Illustration only. Returns shown assume a fixed annual rate compounded yearly and are not guaranteed. Stocks & Shares ISA returns vary. ISA allowance is £20,000 per tax year for 2025–26. Lifetime ISA is capped at £4,000/year with a 25% government bonus. Seek independent financial advice for large decisions.
ISA Guide
What is an ISA and how does it work?
An Individual Savings Account (ISA) lets you save or invest up to £20,000 per tax year completely free of UK income tax and capital gains tax. The money inside grows without HMRC taking a cut — ever.
01
£20,000 annual allowance
You can put up to £20,000 into ISAs each tax year (6 April – 5 April). You can split it across a Cash ISA, Stocks & Shares ISA, and Innovative Finance ISA, but the total can't exceed £20,000.
02
Cash ISA vs Stocks & Shares ISA
A Cash ISA pays a fixed interest rate — low risk, predictable returns. A Stocks & Shares ISA invests in funds or shares — higher long-term potential but value can fall. Historic UK market average is ~7% per year.
03
Lifetime ISA (LISA)
For ages 18–39 only. Save up to £4,000/year and get a 25% government bonus (up to £1,000 free per year). Must be used for a first home or retirement. Penalties apply for other withdrawals.
04
The power of compounding
Because ISA returns aren't taxed, your gains compound uninterrupted. Over 20–30 years, the difference between a taxed and tax-free account can be tens of thousands of pounds.
Frequently Asked Questions
Can I have more than one ISA?
From April 2024 you can open multiple ISAs of the same type in the same tax year, as long as your total contributions don't exceed £20,000. Previously you were limited to one of each type per year.
What happens if I withdraw from my ISA?
For Cash ISAs and Stocks & Shares ISAs, you can generally withdraw freely without losing your tax-free status. Some ISAs are "flexible" — meaning withdrawn amounts can be replaced in the same tax year without counting toward your allowance again. Check your provider's terms. Lifetime ISAs have withdrawal restrictions.
Does unused ISA allowance carry over?
No. If you don't use your £20,000 allowance before 5 April, it's gone. You can't roll it over to the next tax year.
Are ISA returns really tax-free?
Yes — interest, dividends, and capital gains inside an ISA are completely exempt from UK income tax and capital gains tax. You don't even need to declare them on a Self Assessment return.