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Individual Savings Accounts (ISAs)

Individual Savings Accounts or ISAs are a place where you can put a range of savings and investments.

However, you don't pay any tax on the interest or income you earn. There are two types of ISA:

  • a cash ISA
  • an investment ISA (also known as stocks and shares ISAs)

All the interest you earn from a cash ISA is tax free.

With an investment ISA, most of the income you earn from it will be tax free, but if you choose a share-based investment, the money you make on the shares is taxed.

Who can save in an ISA?

You have be resident in the UK to be able to open an ISA.

You can open a cash ISA from age 16 or over and you can open an investment ISA from aged 18 or over.

What’s the difference between a cash ISA and an investment ISA?

Cash ISAs are a good way to save for the short-term. This is normally less than 5 years. They usually offer good rates of interest compared to bank and building society accounts with the added bonus that you don’t pay tax on the interest.

Investment ISAs are for stock market investments. They are worth considering if you want to save for longer than five years and are willing to take a risk with your money.

Investing in the stock market is a riskier way to save because it's possible to lose money rather than make it. However, the longer you invest for, the more likely you are to make more money than if you had saved with a bank or building society. This is called giving you a higher return.

For more information about investing in the stock market, see Investing in the stock market.

You can switch the money you have in a cash ISA into an investment ISA but you can’t put money from an investment ISA into a cash ISA. So if you're thinking of switching to an investment ISA, remember you won’t be able to put it back into a cash ISA if your investment does not do as well as you hoped.

If you want to switch to a different ISA, your ISA provider has to do that for you and may charge you.

If you are interested in putting your money into an investment ISA, you might want to get help from an independent financial adviser. They will help you to decide whether this is the right choice for you.

Help to buy ISA

If you're saving to buy your first home, you can save money into a Help to buy ISA, which is a type of cash ISA. For every £200 you save you'll get a government bonus of £50, up to a maximum of £3,000.

Read more about the Help to buy ISA.

Lifetime ISA

You can save up to £4,000 every year in a Lifetime ISA. You can put as much or as little in as you want each month until you reach 50 and you'll get an extra 25% bonus from the government on top of what you save.

You can put the money you save in your Lifetime ISA towards buying a home if you're a first time buyer. You can also transfer any savings you have in a Help to buy ISA into your Lifetime ISA, but you'll only be able to use the bonus from one ISA. Two first time buyers can use both their savings and the bonus when buying together because limits apply to each person and not to each household.

You can also use the Lifetime ISA to save for your retirement. You can take out all your savings and the extra 25% from the government after your 60th birthday, tax free.
You can withdraw the money from your ISA at any time before you turn 60, but you will have to pay a 25% fee. You don't have to pay the fee if you use the money to buy your first home or if you're terminally ill (with less than 12 months to live).

Innovative finance ISA

Innovative finance ISAs can include 'peer to peer' loans, which are loans that you make to other people or businesses without using a bank. Only loans made through a peer to peer lending website can be included in an innovative finance ISA and you can't transfer any peer to peer loans you've already made into these ISAs. Over time, you should get your money back with tax-free interest. You might have problems with this ISA if the people you lend to can't pay you back, so it's important to check it's the right option for you. You can get more information about the innovative finance ISA from GOV.UK.

How much can you put into an ISA?

How much you can put into your ISA usually changes every April. Check GOV.UK for details for this tax year.

You can’t carry over any of your unused limit from one tax year to the next. You can take out your money at any time you want. However, if you take out any money within the tax year, you can’t replace it until the new tax year starts and you qualify for a new limit.

You can save and invest in one cash ISA and one investment ISA each tax year and they don’t have to be with the same provider. However, you can’t take out two cash ISAs or two investment ISAs during the same tax year.

Capital Gains Tax and ISAs

You can use an ISA to avoid paying Capital Gains Tax (CGT). CGT is a tax the government charges on some profits you make from savings and investments.

If you make profits of more than a set amount from the sale of shares and certain other assets in a tax year you would normally have to pay CGT. However, you do not have to pay any CGT on profits from an ISA.

For more information about capital gains tax, go to the GOV.UK website at

Use your tax allowances

If you live with a partner or are married, you both have tax allowances. This is the amount of money the government lets you earn before you have to start paying tax. If one of you pays tax and the other doesn’t, or if only one of you pays tax at the higher rate, it is worth using up your ISA entitlements and ensure other savings are in the name of the account holder who pays the least tax.

For more information about tax allowances, see Income tax allowances and amounts.

Passing on your ISA allowance when you die

You can choose to pass on your ISA allowance to your husband, wife or civil partner when you die. This gives them a one-off tax-free allowance of the whole value of the savings and investments in your ISA, which is added to their own ISA allowance. You can't pass it on to anyone else.

This only applies to anyone in a marriage or civil partnership who has died since 3 December 2014. The surviving spouse will only get the increased ISA allowance from the start of the following tax year.

If you want your partner to inherit your tax-free ISA allowance, you need to make sure your will leaves your ISA to them.


Bill died on 5 December 2014, leaving £50,000 of ISA savings and investments to his wife Carol. On 6 April 2015 she is given a one-off tax-free allowance of £50,000 to invest into a new or existing ISA, on top of her existing ISA allowance of £15,240. This gives her a combined tax-free ISA allowance of £65,240.

You may find it helpful to speak to an independent financial adviser about these rules and how they will affect you.

Other ways to save tax free

If you are looking for other tax free ways to save, the government backed National Savings and Investments (NS&I) offer a series of index-linked and fixed interest savings certificates. You can save between £100 and £15,000 in each issue and there are several issues a year. To find out more about NS&I go to You should always compare National Savings products interest rates with the interest rates of other products on offer.

Where can you get an ISA?

You can get an ISA through:

All ISA providers have to be regulated by the Financial Conduct Authority (FCA). This is the government financial watchdog.

To find out more about cash ISAs go to:

Further help

On Adviceguide

National Savings and Investments

National Savings and Investments offer a number of financial products which are guaranteed by the Government. They are available through the Post Office, online and by phone. For more information, go to:

Independent financial advice

For help in finding an independent financial adviser, contact one of the following organisations:

Independent Financial Promotions (IFAP)


Institute of Financial Planning (IFP)


Personal Finance Society (PFS)


Moneysavingexpert website

The money saving expert website has lots of useful financial information, including price comparison tables for different savings accounts. Go to:

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