What Is an ISA and How Does It Work?
An ISA — or Individual Savings Account — is a tax-free way to save or invest money in the UK. You don’t pay tax on interest, dividends, or capital gains within an ISA, making it a popular option for long-term savings and investment.
How Much Can You Put in an ISA?
For the 2025/26 tax year, the ISA allowance is:
- £20,000 per person (age 16+ for Cash ISAs, 18+ for other types)
You can split this allowance across multiple ISA types, but you can only pay into one of each type per tax year.
Types of ISAs
There are several types of ISA, each with different features. Here’s a quick overview:
- Cash ISA – A savings account where you earn interest tax-free.
- Stocks & Shares ISA – Invest in funds, shares, or bonds with no capital gains or dividend tax.
- Lifetime ISA (LISA) – Save for your first home or retirement and get a 25% government bonus.
- Innovative Finance ISA – Invest in peer-to-peer loans for higher potential returns (with higher risk).
- Junior ISA – A tax-free savings account for children under 18.
Who Can Open an ISA?
To open an ISA, you must be:
- A UK resident (for tax purposes)
- At least 16 for a Cash ISA, or 18 for other adult ISAs
- Under 40 for opening a Lifetime ISA
Why Use an ISA?
ISAs are valuable because:
- You keep all the interest or investment growth you earn — no tax to pay.
- You don’t need to declare ISA income on your tax return.
- They’re flexible: you can choose low-risk (Cash ISAs) or higher-growth options (Stocks & Shares ISAs).
Can You Withdraw Money from an ISA?
It depends on the ISA type and provider. Some ISAs offer flexible withdrawals, while others may charge penalties or restrict access — especially fixed-rate or Lifetime ISAs.
Can You Transfer an ISA?
Yes — you can transfer ISAs between providers without losing your tax-free status. Just be sure to request a formal ISA transfer, not a manual withdrawal and deposit.
Explore the ISA Types
To dive deeper into each ISA type, check out our dedicated guides: