ISAs

An ISA, short for Individual Savings Account, is a type of savings account where you do not have to pay tax on the interest or returns your money earns¹. Each tax year you can deposit up to £20,000 without the returns being taxed, and any returns you earn are free from UK Income Tax and Capital Gains Tax². The allowance can be split across different types of ISA, so you might hold some in cash and some in investments, or keep it all in one place².

ISAs were introduced on 6 April 1999, replacing the earlier Personal Equity Plans (PEPs) and Tax-Exempt Special Savings Accounts (TESSAs)⁴, and they have now been available for 25 years⁵. They are savings and investment plans which allow you to save a certain amount of money each year tax free, with one important exception: savings and investments in ISAs are free of tax except inheritance tax⁶.

What an ISA is and what it offers

An ISA is a wrapper rather than a product in itself. You put cash or investments inside it, and whatever the money earns, whether interest on cash or growth and dividends on investments, is free from UK Income Tax and Capital Gains Tax³. The government describes ISAs simply as a way to save money tax free¹⁰. The estimated cost to the Exchequer of that tax relief was around £9.4 billion in 2024 to 2025, which gives a sense of the scale of the benefit being given up by savers who do not use their allowance⁴.

The allowance is what makes the wrapper worth having. You can deposit up to £20,000 each tax year without paying tax on the returns², and the £20,000 can be split across different types of ISAs, such as cash ISAs and stocks and shares ISAs¹¹. Interest earned inside a cash ISA does not count towards your allowance, so a full ISA can grow well beyond £20,000 over time¹².

There are limits to what the wrapper protects. ISAs are free of tax with the exception of inheritance tax, so an ISA is not a way to pass wealth on untaxed⁶. Money taken out of an ISA loses its tax-free status, meaning that once withdrawn, returns earned on it afterwards are no longer sheltered⁶. And the tax-free treatment only holds while the account satisfies the ISA regulations: the account manager must notify you if your account is or will become no longer exempt from tax¹³.

The four types of adult ISA

There are four main types of ISA for adults: the cash ISA, the stocks and shares ISA, the Innovative Finance ISA and the Lifetime ISA⁴. On top of these there is a Junior ISA for children, and you can split your annual allowance across the adult types¹⁴.

The cash ISA remains the most popular option¹⁶. An Innovative Finance ISA, sometimes called a crowdfunding ISA, lets you use your ISA allowance for peer-to-peer lending, which matches investors with borrowers who could be individuals, businesses or property developers¹⁰. Peer-to-peer lending carries the risk that borrowers default, which is a materially different risk from a savings account, and the lending partners on one such platform always take at least 20% of each loan, which the provider describes as lowering the risk to investors if a borrower defaults¹⁷.

Each type has its own eligibility rules, particularly the Lifetime ISA, which is restricted by age and purpose, and the Junior ISA, which is held in a child's name. The dedicated pages on cash ISAs, stocks and shares ISAs, Innovative Finance ISAs and Lifetime ISAs cover each in detail.

ISA allowance: £20,000 each tax year

The ISA subscription limit is £20,000 per tax year¹⁸. During the 2026-27 tax year, which runs from 6 April 2026 to 5 April 2027, you can place up to £20,000 into an ISA¹⁹. The allowance covers new money paid in during the tax year; interest you earn on money already inside a cash ISA does not use any of it¹².

You can split the £20,000 across different types of ISAs, for example some into cash and some into stocks and shares¹¹. The overall allowance is set to remain at £20,000²⁰, and the government has confirmed the annual subscription limit will stay at £20,000 until April 2031⁷.

The one figure that changes is the cash ISA limit for under-65s from April 2027, covered below. Everything else about the allowance is per person: it is not shared with a spouse or partner, and each adult has their own £20,000. The full rules on how the allowance works, including how it interacts with transfers and previous years, are on the ISA allowance page.

Use it or lose it: the allowance does not carry over

You cannot carry over unused ISA allowance into the next tax year, and your allowance resets every 6 April³. If you deposit £10,000 one year, you cannot deposit £30,000 the next year to make up the difference¹¹. The allowance does not roll over if it is not used: instead you lose it²¹.

The tax year ends on 5 April every year, and you must use all of your allowance by that date or lose it²². In practice this makes late March and early April the busiest period for ISA opening, though there is nothing in the rules that rewards waiting: the allowance is the same whenever in the year you use it.

