What Is An ISA? – The Ultimate ISA Guide (2026)

An ISA (individual savings account) is a UK account that lets you save or invest without paying tax on what you earn. There’s no income tax on the interest, no dividend tax and no Capital Gains Tax, and you don’t have to tell HMRC about it. If you’re 18 or over and live in the UK, you can put up to £20,000 a year into ISAs, split across a cash ISA, a stocks and shares ISA, a Lifetime ISA and an innovative finance ISA.

Budget update, 28 October 2026: the planned cut to the cash ISA limit has been scrapped. From April 2027 you can still put the full £20,000 into a cash ISA, whatever your age, and the overall allowance stays at £20,000. Everything below reflects that.

What is an ISA?

Think of an ISA as a protective wrapper. You choose what goes inside, cash or investments, and the wrapper keeps the taxman away from whatever it earns. ISAs were introduced in 1999 and have become one of the most popular ways to save and invest in the UK. HMRC says 23 million adults held one in 2023/24.

The main types of ISA are:

You might also hear about two others. The Help to Buy ISA closed to new savers in 2019, although existing savers can pay in until November 2029. And a new First Time Buyer ISA is due to replace the Lifetime ISA for new savers from April 2029. “Ethical ISAs” aren’t a separate type; they’re stocks and shares ISAs that hold ethical funds.

I think most people should have at least one ISA. Why hand the taxman more than you need to?

How Much Can You Put In An ISA?

You can put up to £20,000 into ISAs in the 2026/27 tax year, which runs from 6 April 2026 to 5 April 2027. You can put it all in one ISA or split it however you like. Since April 2024 you can also pay into more than one ISA of the same type in a year, such as two cash ISAs, as long as the total stays within £20,000. The exception is the Lifetime ISA: you can only pay into one a year.

For example, you could put £10,000 in one cash ISA, £3,000 in another cash ISA and £7,000 in a stocks and shares ISA. Or £4,000 in a Lifetime ISA and £16,000 in a stocks and shares ISA.

Any allowance you don’t use by 5 April is gone; it doesn’t carry over. Then it resets on 6 April. There’s more on dates in when the ISA allowance resets.

What’s changing in 2027?

Less than you might have read. The £12,000 cash ISA limit for under-65s announced for April 2027, the charge on cash held in stocks and shares ISAs and the ban on transfers into cash ISAs were all scrapped at the 28 October 2026 Budget. Here’s where things stand:

• The overall ISA allowance stays £20,000 in 2027/28, and the cash ISA limit stays £20,000 for everyone 18 and over. The regulations to confirm this are due before Parliament in November 2026.
• The Lifetime ISA limit stays £4,000 and the Junior ISA limit stays £9,000.
• Tax on savings interest outside ISAs rises to 24%, 44% or 49% from 6 April 2027 (from 20%, 40% and 45%), which makes the ISA wrapper more valuable for savers.
• The government plans a new incentive for people opening a stocks and shares ISA for the first time. No details yet.

I’ve covered every change in my guide to the 2027 ISA changes.

Listen To This

Personal finance creator Timi Merriman-Johnson joined us on The Money Gains Podcast to talk about the ins and outs of ISAs, when to use them and how to build good money habits. You can listen to the full episode with Timi here.

Cash ISA Guide

A cash ISA is essentially a savings account where you don’t pay tax on the interest. You save in exactly the same way; the difference is in what you keep.

In a normal savings account, interest above your Personal Savings Allowance is taxed. That allowance is £1,000 a year for basic rate taxpayers, £500 for higher rate and nothing for additional rate. A cash ISA is especially useful if you have a larger balance, pay higher or additional rate tax, or want your savings to stay tax-free whatever happens to rates and allowances.

Just like normal savings accounts, there are different types of cash ISA:

• Easy access: pay in and take money out when you need it. Some limit withdrawals, so check the terms.
• Fixed rate: lock your money away for a set time, such as one to five years, for a fixed rate. Early withdrawals usually mean a penalty.
• Notice: give a set number of days’ notice before you withdraw.
• Regular saver: pay in a set amount each month, usually for a higher rate.
• Flexible: a feature, not a type. You can take money out and put it back in the same tax year without using up more of your allowance. Your provider will tell you if your ISA is flexible.

