ISAs explained
The types of ISA, the £20,000 yearly limit and what changes in April 2027.
The short answer
An ISA (Individual Savings Account) lets you save or invest without paying UK tax on the interest, dividends or gains. In 2026/27 you can put in up to £20,000 across all your ISAs. The main types are cash ISAs, stocks and shares ISAs, Lifetime ISAs and innovative finance ISAs. You must be 18 or over, and UK resident, to open one.
The main types
- Cash ISA: works like a savings account, with tax-free interest. Good for money you need in the short term.
- Stocks and shares ISA: you invest in funds, shares or bonds, and any growth or dividends are tax-free. Values can fall as well as rise, so it suits money you will not need for at least five years.
- Lifetime ISA: for people under 40, with a government bonus for a first home or retirement. See the Lifetime ISA guide.
- Innovative finance ISA: for peer-to-peer lending and similar. It is higher risk and not covered by the usual savings protection.
How the £20,000 limit works
The limit is a total across all ISA types for the tax year, which runs from 6 April to 5 April. You can split it however you like, for example £8,000 in a cash ISA and £12,000 in a stocks and shares ISA. Unused allowance does not carry over, so it is use it or lose it each year.
From 6 April 2027 the government plans to cut the cash ISA limit to £12,000 for people under 65, while the overall £20,000 limit stays. Anything above £12,000 would need to go into a stocks and shares ISA. Check GOV.UK for the final rules before you plan around it.
Why use an ISA
Outside an ISA, savings interest above your allowance, dividends above £500 and investment gains above £3,000 can all be taxed. Inside an ISA none of it is, and you do not need to declare it. See how is savings interest taxed. ISAs matter most for higher-rate taxpayers, who get a £500 savings allowance instead of £1,000, and for anyone whose savings are large.
Things to watch
- You can pay into more than one ISA of the same type in a tax year, as long as your total stays within the £20,000 limit.
- Some ISAs are flexible, so money you withdraw can be put back in the same year. Check that yours is, before you rely on it.
- Moving an old ISA to a new provider must be done through an ISA transfer, not by withdrawing, or you lose the tax-free status of that money.
- You cannot hold an ISA jointly. Each person has their own allowance.
Where to learn more
This guide is for information only and is not financial advice.