Two things soften the loss. First, money already inside ISAs from previous years keeps its tax-free treatment forever, whether or not you add anything new²². Second, interest earned inside a cash ISA does not count towards the allowance, so an ISA funded in earlier years can keep growing without ever touching the current year's limit¹². The tax year deadline page covers the timing in detail.

Paying into more than one ISA

Since 6 April 2024, the rules permit an individual to subscribe to more than one ISA account of the same type in a tax year⁹. You can open as many different adult ISA accounts as you like, as long as you keep within the ISA allowance rules³. One consumer guide puts it plainly: you can now open and pay into an unlimited number of ISAs in the same tax year²³.

Before April 2024 the position was different: you could generally only pay into one ISA of each type per year. The change means you could open two cash ISAs and contribute to two stocks and shares ISAs in the same year, but you still cannot exceed the £20,000 allowance across them¹⁹. You can have cash ISAs with multiple providers and pay into each of them within the same tax year, providing you do not exceed the overall £20,000 limit, or the £12,000 cash limit for under-65s from April 2027²⁴.

The Lifetime ISA is the exception. Individuals can open and pay into one Lifetime ISA per tax year, though they are free to have multiple accounts with different providers over the years²⁵. NS&I confirms the same rule change from its own product perspective: you can now open and pay into more than one ISA of the same type in a tax year²⁶. The multiple ISAs in one year page works through the combinations.

Cash ISA changes for under-65s from 6 April 2027

The biggest change to ISA rules in years takes effect on 6 April 2027. The government is reducing the annual cash ISA subscription limit to £12,000 for individuals aged under 65⁸. The measure amends the Individual Savings Account Regulations 1998 to make the change²⁷. For investors aged 65 or over, the annual cash ISA limit will remain at £20,000²⁸.

The higher limit for over-65s is deliberate. In recognition of the need of those approaching retirement to restructure and derisk their investments, the government has retained the £20,000 limit and allows transfers into cash ISAs for this group²⁸. The over-65 entitlement applies from the start of the tax year in which an individual turns 65²⁹.

The change only applies to new deposits made from April 2027 and will not have any impact on savings already held¹¹. The overall ISA allowance remains at £20,000 for everyone, so an under-65 who wants to put the full £20,000 in can still do so through stocks and shares ISAs, Innovative Finance ISAs or a Lifetime ISA.

Two anti-circumvention rules stop the £12,000 limit being sidestepped. First, transfers from a stocks and shares ISA or Innovative Finance ISA to a cash ISA are prohibited where the account holder is below the age of 65²⁸. Second, a charge will apply to any interest paid on cash held in a stocks and shares or Innovative Finance ISA, so parking money as cash inside an investment ISA to mimic a cash ISA will not be tax free⁷. The transfer restriction is disapplied for those aged 65 and over, from the start of the tax year in which they turn 65²⁹. It will remain possible to transfer from a cash ISA to a non-cash ISA³¹.

The cash ISA limit changes page covers the transition in full, and the over-65s cash limit page covers the retained £20,000 limit.

Who can open an ISA

All UK residents aged 18 or over can have a cash ISA or a stocks and shares ISA³⁰. Crown employees serving overseas, or individuals married to such employees, are also eligible to open ISAs despite not being UK resident³⁰. Adult cash ISAs are available to children from the age of 16, and eligible children can hold both a Junior cash ISA and an adult cash ISA at the same time⁴.

Residency is the key test. You cannot open an ISA if you are resident abroad². One peer-to-peer provider states the practical consequence for people who move overseas: you can no longer put money into an ISA after the tax year you move abroad, unless you are replacing withdrawn money under flexible ISA rules¹⁷.

Junior ISAs work differently. A Junior ISA can only be opened and managed by the child's parent or guardian, though there are different rules for others to pay in³². NS&I adds that a 16 or 17 year old who is resident in the UK, or a UK Crown servant, or married to or in a civil partnership with a UK Crown servant, can open a Junior ISA for themselves³³. The who can open an ISA page sets out the full eligibility rules, and the Junior ISA pages cover children's saving.

ISAs are strictly single-name accounts. An ISA is an account to which only one qualifying individual subscribes¹³, and you cannot have two account holders on a cash ISA, so couples cannot use them to save together³⁴. The joint names page covers the alternatives.

Transferring an ISA without losing the tax-free status

You can shift money saved in previous years from ISA to ISA, switching provider, without losing the tax breaks²². You can also transfer existing cash ISAs and stocks and shares ISAs into a new stocks and shares ISA without affecting your allowance¹⁹. This is the crucial point: a transfer is not a withdrawal, so the money never leaves the ISA wrapper and never loses its tax-free status.

