ISA questions answered

What is an ISA?

ISAs, short for individual savings accounts, make anything inside them free of UK tax. If you have a savings account, for example, then once you pass your annual personal savings allowance, you have to pay income tax on the interest. If you save in a Cash ISA instead, it doesn’t matter how much interest you make, you never have to pay tax on it.

Similarly, if you invest outside an ISA and pass your dividend allowance, you’ll need to pay tax on dividends. If you make more capital gains than your annual exempt amount, you’ll need to pay that tax too. Inside a Stocks and shares ISA, it makes no difference how much you make in profit or dividends, you never have to pay these taxes.

AJ Bell's Head of Personal Finance, Sarah Coles says:

"From 6 April 2027, there will be a 22% charge on interest paid on cash held in a Stocks and shares ISA. It’s not a tax, but it’ll feel an awful lot like one."

Read more about ISAs

What are the different types of ISA?

There are a variety of different types of ISAs to help you meet your investment goals. Which one is right for you will depend on what you want to invest in, the age of the account holder, and what your investment goal is.

• Cash ISA: This is basically a savings account within an ISA wrapper, so all your interest is tax free.

  Stocks and shares ISA: If you use an ISA offered by an investment platform, you can invest in a variety of stocks and funds, and there’s no income tax or capital gains tax to pay on UK bond investments or dividend tax or capital gains tax on UK share-based investments.

  Junior ISA: These are for children under the age of 18. Their parent or guardian can open an account in their name, and then anyone can pay into it. The money is tied up until the child is 18, and then it belongs entirely to them. It has the same tax benefits as the adult version.

  Lifetime ISA: If you’re aged 18-39, you can open a Lifetime ISA and use it to save or invest for your first property – or for retirement from the age of 60 – or both. You can pay in up to £4,000 a year up to the age of 50, and the government will top it up by 25% – so that’s up to £1,000 of free money every year from the government. The government is consulting on replacing the Lifetime ISA, but until they make the change, you can still open one and use it for life.

  If you withdraw from a Lifetime ISA for any reason other than buying a first property worth up to £450,000 or after you turn 60, you’ll pay a 25% penalty.

  Innovative Finance ISA: These are niche products that allow you to invest in some alternative assets including peer-to-peer loans and crypto exchange traded notes.

Read about which ISA could be right for you

What is the annual ISA allowance?

You have an annual overall ISA allowance of £20,000 each year. In the 2026/27 tax year, you can put it all into a Stocks and shares ISA, all into a Cash ISA, or mix and match. From 6 April 2027, you’ll only be able to put in a maximum of £12,000 into a Cash ISA (those aged 65 and over can still put in £20,000 a year), although you can still use the rest of the £20,000 allowance for stocks and shares.

If you have a Lifetime ISA (LISA), the £4,000 allowance comes out of the overall £20,000 limit. So, if you put £4,000 into a LISA, you can then only put £16,000 into a Stocks and shares or Cash ISA.

Children have a £9,000 Junior ISA (JISA) allowance each year. It doesn’t matter how many JISAs each adult pays into, or how many adults pay into one JISA, as long as no more than £9,000 goes into each child’s JISAs overall.  

Can I have more than one ISA?

Yes. As an adult you can pay into as many ISAs of as many different types as you want during the tax year, as long as you don’t pass the annual allowance.  

Different rules apply to Junior ISAs. Each child can only have one Junior Cash ISA and one Junior Stocks and shares ISA at any time.

Can you have a joint ISA?

No, a joint ISA does not exist. But there’s nothing stopping you from having a joint savings goal with someone, and each paying in an agreed sum to your own ISAs. You can have joint plans without needing a specific joint product.

How do I open an ISA?

You need to start by choosing the right platform for you. It’s worth checking who tends to be recommended by independent organisations.

Then see whether they have the type of ISA you need and if they let you invest in the things you want. Make sure to also consider the charges, and the support that’s on offer. There are a full spectrum and a range of costs, so it’s about finding what works for you.

If it’s a brand-new ISA you’re going to fund with cash, you need your National Insurance number, your bank details and your debit card details. If you’re transferring an existing account, you’ll also need details of the ISA you have elsewhere. 

What kind of assets can I hold in an ISA?

Cash ISAs are for cash savings. Stocks and shares ISAs allow a huge number of assets including individual shares listed on any recognised stock exchange, as well as bonds and gilts. You can also invest in a number of different kinds of funds, including investment trusts and exchange traded funds. These might hold shares, bonds, gold or commercial property, so you can get exposure to all kinds of things in an ISA. If you want to hold a cryptocurrency exchange traded note in an ISA, you would need to do that through an innovative finance ISA.

You can hold cash in a Stocks and shares ISA, although from 6 April 2027 you face a 22% charge on any interest paid on this money, so if you want to hold cash for a significant period, a Cash ISA may be a more sensible option.

Can I buy individual US stocks in a UK ISA?  

Yes, but there will be withholding tax on dividends. The main rate is 30%, but the US and the UK have a tax agreement, so you can complete form W-8BEN (you usually need to do it every three years), which will lower the rate to 15% in your ISA.

Learn more about investing in US stocks

How much will £20,000 make in an ISA?

In a Cash ISA, it will depend on the interest rate on offer, so for example if you got 4% interest a year you could make £815 in interest over 12 months.

With a Stocks and shares ISA, there are no guarantees. It will depend on what you invest in and how it performs over that period. Over the long term it could grow more than cash, but it will rise and fall in value over the short term. You can use our ISA calculator to get an estimate of how much you might be able to make through your investments depending on your risk appetite.

How can I transfer an ISA?

It’s vital not to withdraw from an ISA to move the money, or it will come out of the tax-free wrapper and you’ll have to use this year’s ISA allowance to wrap it up again.

Instead, open an ISA with the company you want to move to, and during the application process, complete the section that says you want to transfer – you’ll need details of where your money is right now. The new provider will do the rest.

Read more about ISA transfers

Can you withdraw from an ISA?

You can usually withdraw at any time from an ISA. There are some exceptions, such as if you have a fixed-rate Cash ISA that ties up your money for a specific time.

For Lifetime ISA, you’ll face a 25% withdrawal penalty charge if the withdrawal is before your 60th birthday and you’re not using it to purchase your first home.

Read about ISA withdrawals

Do I pay tax on ISA withdrawals?  

There’s no tax on ISA withdrawals. It’s one of the reasons it can be so helpful to hold ISAs alongside your pension in retirement, so you can top up your income without paying any additional tax.

Are there any risks of investing in an ISA?  

You take the same risk investing inside an ISA as you would investing outside an ISA.

It’s important not to underestimate the risk involved in investing, but it’s vital not to over-estimate it either.

Understand more about investing risk

Is your money safe in an ISA?  

If you save in a Cash ISA, you have protection from the Financial Services Compensation Scheme. It means that if anything happens to the company running the ISA, the first £120,000 you have with each institution is protected. Just check that savings and ISAs with different banks don’t have the same underlying institution.

If you invest in a Stocks and shares ISA, your money is ringfenced, so if something was to happen to the company offering the ISA, your investments would be protected. However, this is entirely separate from investment risk. As with any other investments, you can still lose money if your investments perform poorly.

Does HMRC know if you have an ISA?  

Yes, ISA providers have to submit the information to HMRC. It doesn’t necessarily happen quickly, so if you were to make a mistake and accidentally pay too much into ISAs in one year, for example, it may take a while for HMRC to spot it. However, they will eventually, and you may end up paying tax on money you made in the interim.

Source: Most asked ISA questions based on data from Google Search Console, Semrush and Peec AI