Types of ISA

An ISA, or Individual Savings Account, is a type of savings account where you do not have to pay tax on the interest or returns your savings earn¹. There are four main types of ISA for adults: the cash ISA, the stocks and shares ISA, the Innovative Finance ISA and the Lifetime ISA². There is also a Junior ISA for children³. All of them share one key feature: money held in them is free from UK Income Tax and Capital Gains Tax on the returns it generates⁴.

The amount you can pay in is capped at £20,000 per tax year across all your adult ISAs combined, and you can split that allowance between different types, for example some into cash and some into investments⁵. The rules are changing from 6 April 2027, when the amount under 65s can pay into cash ISAs will be cut to £12,000 a year, with the rest of the £20,000 still available for the other ISA types⁶. Savers aged 65 and over keep the full £20,000 cash ISA allowance⁷.

The four types of ISA for adults

Official statistics describe the four main types of ISA as the cash ISA, the stocks and shares ISA, the Innovative Finance ISA and the Lifetime ISA². The legislation that underpins ISAs sets out the same list: an ISA must be set up as a stocks and shares account, a cash account, an innovative finance account or a Lifetime ISA¹¹. Alongside the adult types there is a Junior ISA for children, and you can split your annual allowance across the different types you hold³. The cash ISA remains the most popular option of the four¹².

Each type does a different job with your money. A cash ISA works like a tax-free savings account; a stocks and shares ISA invests your money on the stock markets; an Innovative Finance ISA lends your money out to borrowers; and a Lifetime ISA is designed specifically for saving towards a first home or retirement⁴. Choosing between them is usually about how much risk you want to take, what you are saving for, and your age, since the Lifetime ISA has an age window and the Junior ISA belongs to children.

The table below sets the four adult types side by side. Each has its own page in this guide with much more detail on how it works.

Cash ISA: tax-free interest on savings

A cash ISA works like a tax-free savings account: you pay money in, the provider pays interest, and no tax is taken off that interest⁴. With an ISA, any returns you earn are free from UK Income Tax and Capital Gains Tax⁴. For most savers the practical difference from an ordinary savings account is simply that the interest is not counted as taxable income, which matters if your savings interest would otherwise push you over your tax-free allowance.

Cash ISAs are available to children from the age of 16, which makes them the only adult ISA someone of that age can open in their own right². The rules on how much can go into a cash ISA are changing: from 6 April 2027 the annual limit falls to £12,000 for people under 65, while savers aged 65 and over keep the full £20,000⁷. That change is covered in full later in this page, and in our guide to the cash ISA limit changes.

Within the cash ISA category there are further choices that affect how your money behaves. Easy access cash ISAs let you withdraw at any time, while fixed rate cash ISAs lock your money for a set term, usually in exchange for a higher rate, and can charge for early access. These are explained in cash ISAs explained and fixed rate cash ISAs, and the comparison between the two is set out in fixed rate or easy access. Whether a cash ISA beats an ordinary savings account for you depends on your tax position, which is covered in cash ISA vs savings account.

Stocks and shares ISA: investing without tax on gains

A stocks and shares ISA is a tax-free investment account that lets you put money into a range of different investments¹⁴. The money you pay in is invested on the stock markets rather than sitting as cash⁴. Returns on investments held in stocks and shares ISAs are free of income tax, dividend tax and capital gains tax¹⁵, which is what separates them from investing through an ordinary taxable account.

The range of investments is wide, and not everything qualifies: the rules on what can and cannot be held are covered in what investments a stocks and shares ISA can hold. You can also choose how hands-on to be. Some people pick their own shares and funds, while others use a ready-made portfolio where the provider makes the decisions, explained in ready-made and managed ISAs. There are options for people who want their money invested ethically, in ethical and sustainable ISAs, and for savers who need investments compliant with Islamic law, in Sharia-compliant ISAs.

The trade-off compared with a cash ISA is risk. Money invested on stock markets can fall in value as well as rise, and the tax-free wrapper does not protect you from investment losses. What it does is remove the tax on whatever gains and income the investments produce¹⁵. Costs also differ from cash ISAs: platforms and funds charge fees for managing investments, which are explained in ISA fees and charges. The two types are compared side by side in cash ISA vs stocks and shares ISA, and against holding investments outside a wrapper in stocks and shares ISA vs general investment account.

Innovative Finance ISA: peer-to-peer lending

Innovative finance ISAs, sometimes called crowdfunding ISAs, let you use your ISA allowance for peer-to-peer lending⁴. Peer-to-peer lending matches up investors with borrowers, who could be individuals, businesses or property developers¹⁴. Rather than your money sitting in a bank or being invested in shares, it is lent out and you earn the interest the borrowers pay, with the ISA wrapper meaning that interest is free of tax.