How much can I deposit in my Cash ISA each year?

Up to £20,000 in 2026/27, as part of your overall ISA allowance. That stays the same from 6 April 2027, for everyone aged 18 and over, now that the planned £12,000 limit has been scrapped.

Can I have more than one Cash ISA?

Yes. You can hold as many as you like from previous years, and since April 2024 you can pay into more than one in the same tax year, as long as you stay within your £20,000 allowance. You can also move a cash ISA to a better rate. Use an ISA transfer so it keeps its tax-free status, and check you’re not tied into a fixed term first. My guide on how to transfer an ISA shows how.

Still weighing up whether you need an ISA at all? I compare them in ISA vs savings account.

Stocks and Shares ISA Guide

A stocks and shares ISA, sometimes called an investment ISA, lets you invest in shares, funds, ETFs (exchange traded funds, a ready-made basket of investments you buy like a share), bonds and more, without paying tax on anything they make.

Outside an ISA you’d pay dividend tax on dividends above £500 a year and Capital Gains Tax on profits above £3,000 a year. Inside one you pay neither, so apart from fees you keep everything your investments make. The risk is that you can get back less than you put in, because the stock market comes with no guarantees.

When you invest, your capital is at risk.

There are two main ways to run one:

• Self-invested: you choose and manage the investments yourself. Full control, and usually lower fees.
• Managed or ready-made: the provider builds and runs a portfolio for you, for a fee.

Investing has historically done better than cash over long periods, though it isn’t guaranteed, which I go into in cash ISA vs stocks and shares ISA. Either way, work out how much risk you can stomach and tie the money to a long-term goal, such as retiring early.

How much can I deposit each year?

Up to £20,000 a year, as part of your overall ISA allowance. That isn’t changing in 2027. The charge on interest from cash held in stocks and shares ISAs that was planned for April 2027 has been scrapped, so holding some cash while you decide what to buy won’t be penalised.

What are managed stocks and shares ISA accounts?

A managed ISA is where you pay a company to invest the money for you. They’ll usually ask about your goals and your attitude to risk, then put you in a portfolio that matches. It suits people who want to invest but don’t want to pick investments themselves.

An expert-managed ISA option

Moneyfarm

4.2 on Trustpilot

Expert-managed portfolios in an ISA, pension or GIA

What I like

• Expert-managed portfolios
• Fees fall as your pot grows
• ISA and pension available

Watch out for

• £1.25 a month minimum fee: about 2.2% a year on £1,000
• 0.70% a year under £50,000, plus around 0.16% to 0.21% fund costs
• Cash ISA: more than 3 withdrawals a year loses the boost
• Cash ISA is in money market funds: FSCS £85,000, not £120,000

£500

minimum

0.25% platform

platform fee

Min £1.25/mo + 0.45% management to £50k; lower above

None on managed portfolios

trading fee

Visit Moneyfarm (opens in a new tab)

Affiliate link. Capital at risk.

How old do I have to be to open a stocks and shares ISA?

You need to be 18 or over and live in the UK. Under-18s can have a Junior ISA instead.

Which stocks and shares ISA is best?

There are hundreds of providers in the UK, and the right one depends on how you want to invest and how much you’ll put in. Compare the fees (platform, trading and fund charges), what you can invest in, how easy the app is, and reviews from real customers. I’ve compared the ones I rate in the box below.

Are Stocks and Shares ISAs worth it?

If you’re investing for five years or more, they usually are. They’re not built for day trading or money you’ll need soon.

Read nextWhat’s Your Money Personality? Take This Quiz to Find Out

Lifetime ISA Guide

A Lifetime ISA was created by the government to help people buy their first home or save for later life. For every £4 you put in, the government adds £1 (a 25% bonus), up to £1,000 a year. Put in the £4,000 maximum and you get the full £1,000.

