An Individual Savings Account (ISA) is a type of savings account in the UK where the interest earned is tax-free. The ISA allowance for the current tax year (April 6, 2025 to April 5, 2026) is £20,000. This means you can save up to £20,000 in one or more ISAs during the tax year without paying income tax on the interest or capital gains tax on investments. However, as announced in the budget in November 2025, the annual cash ISA limit will be £12,000 from April 2027, unless you are aged 66 or over.
There are several types of ISAs, including Cash ISAs, Stocks and Shares ISAs, Innovative Finance ISAs, and Lifetime ISAs (LISAs). Cash ISAs are similar to regular savings accounts and offer a guaranteed return plus interest. Stocks and Shares ISAs allow you to invest in various products like stocks, bonds, and funds, offering the potential for higher returns but also carrying a risk of losing money. Innovative Finance ISAs involve peer-to-peer lending. Lifetime ISAs are designed to help individuals save for their first home or retirement, with the government adding a 25% bonus to savings. Some ISAs offer flexibility, allowing you to withdraw and replace funds within the same tax year without affecting your annual allowance. ISA providers include Aldermore, Bank of Scotland, Barclays, Halifax, Lloyds, and Nationwide. Interest rates and terms vary depending on the type of ISA and the provider.
