An ISA is a tax-free wrapper for savings and investments. The type you choose depends on your goal, your timeframe and how much risk you’re comfortable with.
Summary
- Interest, dividends and gains inside an ISA are free of UK tax.
- The overall ISA allowance is £20,000 for the 2026 to 2027 tax year, shared across your ISAs.
- A Lifetime ISA adds a 25% government bonus on up to £4,000 a year, with conditions on withdrawals.
- Junior ISAs let you save up to £9,000 a year for a child in the 2026 to 2027 tax year.
An Individual Savings Account, or ISA, is a way to save or invest without paying UK tax on the interest, dividends or gains. ISAs come in several types, and they all share one annual allowance.
The annual allowance
- You can pay in up to £20,000 in the 2026 to 2027 tax year, across all your ISAs.
- The tax year runs from 6 April to 5 April, and unused allowance doesn’t roll over.
- Money you transfer between ISA providers doesn’t count as a new contribution.
Bear in mind
Allowances and rules can change. Check GOV.UK for the current figures before making large contributions.
The main types of ISA
| ISA type | What it holds | Good for |
|---|---|---|
| Cash ISA | Savings in cash, earning interest | Short- to medium-term saving with no investment risk |
| Stocks and shares ISA | Investments such as funds and shares | Long-term goals, accepting that values can fall |
| Lifetime ISA | Cash or investments, plus a government bonus | A first home, or retirement from age 60 |
| Innovative Finance ISA | Peer-to-peer lending and similar | Higher risk; not protected like savings |
| Junior ISA | Cash or investments for a child | Saving for a child until they turn 18 |
The Lifetime ISA in more detail
- You must be 18 to 39 to open one, and you can pay in until you turn 50.
- You can save up to £4,000 a year, and the government adds a 25% bonus, up to £1,000 a year.
- You can use it for a first home or from age 60.
- Other withdrawals face a government charge, which can mean getting back less than you paid in.
Take care
The Lifetime ISA withdrawal charge can cost you some of your own money, not just the bonus. Only use one if you’re confident you’ll use it for a first home or retirement.
Junior ISAs
Parents or guardians can open a Junior ISA for a child under 18, and anyone can pay in, up to £9,000 in the 2026 to 2027 tax year. The money belongs to the child, who can take control of it at 16 and withdraw it at 18.
Common mistakes
- Paying into more ISAs than the rules allow in one tax year.
- Withdrawing money to move providers instead of using a transfer.
- Using a stocks and shares ISA for money you might need soon.
Top tip
For short-term goals, compare cash ISA rates with regular savings accounts, as described in our guide to easy-access and fixed-rate savings. Many people hold both.
The bottom line
Choose a cash ISA for flexibility and safety, a stocks and shares ISA for long-term growth, a Lifetime ISA for a first home or retirement, and a Junior ISA for a child’s future. Pensions offer another tax-efficient route for retirement saving, as our guide to workplace pensions explains.
Questions readers ask
Can I have more than one ISA?
Yes. You can pay into several ISAs in the same tax year, as long as your total contributions stay within the annual allowance. GOV.UK explains the current rules on combining ISA types.
What happens to unused ISA allowance?
It doesn’t carry over. Each tax year, from 6 April to 5 April, comes with a new allowance.
Can I move my ISA to another provider?
Yes. Use the new provider’s ISA transfer process rather than withdrawing the money yourself, so the savings keep their tax-free status.
What is a flexible ISA?
Some cash ISAs let you withdraw money and put it back in the same tax year without it counting again towards your allowance. Check whether your ISA offers this.
This guide is general information, not financial advice. Rules, rates and allowances can change, so check the latest details with the provider, GOV.UK or the Financial Conduct Authority before making decisions. For advice on your own circumstances, speak to an FCA-authorised financial adviser.