- What types of ISA are there?
- Is a Cash ISA worth it?
- Should you get a Cash ISA, Stocks and Shares ISA, Innovative Finance ISA, or Lifetime ISA?
- How much can you put in an ISA?
- History of the annual ISA allowance
- Annual PEP allowances
- Who can open an ISA?
- How can you withdraw money?
- Can you switch providers once you’re set up?
- Can you get an ISA for your kids?
An Individual Savings Account, or ISA, is a savings account or investment account that protects your money from both income tax (on interest or dividends) and capital gains tax (on any profits you make). There is a limit to how much you can put into your ISA accounts each year in the UK, and this is referred to as your annual ISA allowance.
Currently, every UK resident aged 18 and over gets an annual ISA allowance of up to £20,000. Children under the age of 18 can get a Junior ISA instead. It is ‘use it or lose it’, though. At the start of each tax year on 6 April, you get another annual ISA allowance.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
What types of ISA are there?
There are four main types, and they are:
- Cash ISAs
- Stocks & Shares ISAs
- Innovative Finance ISAs
- Lifetime ISAs
You can probably guess what you can have in Cash ISAs and Stocks & Shares ISAs!
Innovative Finance ISAs allow you to invest in peer-to-peer loans (where you lend your money to lots of other people or companies, just like a bank does).
Lifetime ISAs can include either cash or stocks & shares, but the proceeds have to be used to buy your first home or for your retirement. You must be aged 18 to 39 to open one, but you can put money into an already open Lifetime ISA until you’re 50. The government adds a 25% bonus to the amount you put in.
You can put money into multiple ISAs of each of these four types every tax year as long as the combined amount you put in does not exceed your UK ISA allowance of £20,000. There is a lower limit of £4,000 for Lifetime ISAs.
Is a Cash ISA worth it?
Good question! Cash ISAs have gone through something of a revival in recent years, and for many savers they are now well worth considering again.
The biggest change is interest rates. After years of near-zero returns, the best easy-access Cash ISAs are now paying around 4.3–4.5% AER, with some fixed-rate deals reaching even higher. Crucially, many of these rates are now above the current rate of inflation, meaning savers are once again earning a real return on their cash.
This matters more than ever because the Personal Savings Allowance (PSA) is more likely to be breached at today’s rates. Basic-rate taxpayers can earn up to £1,000 of interest tax-free, while higher-rate taxpayers get only £500, and additional-rate taxpayers receive no allowance at all. With rates above 4%, a basic-rate taxpayer with savings of just £25,000 will start paying tax on their interest. A Cash ISA neatly sidesteps this issue by sheltering all interest from tax, regardless of how much you earn.
There is one important change on the horizon, however. From April 2027, savers under the age of 65 will only be able to deposit up to £12,000 per year into a Cash ISA (down from £20,000), while those aged 65 and over retain the full £20,000 limit. This means savers who want to maximise their Cash ISA contributions should consider doing so in the current tax year before that cap comes into force.
Overall, Cash ISAs are significantly more attractive than they were a few years ago. Whether one is right for you will depend on the size of your savings pot, your income tax bracket, and how likely you are to exceed your Personal Savings Allowance.
Should you get a Cash ISA, Stocks and Shares ISA, Innovative Finance ISA, or Lifetime ISA?
The type of ISA you get will depend on what you are aiming to achieve with your money and your own unique personal circumstances.
Lifetime ISAs are designed for younger people looking to buy their first home or save for their retirement. So they are less flexible than the other types of ISA, and you can put less into them.
Investment and Innovative Finance ISAs are designed to be held for longer periods, so if you think you may need access to your money at short notice, then a Cash ISA may be more appropriate.
Of course, it’s possible to put money into all four types of ISA in the same tax year, as long as you don’t exceed your annual ISA allowance, so they are not mutually exclusive.
How much can you put in an ISA?
The table below shows how the UK ISA allowance has changed since ISAs were introduced in 1999.
Tax years run from 6 April to 5 April the following year. So, the 2021/22 tax year runs from 6 April 2021 to 5 April 2022.
History of the annual ISA allowance
| Tax year | Share ISA/ Total allowance | Cash ISA | Junior ISA | Lifetime ISA |
| 1999/00 | £7,000 | £3,000 | – | – |
| 2000/01 | £7,000 | £3,000 | – | – |
| 2001/02 | £7,000 | £3,000 | – | – |
| 2002/03 | £7,000 | £3,000 | – | – |
| 2003/04 | £7,000 | £3,000 | – | – |
| 2004/05 | £7,000 | £3,000 | – | – |
| 2005/06 | £7,000 | £3,000 | – | – |
| 2006/07 | £7,000 | £3,000 | – | – |
| 2007/08 | £7,000 | £3,000 | – | – |
| 2008/09 | £7,200 | £3,600 | – | – |
| 2009/10 1 | £7,200 | £3,600 | – | – |
| 2010/11 | £10,200 | £5,100 | – | – |
| 2011/12 | £10,680 | £5,340 | £3,600 | – |
| 2012/13 | £11,280 | £5,640 | £3,600 | – |
| 2013/14 | £11,520 | £5,760 | £3,720 | – |
| 2014/15 2 | £15,000 | £15,000 | £4,000 | – |
| 2015/16 | £15,240 | £15,240 | £4,080 | – |
| 2016/17 | £15,240 | £15,240 | £4,080 | – |
| 2017/18 | £20,000 | £20,000 | £4,128 | £4,000 |
| 2018/19 | £20,000 | £20,000 | £4,260 | £4,000 |
| 2019/20 | £20,000 | £20,000 | £4,368 | £4,000 |
| 2020/21 | £20,000 | £20,000 | £9,000 | £4,000 |
| 2021/22 | £20,000 | £20,000 | £9,000 | £4,000 |
| 2022/23 | £20,000 | £20,000 | £9,000 | £4,000 |
| 2023/24 | £20,000 | £20,000 | £9,000 | £4,000 |
| 2024/25 | £20,000 | £20,000 | £9,000 | £4,000 |
| 2025/26 | £20,000 | £20,000 | £9,000 | £4,000 |
| 2026/27 | £20,000 | £20,000 | £9,000 | £4,000 |
| 2027/28* | £20,000* | £12,000* | £9,000* | £4,000* |
Notes:
1. A higher limit of £10,200 for Share ISAs and £5,100 for Cash ISAs applied for people aged over 50 from 6 October 2009.
