Your friendly guide to ISAs
This Friendly Guide to ISAs explains exactly what ISAs are, the different kinds available, and how they could help you and your family save and invest for the future.
What is an ISA?
Let’s start with the basics. ISA stands for Individual Savings Account and is a tax-free way to save and invest for the future. There are four different types of ISA that you can save or invest in, and you can have one of each in each tax year if you remain within your annual ISA allowance. Tax treatment depends on individual circumstances and tax rules could change in the future.
What is the ISA allowance?
Your ISA allowance for the current year is £20,000. This is the total you can save and invest in all types of ISA throughout the year (which starts on 6th April each year). You can’t carry any of your allowance forward into the next tax year so, if you haven’t used your full allowance by 5th April, you simply lose it.
Cash ISA
This one is all about saving. It's like a savings account where you can put your money away and watch it grow tax-free. The best part? The taxman can't touch any interest you earn.
Investment ISA
Also tax-free, an Investment ISA lets you invest your money in a range of assets. Things like funds, bonds, property, or stocks and shares. It's all about aiming to make the most of the power of the financial markets.
Innovative Finance ISA
An Innovative Finance ISA lets you lend to others through a peer-to-peer loan without paying tax on the interest you earn.
Lifetime ISA
Intended for a deposit for a first home or to save towards retirement with a government bonus added to your contribution until age 50.
Unleash the power of your ISA Allowance
Your ISA allowance for the current tax year is £20,000. Nice amount, right?
The tax year starts on the 6th of April each year, and it's the Government that sets the rules and limits for ISAs. They can change things, so staying in the loop is always a good idea.
To be eligible, you need to be at least 18 years old (16 if you're eyeing a Cash ISA) and a resident of the United Kingdom.
You can divide your ISA allowance in any way you like between a Cash ISA, Investment ISA, and Innovative Finance ISA. You can put up to £4,000 of the limit into a Lifetime ISA.
You can't carry any of your ISA allowance forward into the next tax year. So, if you haven't used it all up by the 5th of April, it goes.
It really is a case of “use it or lose it”.
Please remember that tax treatment depends on your individual circumstances, and tax law may change in the future.
The table below should help you quickly see the main differences and could help you work out what suits your needs best.
| Cash ISA | Investment ISA | Innovative Finance ISA | Lifetime ISA | |
| How much can I save or invest each year? | £20,000 less any amount paid into the other three types of ISA in the current tax year. | £20,000 less any amount paid into the other three types of ISA in the current tax year. | £20,000 less any amount paid into the other three types of ISA in the current tax year. | £4,000 or if you've paid in more than £16,000 between the other types of ISA the remainder of your allowance. |
| Who can get one? | UK residents aged 16 and over. | UK residents aged 18 and over. | UK residents aged 18 and over. | UK residents aged 18 to 39. |
| Is there risk involved? | No. The value of your initial investment cannot decrease. However, depending on interest rates, the return on your money could struggle to outpace inflation. | Yes. While the long-term potential returns are greater, the value of your investment can go down as well as up and you could get back less than you have paid in. | Yes and no. Lifetime ISAs can be in cash and stock & shares, so the risk depends on the type you choose. | Yes and no. Lifetime ISAs can be in cash and stock & shares, so the risk depends on the type you choose. |
| Can I switch between ISAs? | You can transfer funds between Cash ISAs or from a Cash ISA into an Investment ISA, Innovative Finance ISA or Lifetime ISA. | You can transfer funds between Investment ISAs or from an Investment ISA into a Cash ISA, Innovative Finance ISA or Lifetime ISA. | You can transfer funds between Innovative Finance ISAs or from an Innovative Finance ISA into a Cash ISA, Investment ISA or Lifetime ISA. | You can transfer funds between Lifetime ISAs. |
Investing for life. Let’s get started.
We want saving and investing to be open to all. All through life.
From moving home to enjoying retirement. From your child's education to a new set of wheels.
That’s why our ISAs and Junior ISAs are made for beginners and seasoned investors alike.
Check out our free friendly guides. They’re available online, downloadable, or delivered straight to your inbox.
Guide to Stocks & Shares ISAs
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Guide to Stocks & Shares Junior ISAs
Planning for your child's financial future? Our detailed guide to Junior ISAs will walk you through the basics, benefits, and how to get started on this long-term savings journey.
Cash ISA vs Investment ISA
Confused about the difference between Cash and Investment ISAs? Our guide demystifies these options, helping you understand the risks, returns, and which might be the best fit for you.
Frequently asked questions
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