What is an ISA?
Key takeaways
ISAs let you save or invest tax-free.
You can deposit up to £20,000 per tax year.
There are four main types of ISA, each designed for different goals.
You can split your allowance across multiple ISAs.
How do ISAs work?
ISAs shield your money from tax.
In the 2025/26 tax year, you can put up to £20,000 into one or more ISAs. This is your annual ISA allowance.
The tax year runs from 6 April to 5 April.
Your allowance resets every year (it doesn’t roll over).
You can split your allowance across different ISA types.
You can open and pay into multiple ISAs of the same type in one tax year, as long as you stay within your total £20,000 limit.
Types of ISA
There are four main types of ISA in the UK. Each is designed for a different savings or investment goal.
Cash ISA
What is it?
A savings account where you earn interest tax-free.
Who is it for?
People who want a low-risk place to save money.
Annual allowance
Up to £20,000 (part of your overall ISA limit)
How it works
Cash ISAs work like standard savings accounts. You can choose between:
Easy-access accounts (withdraw anytime)
Fixed-rate accounts (higher rates, but money locked away)
Notice accounts
Pros
Low risk
Guaranteed returns
FSCS protection (up to £85,000 per provider)
Cons
Lower returns than investing over the long term
Stocks and Shares ISA
What is it?
An investment account that lets you buy assets like shares, funds and bonds tax-free.
Who is it for?
People willing to invest for potentially higher returns over the long term.
Annual allowance
Up to £20,000 (shared with other ISAs)
How it works
Your money is invested in financial markets, so its value can go up or down.
Pros
Potential for higher returns
No tax on profits or dividends
Cons
Investment risk – you could lose money
May involve fees
Lifetime ISA
What is it?
A savings or investment account with a government bonus.
Who is it for?
People aged 18 to 39 saving for:
A first home
Retirement
Annual allowance
Up to £4,000 per year (counts towards your £20,000 limit)
How it works
The government adds a 25% bonus to your savings (up to £1,000 per year) as long as you use it to buy a house or for your retirement.
Pros
Free government bonus
Can be used for a house deposit
Cons
Withdrawal penalty if used for other purposes
Property price limits apply
Junior ISA
What is it?
A tax-free savings or investment account for children under 18.
Who is it for?
Parents or guardians saving on behalf of a child.
Annual allowance
Up to £9,000 per child
How it works
The account is managed by a parent/guardian, but the money belongs to the child and can only be accessed at age 18.
Pros
Tax-free savings for children
Long-term growth potential
Cons
Money is locked in until age 18
ISA allowance for 2025/26
Your total ISA allowance is £20,000 per tax year.
You can:
Put it all into one ISA, or
Split it across multiple ISAs
ISA | Annual allowance |
|---|---|
Cash ISA | Up to £20,000 |
Stocks & Shares ISA | Up to £20,000 |
Lifetime ISA | £4,000 |
Junior ISA | £9,000 (per child) |
Total allowance | £20,000 |
Who can open an ISA?
To open a standard ISA, you typically need to:
Be a UK resident
Be aged 18 or over
Additional ISA rules
Lifetime ISAs: age 18 to 39
Junior ISAs: for under 18s
How many ISAs can you have?
There’s no limit to how many ISAs you can open.
You can open multiple ISAs of the same type in one tax year.
You must stay within your £20,000 allowance.
Exceptions
One Lifetime ISA per person
One Junior ISA per child
How do ISA transfers work?
You can move your ISA to a new provider if you find a better rate or investment option.
To keep your tax-free benefits:
Always use an official ISA transfer process
Don’t withdraw the money yourself
Not all providers accept transfers, so check before opening a new account.
Are there alternatives to ISAs?
ISAs are tax-efficient, but they’re not always the best option. Alternatives include:
If the return is high enough, these can sometimes outperform ISAs even after tax.
Compare ISAs with MoneySuperMarket
Before opening an ISA, it’s worth comparing your options.
MoneySuperMarket lets you compare ISAs from leading UK providers, helping you find an account that suits your savings goals and risk level.
Author
Rebecca Goodman
Personal Finance & Insurance Expert
Rebecca is an award-winning financial journalist with over a decade of experience writing for print and online media. Her mission is to take the jargon out of personal finance and to help everyone...
Reviewer
Alan Cairns
Senior Content Editor
Alan breaks down subjects like money and energy into plain English to help you save money.
