What’s an ISA?

chapter
2 min read

All about ISAs

Our 2-minute ISA explainer will give you all the basics you need to know about ISAs. 

Individual Savings Accounts (ISAs) are a type of tax-efficient savings account available to UK residents. There are four types of ISA accounts: 

  • Cash ISAs
  • Stocks and Shares ISAs
  • Innovative Finance ISAs
  • Lifetime ISAs (LISAs)

Each account type has a different purpose, benefits and limitations. 

The biggest advantage of an ISA is that your money can grow and you won’t pay any tax on it.  

The Government sets a limit for each account type every tax year. You can save the full amount into one type of account or split the allowance across account types. A tax year in the UK runs from 6 April to 5 April the following year. 

The maximum annual allowance for ISAs is £20,000 per tax year. This is how much money you can pay in each year, not the total value of the ISA. This is the limit across ALL of your different types of ISA accounts. So you could put £5,000 in a Cash ISA and £15,000 in a Stocks and Shares ISA. The maximum amount you can put in a Lifetime ISA is £4,000 per tax year. And this amount is part of your £20,000 annual allowance. So if you put £4,000 in your Lifetime ISA in one tax year, you only have £16,000 left to split between the rest of your ISA accounts.

The allowance expires at the end of each tax year, so if you have any unused allowance, this is lost rather than rolled over. 

Further Chapters

What’s investing?What are the different types of ISAs?What’s an investment account?What’s compound interest?What’s an ISA?Is investing risky?What to look for when choosing an investmentWhat are the different ways you can invest?What can you invest in?How much should I invest?What is a fund and how does it work?What is risk tolerance?How to determine your risk profile What is a recession?Cash saving vs investingWhen should I consider investing?Is a Lifetime ISA right for me?Should I invest in property?