The government introduced the Innovative Finance ISA as a new type of ISA specifically so that interest and gains from peer-to-peer loans could benefit from ISA tax advantages¹⁶. The regulations creating it came into force in 2016, establishing the innovative finance account as a new type of Individual Savings Account¹⁷, offered by peer-to-peer lending platforms with the appropriate regulatory permissions¹⁶. The consultation that led to it ran alongside the existing cash ISA and stocks and shares ISA¹⁸, and the Financial Conduct Authority consulted on the rules for the new component, allowing loan-based crowdfunding investments to be included in ISAs¹⁹. Qualifying investments can be either a peer-to-peer arrangement between a borrower and lender, or a debenture issued by a company or charity¹¹.

You can transfer money that is already within a cash ISA or a stocks and shares ISA into an innovative finance ISA offered by a peer-to-peer provider¹⁴. The main thing to weigh is risk: peer-to-peer loans are not savings, and if borrowers do not repay, you can lose money. The protections are also different from a bank account, as explained in how your ISA is protected. The comparisons with the other types are in Innovative Finance ISA vs cash ISA and Innovative Finance ISA or stocks and shares ISA, and the full guide is at Innovative Finance ISAs.

Lifetime ISA: saving for a first home or retirement

The Lifetime ISA is the only ISA type with an age window: you must be 18 or over but under 40 to open one⁹. It is designed for two savings objectives, house purchase and saving for retirement, either in the alternative or in combination²⁰. The rules require providers to make these objectives clear, along with the types of qualifying investments the account can hold²⁰.

A Lifetime ISA can hold the same kinds of investments as the other types: any type of investments which would qualify to be held in a cash ISA or a stocks and shares ISA can be held in a Lifetime ISA¹³, and the legislation defines qualifying investments for a Lifetime ISA component as both the stocks and shares and cash kinds²¹. In practice, the money can be put into either cash accounts or stocks and shares²². Individuals can open and pay into one Lifetime ISA per tax year¹⁰, which is stricter than the rules for other types.

The Lifetime ISA has its own subscription limit within the overall allowance, and the government adds a bonus to contributions, which is why it is often compared with a pension for retirement saving. The details are in Lifetime ISA explained, how much is the Lifetime ISA government bonus and Lifetime ISA or workplace pension. For the first home route, the savings must be used to buy a home with a mortgage²³, and the Lifetime ISA can be used towards a deposit for the Scottish Government's First Homes Fund alongside a Help to Buy ISA²⁴. The property price cap is covered in Lifetime ISA property price limit, and the buying process in buying your first home with a Lifetime ISA and using a Lifetime ISA for shared ownership.

Junior ISA for children

A Junior ISA is a tax-advantaged savings product available to children²⁶. It comes in both cash and stocks and shares forms: NS&I's Junior ISA, for example, is a cash ISA⁴. Junior ISAs were made available by the government from 1 November 2011, in both types, and around 300,000 children have one²⁷. A Junior ISA has its own allowance, separate from the adult £20,000, and money in it belongs to the child, who takes control at 18.

Who can open one has its own rules. A Junior ISA application may be made by a person who is over 16²⁶, which in practice means a parent or guardian opens it for a younger child, while someone over 16 can apply for one themselves. A child aged 16 or 17 can hold both a Junior ISA and an adult cash ISA at the same time². Children with a Child Trust Fund can also hold a Junior ISA, and money can be moved between them, as explained in Child Trust Funds, moving a Child Trust Fund into a Junior ISA and can a child have a Junior ISA and a Child Trust Fund.

The practical questions parents ask are covered in dedicated guides: who can open a Junior ISA, how much can I put in a Junior ISA, cash Junior ISA vs stocks and shares Junior ISA, what happens to a Junior ISA at 18, whether money can be taken out before 18, and moving Junior ISA money into a Lifetime ISA. There is also a version for children in local authority care, in Junior ISAs for children in care, and a comparison with a children's pension in Junior ISA or Junior SIPP.

The £20,000 ISA allowance is shared across all types

The ISA Regulations provide a single overall annual ISA subscription limit of £20,000⁷. That £20,000 is not per account and not per type: it is the total you can pay in across all your adult ISAs in a tax year, and you can split it across different types, such as cash ISAs and stocks and shares ISAs⁵. The legislation confirms the same figure, with the annual cash ISA limit for those below 65 set at £12,000 within the overall annual ISA limit of £20,000²⁸.

The allowance resets each tax year and does not roll over: any unused allowance is lost at the end of the tax year, which is why the weeks before 5 April see a rush of last-minute subscriptions. The timing is covered in the ISA deadline and the end of the tax year, the full rules in the ISA allowance, and past years' figures in ISA allowances in past tax years. Transfers between providers do not use up the allowance, as explained in does transferring an ISA use my allowance.