The method matters. Do not withdraw your money out of your other ISAs to transfer, as it could impact your current ISA allowance¹⁵. Once money is withdrawn rather than transferred, paying it back in counts as a new subscription against the current year's allowance, unless the account is flexible. The how to transfer an ISA page gives the step-by-step process.

What you can transfer depends on the type. Funds invested in a stocks and shares ISA can only be transferred to another stocks and shares ISA; funds in a cash ISA can be transferred to a stocks and shares ISA or another cash ISA⁴. You can transfer any money already within a cash ISA or stocks and shares ISA to an Innovative Finance ISA offered by a peer-to-peer provider¹⁵. From April 2027, transfers from stocks and shares or Innovative Finance ISAs into cash ISAs are prohibited for under-65s²⁸.

Timing is regulated. The business period for implementing transfer or withdrawal instructions must not exceed 30 days, subject to exceptions for certain innovative finance and stocks and shares investments¹³. On the account investor's instructions, the account or agreed parts of it must be transferred to another account manager¹³, and partial transfers of current-year subscriptions are allowed⁹. If a transfer goes wrong, the compensation for delayed transfers page explains your rights.

Taking money out: flexible and non-flexible ISAs

Whether you can pay money back in after withdrawing it depends on whether your ISA is flexible. A flexible ISA, which can be a cash ISA or a stocks and shares ISA, allows you to withdraw money and pay it back in again within the same tax year without it affecting your ISA allowance³. Flexible ISAs let you withdraw funds and replace them without the replacement counting further towards your allowance, as long as this is done into the same account and in the same tax year²⁴.

An ISA that is not flexible will count every deposit made as part of your ISA allowance³. So on a non-flexible account, if you pay in £20,000, withdraw £5,000 and then pay the £5,000 back, the replacement deposit counts towards your allowance again, and the account has received more than the £20,000 limit in total deposits for that tax year.

This flexibility is not compulsory and is not available on all ISAs, so a saver's provider will confirm whether a particular account is flexible before any money is withdrawn³⁰. The distinction matters most for savers who need temporary access to their money but want to keep it inside the tax-free wrapper. The flexible ISAs and taking money out pages cover the mechanics, and the withdrawal tax page covers what happens to money once it leaves.

Tax: what ISAs shelter and what they do not

All interest received on assets held within ISAs is entirely tax free³⁶. The Personal Savings Allowance does not apply to any growth or interest paid in an ISA²⁹, which means ISA interest does not use up the allowance you have for interest on ordinary savings elsewhere. NS&I states the position for its own Direct ISA in the same terms: the interest you earn is tax free, so it will not count towards your Personal Savings Allowance²⁶. Independent guidance confirms that interest in a cash ISA is not taxed²⁴.

The ISA wrapper also shelters investments from Capital Gains Tax and dividends from Income Tax³. This is the main practical difference between a stocks and shares ISA and an ordinary investment account, where gains above the annual exempt amount and dividends above the allowance are taxed.

There are two things the wrapper does not do. First, it does not protect against inheritance tax: savings and investments in ISAs are free of tax with the exception of inheritance tax⁶, and if inherited by anyone other than a spouse or civil partner, ISAs are included as part of the estate for inheritance tax calculations³⁷. Second, from April 2027 the new charge on interest paid on cash held in a stocks and shares or Innovative Finance ISA means cash sitting in an investment ISA will no longer be tax free for under-65s⁷.

The ISAs and tax page works through each element of tax treatment, and the cash ISA vs savings account comparison covers when the tax-free wrapper makes a real difference.

Going over the allowance and what happens

The ISA rules are enforced through the account manager. The account investments must be in the beneficial ownership of the account investor, or of the named child in the case of a junior ISA, and the manager must notify you if your account is or will become no longer exempt from tax because of a failure to satisfy the regulations¹³. Paying in more than your allowance is the most common way this happens.

Money that breaks the rules is treated as an invalid subscription: it loses its tax-free status, and interest or growth on it becomes taxable. The practical consequence is usually a correction by the provider rather than a penalty, but the tax-free treatment of the excess is lost. The invalid subscriptions page explains how corrections work and what to do if your provider tells you your account has broken the rules.

