Individual Savings Accounts (ISAs)

ISAs remain one of the most tax efficient solutions for your savings. On 1 July 2014, several restrictions were removed to improve flexibility and transfer options.

From April 2024 there is no limit to the number of ISA’s you can open, you can now invest in as many ISA’s as you see fit, you're also now able to make partial transfers from one ISA to another.

It is important to note, whilst you can have a number of ISA's, your ISA allowance is not per ISA but an overall amount for the year. For 2025/26, the ISA allowance is £20,000.

You'll also be able to transfer new and previous years' ISA investments from Stocks and Shares into Cash, and vice versa, as opposed to previous rules which didn’t allow stocks and shares ISAs to be transferred into Cash ISAs.

From Autumn 2015 individuals may be able to withdraw money from ISAs and replace it in the same tax year without the replacement counting towards their annual ISA subscription limit for that year. This only applies if the ISA has adopted the Flexible ISA rules. Please check with your provider.

What is an ISA?

Available since April 1999, ISAs offer an attractive tax-efficient investment to anyone aged 18 or over (16 or over for cash ISAs).

Tax must usually be paid on the income and profits made from stock market investments - either directly or via unit trusts and OEICs - however, an ISA is a tax wrapper and placing savings into an ISA is tax efficient. You will not be charged Capital Gains Tax on investment growth or Income Tax on any income or dividends received.

The Government has said that the ISA will be available indefinitely.

Lifetime ISA

A Lifetime ISA provides a 25% bonus payment on top of individual contributions paid on a monthly basis. However a Lifetime ISA has to be opened between the ages of 18 and 39 and money must be held in the ISA until the individual is aged 60. An exception is made if the money is being withdrawn to purchase a first home. The Lifetime ISA annual allowance is £4,000 and it can be held alongside other ISAs, but it forms part of the £20,000 overall individual allowance.

You will only receive the Government's 25% bonus if you go on to use the savings in your Lifetime ISA towards the deposit on your first home and/or towards your retirement after saving for a minimum of 12 months. If you make a withdrawal not connected to these two events, then a 25% penalty will apply to the amount you withdraw. This will recover the Government's bonus and you will get back less than you have saved

By saving in a lifetime ISA instead of enrolling in, or contributing to an auto-enrolment pension scheme, occupational pension scheme, or personal pension scheme:

• you may lose the benefit of contributions from your employer (if any) to that scheme; and
• your current and future entitlement to means tested benefits (if any) may be affected.

Innovative Finance ISA

Investing in an Innovative Finance ISA potentially offers higher returns. However, it operates in a similar fashion to crowdfunding so as a result, the risks to capital may also be very high. Investments in these ISAs count towards the overall £20,000 ISA allowance. You should seek financial advice before considering this form of ISA.

The main benefits of an ISA

No personal tax (income or capital gains) on any investments in an ISA.
Income and gains from ISAs do not need to be included in tax returns.

How ISAs work

There are several types of ISA, which may contain one or more of the following components:

Stocks and shares, in the form of either individual shares or bonds, or pooled investments such as open-ended investment funds or life assurance investments.
Cash, usually containing a bank or building society savings account.
Junior ISAs
Peer to peer loans (Innovative Finance ISA)

Junior ISAs are now also available as both stocks and shares Junior ISAs and cash Junior ISAs, the current contribution limit for these is £9,000 per annum (2025/26) with no change from 2024/25. Your child can have a Junior ISA if they:

• Are under 18: The child must be under the age of 18.
• A UK Resident: The child must live in the UK.
• If the child was born between September 1, 2002, and January 2, 2011, they would have been eligible for a Child Trust Fund. If they were not eligible (born before or after those dates) or if they closed an existing CTF, they can have a Junior ISA. A CTF can be transferred to a Junior ISA, but it must be a full transfer, and the CTF must be closed.
• weren’t entitled to a Child Trust Fund (CTF) account (or if they transfer their CTF funds to a JISA and close their CTF first)