The allowance has not always been this high. Historic cash ISA limits were £3,600 in 2008 to 2009, £5,100 in 2010 to 2011, £5,340 in 2011 to 2012, £5,640 in 2012 to 2013 and £5,760 in 2013 to 2014, with the overall limits in those years roughly double those figures². The overall limit for 16 to 18 year olds, who could then only invest in cash ISAs, was raised from £5,940 to £15,000 in July 2014²⁹.

From April 2027, cash ISAs are capped at £12,000 for under 65s

At Budget 2025 the government announced that, from 6 April 2027, the annual cash ISA subscription limit for individuals aged under 65 will be reduced to £12,000⁷. For investors aged 65 or over, the annual cash ISA limit will remain at £20,000⁷. The Treasury Committee's report on the change records the Cash ISA limit set at £12,000 from April 2027 for under 65s, with savers over 65 continuing to be able to save up to £20,000 in a cash ISA each year⁶. The Budget documents describe it as a cash limit of £12,000 within the overall annual limit of £20,000³⁰.

The legislation sets the boundary precisely: in any year in which a qualifying individual is 64 or under at the end of that year, the subscription limit in relation to cash accounts is £12,000 per year³¹. Individuals aged 65 and over will benefit from a higher cash ISA limit of £20,000, with entitlement applying from the start of the tax year in which an individual turns 65³². The government's stated rationale for keeping the higher limit for older savers is recognition of the need of those approaching retirement to restructure and derisk their investments²⁸.

The change is paired with new anti-circumvention rules. Transfers from non-cash ISAs into cash ISAs will not be permitted, while it will remain possible to transfer from a cash ISA to a non-cash ISA³³. The legislation provides that 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. The transfer restriction will be disapplied for those aged 65 and over³², and the charge on interest earned on cash held in non-cash ISAs, along with the prohibition on 100% cash-like investments, will remain in place³². The anti-circumvention rules are designed to prevent transfers from non-cash ISAs into cash ISAs for the under 65s³⁴.

Until 6 April 2027, the current rules apply: funds invested in a stocks and shares ISA can only be transferred to another stocks and shares ISA, while funds in a cash ISA can be transferred to a stocks and shares ISA or another cash ISA². Independent guidance confirms the same picture, that from April 2027 the amount under 65s can pay into cash ISAs will be cut to £12,000 a year³⁵. The consultation on the amending regulations confirms that for investors aged 65 or over the annual cash ISA limit will remain at £20,000³⁶. The full detail of the change, including what it means for existing accounts, is in changes to the cash ISA limit and cash ISA limit for over 65s.

Paying into more than one ISA of the same type

The ISA rules changed on 6 April 2024: you can now open and pay into more than one ISA of the same type in a tax year⁸. The legislation behind that change permits an individual to subscribe to more than one ISA account of the same type in a tax year³⁷, and the amending regulations were made to permit exactly that¹¹. There is no specific limit for how many ISAs you can hold overall, and for most types of ISA you can now have, open and pay into multiple accounts of the same type in the same tax year³⁵.

The exceptions are the Lifetime ISA, where individuals can open and pay into one per tax year¹⁰, and the Junior ISA, which sits outside the adult rules. You can open as many different adult ISA accounts as you like, as long as you keep within the ISA allowance rules⁴. The combined effect is flexibility: in a single tax year you could, for example, pay into two cash ISAs with different providers and a stocks and shares ISA, so long as the total across all of them stays within £20,000 and, from April 2027, your cash payments stay within £12,000 if you are under 65.

The detail on how this works in practice, including the position before April 2024, is in can I pay into more than one ISA in a year. If you accidentally pay in too much, the rules on what makes a subscription invalid are in when an ISA subscription breaks the rules.

Tax on money taken out, and where protection comes in

Income you earn from an ISA is not taxable³⁸. Taking money out does not create a tax bill: the tax-free treatment applies to the returns your money earns, and withdrawals themselves are not taxed as income. With a flexible ISA, money you take out and later replace does not use up your allowance again, which is explained in flexible ISAs and do I pay tax if I take money out of an ISA. The Lifetime ISA is the exception to watch: withdrawals outside the permitted reasons attract a charge, covered in the Lifetime ISA withdrawal charge.

The tax rules in full, including what is and is not tax free, are in ISAs and tax. ISAs sit alongside other tax-free allowances: income from them does not count as taxable income, and the interaction with pensions and other savings is part of the wider picture in personal tax and pensions.

Protection works on two levels. First, the rules: ISA managers are regulated by the Financial Conduct Authority, and if something goes wrong with how an account was run, you can complain to the provider and then to the Financial Ombudsman Service, which handles complaints about individual savings accounts⁴ and about Lifetime ISAs³⁹. Second, the money itself: cash in an ISA is protected by the deposit protection scheme up to the standard limit, while investments are covered differently, and the detail is in how your ISA is protected and complaining about an ISA provider. If a transfer between providers goes wrong or is delayed, compensation may be available, as explained in compensation if my ISA transfer is delayed.