What is an ISA?
Key takeaways
ISAs let you save or invest without paying tax on interest, investment income or capital gains.
You can put up to £20,000 into ISAs in the 2026/27 tax year.
There are different types of ISA for saving, investing and longer-term goals.
You can split your allowance across multiple ISAs, subject to the rules for each type.
From 6 April 2027, the Cash ISA limit for most under-65s is due to fall to £12,000, while the overall ISA allowance will remain £20,000.
How do ISAs work?
ISAs let you save or invest without paying tax on the interest, income or capital gains you make within the account.
In the 2026/27 tax year, you can put up to £20,000 into one or more adult ISAs. This is your annual ISA allowance.
The tax year runs from 6 April to 5 April.
Your allowance resets every year and unused allowance 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, although you can only pay into one Lifetime ISA in a tax year.
What’s changing from April 2027?
From 6 April 2027, people under 65 will be able to put up to £12,000 a year into Cash ISAs, within the overall £20,000 ISA allowance.
People who are 65 or turn 65 during the tax year will be able to put up to £20,000 into Cash ISAs.
Types of ISA
There are four main types of adult ISA in the UK: Cash ISAs, Stocks and Shares ISAs, Innovative Finance ISAs and Lifetime ISAs.
Junior ISAs are separate tax-free accounts designed for children under 18.
Cash ISA
What is it?
A savings account where you earn interest tax-free.
Who is it for?
People who want to save without exposing their money to investment-market risk.
Annual allowance
Up to £20,000 in 2026/27, as part of your overall ISA limit.
From 6 April 2027, the Cash ISA limit is due to fall to £12,000 for people under 65. The overall ISA allowance will remain £20,000.
How it works
Cash ISAs work much like standard savings accounts. Depending on the provider, you may be able to choose between:
Easy-access accounts
Fixed-rate accounts
Notice accounts
Pros
Your savings aren’t exposed to stock-market movements
Interest is tax-free
Eligible deposits are protected by the FSCS up to £120,000 per person, per authorised firm
Cons
Returns may be lower than you could potentially achieve by investing over the long term
Some accounts restrict withdrawals or charge penalties
Stocks and Shares ISA
What is it?
An investment account that can hold investments such as shares, funds and bonds, with returns sheltered from UK Income Tax and Capital Gains Tax.
Who is it for?
People comfortable taking investment risk in return for the potential for higher long-term returns.
Annual allowance
Up to £20,000, shared with your other adult ISAs.
How it works
Your money is invested in financial markets, so the value of your investments can rise or fall.
Pros
Potential for higher long-term returns than cash
No UK Income Tax or Capital Gains Tax on investments held within the ISA
Cons
Your investments can fall in value and you could get back less than you put in
Fees and charges may apply
Innovative Finance ISA
What is it?
An ISA that can hold certain alternative investments, such as eligible peer-to-peer loans and crowdfunding investments.
Who is it for?
More experienced investors who understand the additional risks involved with alternative investments.
Annual allowance
Up to £20,000, shared with your other adult ISAs.
How it works
Instead of keeping your money in cash or conventional investments, your money is put into eligible alternative investments. Returns can be tax-free, but your capital is at risk.
Pros
Potential for tax-free investment returns
Provides access to some investments that aren’t available through a standard Stocks and Shares ISA
Cons
Investments can be higher risk and less easy to sell
You could lose some or all of your money
FSCS protection may not apply to investment losses
Lifetime ISA
What is it?
A savings or investment account with a government bonus, designed to help you buy your first home or save for later life.
Who is it for?
People aged 18 to 39 who want to start saving for:
A first home
Later life
Annual allowance
Up to £4,000 per tax year, which counts towards your £20,000 overall ISA allowance.
How it works
The government adds a 25% bonus to what you pay in, up to £1,000 each tax year.
You can continue paying in and receiving the bonus until you turn 50.
You can normally withdraw the money without a government withdrawal charge if you use it to buy an eligible first home, take it out from age 60, or meet certain other qualifying conditions.
For a first-home purchase, the property must cost £450,000 or less, and you normally need to have made your first Lifetime ISA payment at least 12 months before buying.
Pros
Government bonus worth up to £1,000 a year
Can help you save towards a first-home deposit or later life
Cons
A 25% withdrawal charge usually applies if you take money out for another reason
First-home price and eligibility rules apply
Junior ISA
What is it?
A tax-free cash or investment account for children under 18.
Who is it for?
People who want to save or invest for a child.
Annual allowance
Up to £9,000 per child in the 2026/27 tax year.
How it works
A child can have a Cash Junior ISA, a Stocks and Shares Junior ISA, or both, with the £9,000 annual allowance shared between them.
Parents or guardians with parental responsibility can usually open and manage the account, although children can take control of it from age 16. The money belongs to the child and normally can’t be withdrawn until they turn 18.
Pros
Tax-free saving or investing for a child
Potential for long-term growth if the money is invested
Cons
Money is normally locked away until the child turns 18
Investments can fall as well as rise in value
ISA allowance for 2026/27
Your overall adult ISA allowance is £20,000 for the 2026/27 tax year.
You can put it all into one eligible ISA or split it across different ISA types, subject to their individual limits.
ISA | Annual allowance |
|---|---|
Cash ISA | Up to £20,000 |
Stocks & Shares ISA | Up to £20,000 |
Innovative Finance ISA | Up to £20,000 |
Lifetime ISA | £4,000 |
Overall adult ISA allowance | £20,000 |
Junior ISA | £9,000 per child |
Junior ISA contributions use a separate allowance and don’t count towards your own £20,000 adult ISA limit.
Who can open an ISA?
To open an adult ISA, you generally need to:
Be aged 18 or over
Be resident in the UK, although some exceptions apply for Crown servants and their spouses or civil partners
Additional ISA rules
Lifetime ISAs: you must be aged 18 to 39 when you make your first payment
Junior ISAs: for children under 18
How many ISAs can you have?
There’s no general limit on the number of adult ISAs you can hold.
You can also pay into multiple Cash ISAs, Stocks and Shares ISAs or Innovative Finance ISAs during the same tax year, provided you stay within your overall annual allowance.
Exceptions
You can only pay into one Lifetime ISA in each tax year.
A child can hold up to one Cash Junior ISA and one Stocks and Shares Junior ISA at a time.
How do ISA transfers work?
You can transfer an ISA to another provider if you find a better rate, lower fees or an investment option that suits you better.
To make sure the money keeps its ISA tax advantages:
Ask the new provider to carry out an official ISA transfer
Don’t simply withdraw the money and pay it into another ISA
Not all providers accept every type of ISA transfer, so check the terms before moving your money.
Are there alternatives to ISAs?
ISAs are tax-efficient, but they’re not always the best home for your savings.
Depending on your circumstances, alternatives include:
You may be able to earn some savings interest outside an ISA without paying tax because of allowances such as the Personal Savings Allowance. So it’s worth comparing the rate you’ll receive as well as the tax treatment.
Compare ISAs with MoneySuperMarket
Before opening an ISA, it’s worth comparing your options.
MoneySuperMarket lets you compare ISAs from a range of UK providers, helping you find an account that suits your savings goals and, where relevant, your attitude to investment risk.
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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...
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