The Annual Allowance
The ISA allowance is £20,000 per tax year (6 April to 5 April). You can split this across different ISA types, but the total must not exceed £20,000. The allowance does not carry forward — if you don’t use it, you lose it.
Types of ISA
Cash ISA
Tax-free savings account. Interest earned is free from income tax. You can hold one Cash ISA per tax year (multiple from different years).
Stocks and Shares ISA
Invest in funds, shares, and bonds with no Capital Gains Tax or income tax on returns. Best suited for goals five or more years away.
Lifetime ISA
For 18–39 year olds saving for a first home or retirement. £4,000 annual sub-limit (counts towards £20,000 total). 25% government bonus on contributions — up to £1,000 per year. 25% penalty on withdrawals for other purposes.
Innovative Finance ISA
Holds peer-to-peer lending investments. Interest and gains are tax-free, but the underlying investments carry higher risk.
Limits at a Glance
| ISA Type | Annual Limit |
|---|---|
| Adult ISA (all types combined) | £20,000 |
| Lifetime ISA sub-limit | £4,000 |
| Junior ISA | £9,000 |
Key Rules
- You can hold one of each ISA type per tax year.
- Unused allowance does not carry forward to the next tax year.
- ISAs are individual — there is no joint ISA. Couples each get £20,000.
- You must be a UK resident and aged 18 or over (16 for Cash ISAs).
Transferring ISAs
You can transfer ISAs between providers without losing your tax-free status. Current year contributions must be transferred in full; previous years’ contributions can be transferred partially.
Always use the formal ISA transfer process — withdrawing and redepositing uses up your annual allowance.
Flexible ISAs
Some providers offer flexible ISAs. If you withdraw money, you can replace it within the same tax year without it counting towards your annual allowance. Not all providers offer this, so check before withdrawing.