Money basics

What is an ISA?

A tax-free box for your savings and investments, and how to use it.

5-minute readPart 3 of 5Last checked 9 October 2026

Why ISAs matter

Outside an ISA, you can pay tax on savings interest, dividends and investment gains once you go over certain allowances. Inside an ISA, you pay none of these, and you don't need to tell HMRC about it. The benefit is small at first but grows as your money does.

The main types of ISA

  • Cash ISA: like a savings account, but the interest is tax-free. Cash ISAs explained
  • Stocks and shares ISA: for investments such as funds and shares, with no tax on growth or income. Stocks and shares ISAs explained
  • Lifetime ISA: for a first home or later life, with a 25% government bonus. You can open one between the ages of 18 and 39. Lifetime ISAs explained
  • Innovative Finance ISA: for peer-to-peer lending. It's higher risk and less common.

Parents can also open a Junior ISA for children under 18.

The £20,000 allowance

In the 2026/27 tax year (6 April 2026 to 5 April 2027), you can put up to £20,000 into ISAs in total. You can split it across different types however you like, within the limit for each one. For example:

  • Lifetime ISA£4,000
  • Cash ISA£6,000
  • Stocks and shares ISA£10,000

Total: £20,000, the full allowance for 2026/27.

One example of splitting the £20,000 allowance. The Lifetime ISA has its own limit of £4,000 a year.

The allowance resets every April. Anything you don't use is lost, but money already in your ISAs stays tax-free. From April 2027, the most that people under 65 can put into cash ISAs each year is due to fall to £12,000, while the overall allowance is due to stay at £20,000.

Things to know

  • You need to be 18 or over to open a cash ISA or a stocks and shares ISA.
  • You can usually take money out at any time, but taking money out of a Lifetime ISA for anything other than a first home, after 60 or because of terminal illness usually costs 25%.
  • To move an ISA to another provider, use the new provider's transfer service so it keeps its tax-free status.
  • Cash ISAs with UK-authorised banks and building societies are protected by the FSCS, up to £120,000 per person, per institution.

Check you've got it

Three quick questions. Nothing is saved or sent anywhere.

1How much can you put into ISAs in total in the 2026/27 tax year?

2Is an ISA itself an investment?

3What happens to ISA allowance you haven't used by 5 April?

Go further

Ready for the practical side? Read Stocks and shares ISAs explained.

Sources

We checked this page against these sources on 9 October 2026. Rules and allowances can change, so always check the latest position on GOV.UK.

This page is general information, not personal financial advice. Read our full disclaimer.

Next in Money basics What is a pension? A long-term pot for later life that your employer and the government help you fill.

Previous: How does tax work?

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