ISA (Individual Savings Account)
UK tax glossary · Last reviewed: April 2026
You can save up to £20,000 per tax year across all your ISAs. Interest, dividends, and capital gains inside an ISA are completely tax-free — they do not count toward your Personal Savings Allowance, Dividend Allowance, or Annual Exempt Amount.
Main ISA types: Cash ISA (savings, interest-bearing), Stocks and Shares ISA (investments), Innovative Finance ISA (peer-to-peer), and Lifetime ISA (LISA). The LISA offers a 25% government bonus of up to £1,000/year for first-time buyers or retirement, but has a 25% withdrawal penalty if used for other purposes before 60.
Junior ISAs (JISAs) allow up to £9,000 per year per child. ISA allowances cannot be carried forward — unused allowance is lost at the tax year end.
Worked example
Invest £20,000 in a Stocks and Shares ISA. After 10 years at 7%/year growth: ~£39,344. Gains: ~£19,344 — entirely free of CGT and Income Tax. Outside an ISA the same gains could trigger significant CGT.
Common questions
Can I transfer my Cash ISA to a Stocks and Shares ISA?
Yes. ISA transfers preserve your tax-free status and do not count as a new subscription. Always transfer directly between providers — if you withdraw and redeposit, you lose the ISA wrapper on the withdrawn amount.
What happens if I pay too much into an ISA?
Over-subscribing voids the ISA status on the excess. HMRC monitors contributions and will contact you. Avoid by tracking your contributions across all providers in the same tax year.
Related resources
TaxHelper provides general information based on published HMRC rates and guidance. It is not regulated financial or tax advice. For decisions involving significant sums, complex circumstances, or if you are unsure, speak to a qualified accountant or HMRC directly.