One situation can increase your allowance rather than breach it. If your spouse or civil partner dies, you may still be entitled to an increased allowance even if the ISA money itself is left to someone else, and it can be funded with your own money³⁸. So if you left £50,000-worth of ISA assets to your child, your partner would still be entitled to an increased ISA allowance³⁸. This is the additional permitted subscription, covered in full on the inheriting a spouse's ISA allowance page.

ISAs after death: spouses, civil partners and inheritance tax

ISAs can be handed to your spouse or civil partner tax free, and they will get an extra ISA allowance equivalent to the value of the ISA inherited³⁷. NS&I describes the same rule from the provider's side: you can now inherit an additional ISA allowance if your spouse or civil partner dies, up to the value of their ISA at the date of death²⁶.

The treatment is different for everyone else. If inherited by anyone other than a spouse or civil partner, ISAs are included as part of the estate for inheritance tax calculations³⁷. The ISA wrapper's tax-free treatment ends on death, and the money passes under the will or the rules of intestacy like any other asset.

The extra allowance is worth planning around, because it is per person and separate from the survivor's own annual allowance. Under the ISA rules you can only open and pay into one cash ISA and one stocks and shares ISA per tax year in the ordinary way, but you will not breach those rules if you open an ISA for the sole purpose of transferring inherited savings³⁸. The what happens to an ISA when someone dies page covers the process, and the Lifetime ISA on death page covers that product's own rules.

Help to Buy ISAs: closed to new savers

The Help to Buy: ISA scheme was closed to new accounts on 30 November 2019⁴, and the Welsh Government confirms the scheme closed to new customers in 2019³⁹. No new accounts can be opened, so anyone looking for a first-home bonus today is directed to the Lifetime ISA instead.

Existing account holders were not shut out. Help to Buy: ISA account holders can continue saving into their existing accounts, and the scheme's accounts close to contributions on 30 November 2029⁴. After that date no further payments can be made, and the government bonus must be claimed by 1 December 2030.

The Help to Buy ISA page covers the closing arrangements, and the moving a Help to Buy ISA into a Lifetime ISA page covers the alternative for those still saving towards a first home.

Who provides ISAs in the UK

ISAs are offered across the whole UK savings and investment market, from high street banks and building societies to investment platforms and specialist providers. NS&I, the government's own savings provider, offers a Direct ISA alongside its Junior ISA²⁶. Building societies such as Bath, Newcastle, Newbury, Monmouthshire and Skipton offer cash, junior and Lifetime ISAs. Investment platforms including interactive investor, Hargreaves Lansdown, Zopa and Dodl offer stocks and shares and Lifetime ISAs.

Specialist providers fill particular niches. Loanpad, for example, offers an Innovative Finance ISA backed by property finance: it provides shorter-term loans of 3 to 24 months for property development, bridging or business funding, and its lending partners always take at least 20% of each loan, which the provider says lowers the risk to investors if a borrower defaults¹⁷. Innovative Finance ISAs of this kind are not savings accounts: the capital is at risk if borrowers fail to repay.

The choice of provider affects the products available, the minimum deposits, the fees on investment ISAs and the service standards, but not the tax treatment: the ISA wrapper works the same way whoever holds it. The ISA fees and charges page covers what investment platforms charge, and the ISA promotions and transfer offers page covers the incentives providers use to attract transfers.

How your ISA is protected, and where to complain

Money in a cash ISA is protected in the same way as money in an ordinary savings account with the same provider, through the Financial Services Compensation Scheme up to £120,000 per person per firm, a limit that has applied since 1 December 2025. Investments in a stocks and shares ISA are covered differently: the FSCS protects against provider failure, not against investment losses. The how your ISA is protected page explains the detail.

If something goes wrong with the administration of an ISA, a failed transfer, a wrongly recorded subscription, a missing payment, the Financial Ombudsman Service can consider complaints about individual savings accounts¹⁰. The ombudsman is free to use and can award compensation where a provider has got things wrong. The complaining about an ISA provider page sets out the process in order.

The rules have moved repeatedly over the ISA's lifetime, and knowing the timeline helps make sense of accounts opened years ago. ISAs were introduced in 1999 and the allowance was originally lower, only reaching £20,000 in 2017¹². The April 2024 changes allowed multiple subscriptions of the same type⁹, and the April 2027 changes split the cash limit by age⁸. The overall £20,000 limit is frozen until April 2031⁷, which gives some certainty for planning, though future governments can change ISA rules as they have throughout the product's history.