends, or investment growth, and you don't need to report ISAs on your tax return. There are four types of ISA available, each designed for different saving and investment goals.

What are ISAs and why use them?

ISAs are tax-efficient savings and investment accounts that shelter your money from tax. Unlike ordinary savings accounts or investment portfolios, you pay no tax on:

• Interest earned on cash savings
• Income from investments (such as dividends)
• Capital gains when your investments increase in value

This makes ISAs particularly valuable if you've already used up your personal savings allowance or dividend allowance, or if you're a higher earner who doesn't benefit from these allowances.

You don't need to declare ISA income or gains on your Self Assessment tax return, which simplifies your tax affairs.

Annual ISA allowance

For the 2025/26 tax year (running from 6 April 2025 to 5 April 2026), you can save up to £20,000 across all your ISAs. This is the total amount you can contribute — not £20,000 per ISA type.

You can split this allowance across multiple ISAs as you wish. For example:

• £15,000 in a cash ISA, £2,000 in a stocks and shares ISA, and £3,000 in an innovative finance ISA
• £10,000 in one cash ISA, £3,000 in another cash ISA, and £7,000 in a stocks and shares ISA
• £11,000 in a cash ISA, £2,000 in a stocks and shares ISA, £3,000 in an innovative finance ISA, and £4,000 in a Lifetime ISA

The £20,000 allowance resets each tax year, but your ISAs don't close. Money you've saved in previous years remains in your ISA and continues to grow tax-free.

Types of ISA

Cash ISAs

Cash ISAs work like ordinary savings accounts but without tax on the interest. You can hold:

• Savings in bank and building society accounts
• Certain National Savings and Investments products

Stocks and Shares ISAs

These ISAs let you invest in a range of assets without paying tax on dividends or capital gains. You can hold:

• Shares in companies
• Unit trusts and investment funds
• Corporate bonds
• Government bonds
• Long-term asset funds

You cannot transfer shares you already own into a stocks and shares ISA, unless they come from an employee share scheme. Cryptoasset exchange traded notes cannot be held in a stocks and shares ISA (unless they were already there before 6 April 2026) — these must now go in an innovative finance ISA.

Innovative Finance ISAs

These ISAs are for alternative investments, including:

• Peer-to-peer loans (loans you make directly to people or businesses without using a bank)
• Crowdfunding debentures (investing in a business by buying its debt)
• Funds with notice or redemption periods that make them unsuitable for stocks and shares ISAs
• Cryptoasset exchange traded notes

Long-term asset funds cannot be held in innovative finance ISAs unless they were there before 6 April 2026 — these now belong in stocks and shares ISAs.

You cannot transfer existing non-ISA investments or arrangements into an innovative finance ISA.

Lifetime ISAs

Lifetime ISAs are designed to help you save for your first home or retirement. They can hold either cash or stocks and shares. You must be under 40 to open one, but you must be at least 18.

You can only pay into one Lifetime ISA per tax year, with a maximum contribution of £4,000. This £4,000 counts towards your overall £20,000 ISA allowance.

Lifetime ISAs have different withdrawal rules than other ISAs, so check the specific guidance before opening one.

Who can open an ISA

You must be 18 or over to open an ISA. For Lifetime ISAs specifically, you must be under 40 when you open the account.

You must also be:

• Resident in the UK, or
• A member of the armed forces, a Crown servant (such as diplomatic or overseas Civil Service), or their spouse or civil partner, even if you don't live in the UK

ISAs are individual accounts — you cannot hold one jointly with someone else. For children under 18, Junior ISAs are available instead.

How to open an ISA

You can open an ISA through:

• Banks
• Building societies
• Credit unions
• Friendly societies
• Stockbrokers
• Peer-to-peer lending services
• Crowdfunding companies
• Other financial institutions

You'll need your National Insurance number to open an ISA. Contact your chosen provider directly to open an account with them.

Withdrawing money from your ISA

You can withdraw money from most ISAs at any time without losing the tax benefits on the money that remains invested. Check your ISA terms for any withdrawal charges.

If your ISA is "flexible", you can withdraw money and then pay it back in during the same tax year without it counting towards your annual allowance. Your provider can tell you whether your ISA is flexible.

For example, if you've paid £10,000 into a flexible ISA in 2025/26 and then withdraw £3,000, you can still pay in £13,000 more that tax year (£10,000 remaining allowance plus the £3,000 you withdrew). With a non-flexible ISA, you could only pay in the remaining £10,000.

Transferring ISAs between providers

You can transfer your ISA savings from one provider to another at any time, whether they were saved this year or in previous years. You can transfer to a different type of ISA or the same type.

To transfer, contact the provider you want to move to and complete their ISA transfer form. Don't simply withdraw the money yourself — if you do, you won't be able to reinvest that portion of your allowance.

ISA transfers should take:

• 15 working days for cash ISA to cash ISA transfers
• 30 calendar days for other types of transfer

Some innovative finance ISAs may have restrictions on transferring investments (though you can usually transfer cash out). Check with your provider about any restrictions or charges.

If your transfer takes longer than these timescales, contact your ISA provider. If you're unhappy with their response, you can contact the Financial Ombudsman Service.

If you move abroad

If you move abroad and become a non-UK resident, you cannot pay into your ISA unless you're a Crown employee working overseas or their spouse or civil partner. You must tell your ISA provider if you move abroad.

Sources

• Individual Savings Accounts (ISAs)

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.