2. Lower limits of £11,880 for Share ISAs, £5,940 for Cash ISAs and £3,840 for Junior ISAs applied until 30 June 2014.
3. For simplicity, we’ve ignored a couple of changes to ISAs that have been made over the years. Up until April 2005, you could get a Life Insurance ISA (as well as Share and Cash ISAs). Prior to April 2008, there was also a distinction between Maxi ISAs (which were for shares) and Mini ISAs (which could have been for shares, cash or insurance).
* As of 6 April 2027, the Cash ISA allowance is set to drop to £12,000 from £20,000 for anyone who is not age 65 or over. All other ISA allowances are not expected to change.
Annual PEP allowances
Personal Equity Plans (PEPs) were introduced in 1987 and ran until April 1999, when they were replaced by ISAs. The allowances for 1987 and 1988 applied to calendar years, with the shift to tax-year allowances beginning from 6 April 1989.
| Calendar year / Tax year | General PEPs | Single company PEPs |
| 1987 | £2,400 | – |
| 1988 | £3,000 | – |
| 1989/90 | £4,800 | – |
| 1990/91 | £6,000 | – |
| 1991/92 | £6,000 | £3,000 |
| 1992/93 | £6,000 | £3,000 |
| 1993/94 | £6,000 | £3,000 |
| 1994/95 | £6,000 | £3,000 |
| 1995/96 | £6,000 | £3,000 |
| 1996/97 | £6,000 | £3,000 |
| 1997/98 | £6,000 | £3,000 |
| 1998/99 | £6,000 | £3,000 |
Who can open an ISA?
There are slightly different requirements, depending on which type of ISA you want:
- Any UK resident aged 18 or over can open a Cash ISA, a Stocks & Shares ISA or an Innovative Finance ISA.
- Any UK resident aged 18 to 39 can open a Lifetime ISA.
You can also open these ISAs if you meet the age requirement above and are a Crown servant (essentially someone who works for the UK government but lives overseas) or their spouse or civil partner.
How can you withdraw money?
You contact the provider concerned, either online, via post, or in person and ask them to withdraw part or all of your money.
Typically, there will be no charge for withdrawing your money, but if you have a fixed-rate savings product, you have to pay a charge or lose some interest if you withdraw your money early.
Once you have taken money out of your ISA, it is no longer protected from tax, so you may want to access any other source of cash you have first.
Can you switch providers once you’re set up?
Yes, it’s fairly easy to switch ISA providers if you want to. Usually, your new provider will handle the process for you once you provide them with the relevant details.
It’s important to let the provider do this for you, rather than you taking the money out yourself and then putting it with a new ISA provider, as that would count towards your annual ISA allowance.
Can you get an ISA for your kids?
Yes, children under the age of 18 can open a similar product called a Junior ISA. The annual allowance for JISAs, as they are called, is £9,000.
There are two types: Cash and Stocks & Shares. The child can take control of the account when they’re 16, but cannot withdraw money until they turn 18.
Once your child turns 18, the Junior ISA is automatically converted into an adult ISA, so the money can stay protected from tax.
Frequently Asked Questions
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Yes, under the current rules you can put £20,000 into an ISA account every tax year (6 April to 5 April).
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The UK ISA allowance for 2026/27 is £20,000. There is a lower allowance of £4,000 for Lifetime ISAs.
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Yes, you can pay into multiple of each of the four types of ISA (Cash, Stocks & Shares, Innovative Finance, and Lifetime) every tax year.
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If your ISA is with a single provider, they will normally have processes in place to ensure this doesn’t happen. But it can be an issue if you have ISAs with two or more providers.
HMRC normally checks its records at the end of each tax year and will ask providers to return any excess money that has been contributed and any tax payable as a result of the extra money.
You can also call HMRC on 0300 200 3300 if you become aware of the error earlier. The general advice given is not to try and fix the issue yourself by withdrawing the extra money but to let your ISA providers and HMRC fix it themselves.
Note that some, but not all ISAs, are now deemed to be Flexible ISAs. This means that you can take some money out and return it by the end of the tax year as long as the net amount you put in does not exceed the UK ISA allowance.
Therefore, you could put in £15,000, withdraw £5,000, and then put in a further £10,000 in the same tax year without breaching the limits of your annual ISA allowance.