You can hold cash or invest inside a Lifetime ISA, depending on the provider. If you invest, the bonus gets invested too and you keep all the growth tax-free. It sounds like free money, and in a way it is, but you need to stick to the rules or you could end up out of pocket:

• You must be 18 or over but under 40 to open one.
• You can keep paying in until you turn 50.
• The limit is £4,000 a tax year, and it counts towards your £20,000 ISA allowance. You can only pay into one Lifetime ISA a year.
• To use it for a home, it must be your first home and cost £450,000 or less.
• You must buy at least 12 months after your first payment in.
• You must buy with a mortgage, and use a conveyancer or solicitor, who receives the money directly.
• You can take the money out for any reason from age 60, or if you’re terminally ill with less than 12 months to live.
• Any other withdrawal costs you 25% of what you take out. That wipes out the bonus and takes some of your own money too.
• From 29 October 2026, the charge drops to 20% if you use the money to buy a first home costing more than £450,000. That broadly means you lose the bonus but not your own money.

The Lifetime ISA is due to close to new savers from 6 April 2029, when a new First Time Buyer ISA is due to replace it. If you already have one, you can keep paying in under the current rules. Work out your bonus with the calculator below.

Junior ISA Guide

A Junior ISA gives a child a tax-free head start. Parents or guardians with parental responsibility can open one for any child under 18 who lives in the UK. The money can be kept in cash or invested, and everything it earns is tax-free.

You can put up to £9,000 a year into a child’s Junior ISAs in 2026/27, and that’s separate from your own £20,000. A child can have a cash Junior ISA, a stocks and shares Junior ISA, or both, with the £9,000 shared between them.

The money belongs to the child, not you. They can take control of the account at 16 but can’t withdraw until they turn 18. At 18 it becomes an adult ISA, and they can take the money out or keep it growing tax-free. If your child has a Child Trust Fund, they can’t have a Junior ISA as well, but you can transfer the fund into one.

Who can open an account for a child?

A parent or legal guardian with parental responsibility for the child.

Do the contributions affect my own tax-free allowance?

No. Junior ISA payments don’t touch your £20,000. Just remember the money becomes the child’s once it’s in, and you can’t take it back.

Innovative Finance ISAs

An innovative finance ISA lets you lend money through peer-to-peer (P2P) platforms, which match you with people or businesses who want to borrow. You earn interest tax-free, but you’re taking a real risk: borrowers can fail to repay, and your money isn’t protected the way bank savings are.

They’re much less common than the other types, and generally better suited to experienced investors. The planned 2027 charge on cash held in these ISAs has been scrapped too, and the limit stays within your £20,000.

Who can open an ISA?

• You must be 18 or over, and under 40 to open a Lifetime ISA.
• You must be a UK resident, or a Crown servant such as the armed forces or diplomatic service working overseas, or their spouse or civil partner.
• ISAs are always in one name. You can’t hold one jointly with someone else.
• If you move abroad, you can keep your ISA and its tax-free status, but you can’t pay into it until you’re UK resident again. You must tell your provider when you stop being UK resident.

Can you take money out of an ISA?

Yes, at any time, without losing the tax benefits on what you take out. The Lifetime ISA is the exception, with the charge explained above, and fixed rate cash ISAs may charge a penalty.

What matters is whether your ISA is flexible. With a flexible ISA you can put money back in the same tax year without using more allowance. With a non-flexible one, anything you pay back counts as new money. For example, if you’ve paid in £10,000 and take out £3,000, a flexible ISA lets you pay in £13,000 more that year; a non-flexible one only £10,000.

Is my money safe in an ISA?

The ISA wrapper protects you from tax, not from a provider going bust. That’s the job of the FSCS (Financial Services Compensation Scheme):

• Cash ISAs: covered up to £120,000 per person per bank, building society or credit union (per banking licence) since 1 December 2025.
• Stocks and shares ISAs: covered up to £85,000 per person per firm if the firm fails and can’t return your money. Nothing covers your investments falling in value.

How I use my ISAs

I personally own both a cash ISA and a stocks and shares ISA, and pay into both regularly. I use my cash ISA as my emergency fund and don’t use fixed term options for it, because I want to be able to get at the money. I may change that as my situation changes.

I pay into my stocks and shares ISA religiously every month and invest in a mix of stocks, ETFs and index funds. Saving on tax and growing your own pots is one of the best ways to build a better future.

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