SAVINGS & INVESTMENTS

Individual Savings Account (ISA)

Allow your money to grow free from UK income tax and capital gains tax

Individual Savings Account (ISA)

An Individual Savings Account (ISA) is a tax-efficient savings and investment vehicle that allows you to save or invest without incurring UK income or capital gains tax on returns. Within an ISA, you can hold cash or invest in assets such as shares, bonds, and collective investment funds.

ISAs are available to individuals who are resident in the UK. They are also open to Crown servants, including members of the armed forces and the diplomatic service, and their spouses or civil partners, even if they are not UK residents. To open an adult ISA, you must be aged 18 or over.

ISA allowances and rules for 2025/26

For the tax year running from 6 April 2025 to 5 April 2026, the government has set the following allowances and rules:

Overall allowance: The total amount you can save or invest across all your ISAs is £20,000.
Junior ISA (JISA) allowance: The separate allowance for a Junior ISA is £9,000.
Lifetime ISA (LISA): You can contribute up to £4,000 per tax year into a LISA. This contribution counts towards your overall £20,000 ISA allowance.

Your annual allowance can be divided across different ISA types in any proportion, including:

Recent changes to ISA flexibility

ISA rules have been updated to give savers and investors greater choice and control:

Multiple subscriptions: You can now pay into multiple ISAs of the same type with different providers within the same tax year. This allows you to take advantage of different interest rates or investment opportunities.
Partial transfers: You are now able to transfer part of the money you have paid into an ISA in the current tax year to another provider, without having to move the entire amount.
No need to reapply: You no longer need to reactivate an existing ISA if you have not contributed to it for a tax year, removing unnecessary administration.
Age harmonisation: The minimum age to open any type of adult ISA is now 18. (Note: 16 and 17-year-olds can still open and manage their own Cash JISA).

How ISAs are typically used

ISAs are designed to encourage both saving and investing. Many have low minimum contribution levels and, depending on the product, may not require you to commit your money for a fixed period.

The key benefit is tax efficiency. Any interest, dividends, or investment growth generated within an ISA is free from UK income tax and capital gains tax. This can be particularly valuable for higher-rate taxpayers.

Examples of how the £20,000 allowance might be used include:

Access, withdrawals, and ISA transfers

Access to your money depends on the type of ISA you hold. Easy-access Cash ISAs usually allow withdrawals at any time, while fixed-rate accounts may restrict access or apply penalties for early withdrawal.

Some providers offer Flexible ISAs, which allow you to withdraw funds and replace them within the same tax year without affecting your annual allowance.

ISAs can be transferred between providers at any time, whether to secure a better interest rate or reduce investment charges. Transfers must always be completed using the new provider’s official transfer process. Withdrawing funds yourself and reinvesting them will cause the money to lose its tax-free status.

Under current rules, you can transfer:

This added flexibility allows you to manage your ISAs more efficiently.

* Please note that not all financial planning firms offer advice on Innovative Finance ISAs.

THE VALUE OF INVESTMENTS AND THE INCOME THEY PRODUCE CAN FALL AS WELL AS RISE. YOU MAY GET BACK LESS THAN YOU INVESTED.

ISA INVESTORS DO NOT PAY ANY PERSONAL TAX ON INCOME OR GAINS, BUT ISAS MAY PAY UNRECOVERABLE TAX ON INCOME FROM STOCKS AND SHARES RECEIVED BY THE ISA MANAGERS. TAX TREATMENT VARIES ACCORDING TO INDIVIDUAL CIRCUMSTANCES AND IS SUBJECT TO CHANGE.