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- There are five different types of ISA available: Cash ISA, Stocks and shares ISA, Lifetime ISA, Innovative Finance ISA, and Junior ISA
- Which ISA is right for you depends on your goals: whether you want to save a pot of cash, invest for your child, or buy a house for example
- You can save or invest up to £20,000 across your ISAs in the 2026/27 tax year without paying tax on interest, dividends, or capital gains
- Different ISA age limits apply depending on the type of account: Cash ISAs and Stocks and shares ISAs from age 18, Lifetime ISAs between ages 18-39, and Junior ISA for children under the age of 18
What is an ISA and how does it work?
An Individual Savings Account (ISA) is a tax-efficient savings and investment wrapper that allows UK residents to save or invest money without paying tax on the returns. Think of it as a protective shield around your money – whatever growth, interest or dividends you earn inside an ISA stays completely free from UK tax.
Each tax year (which runs from 6 April to 5 April the following year), you receive an ISA allowance, which is the amount of money you can pay in each year. For 2026/27, this allowance is £20,000. According to HMRC statistics from September 2025, £103 billion was put into adult ISAs in 2023 to 2024, demonstrating how popular these accounts have become for UK savers and investors.
AJ Bell offers three ISA accounts to help you make the most of your allowance.
What are the five different types of ISA?
There are five types of ISA: four for adults and one for children.
For adults, the four options are:
- Cash ISA
- Stocks and shares ISA
- Lifetime ISA (can be cash or stocks and shares)
- Innovative Finance ISA
And then for children under the age of 18, there’s the Junior ISA, where the money is saved under the child’s name and they can only withdraw it when they turn 18.
Each ISA serves a different purpose and comes with its own rules. Understanding the different types of ISA accounts and requirements helps you choose the right account for your circumstances.
| ISA type | What it is | Age limit | Example |
|---|---|---|---|
| Cash ISA | A savings account where you earn tax-free interest on your cash. Your money is protected by the FSCS up to £120,000 per institution. | 18 years or older | You deposit £10,000 into a Cash ISA and any interest earned is completely tax-free. |
| Stocks and shares ISA | An investment account allowing you to invest in stocks, bonds, funds, and other investment types without paying UK capital gains tax or tax on dividends. | 18 years or older | You invest £20,000 in a mix of funds through AJ Bell’s Stocks and shares ISA. Any growth and dividends are completely tax-free. |
| Lifetime ISA | Designed for first-time home buyers or retirement savings, where the government adds a 25% bonus to your contributions (up to £1,000 per year). | Aged 18 to 39 to open; you can make contributions until age 50 | You save £4,000 in a Lifetime ISA, and the government adds £1,000, which could go towards your first home or retirement. |
| Junior ISA | A savings or investment account for children. | Under 18 years - withdrawals can only be made by the child once they reach 18 | Parents save £100 monthly into a Junior ISA for their child. By age 18, the child has access to a tax-free pot for university or other expenses. |
| Innovative Finance ISA | Allows you to lend money through peer-to-peer lending platforms and receive tax-free interest. | 18 years or older | You lend £5,000 through a peer-to-peer platform within an Innovative Finance ISA earning tax-free interest. |
What is the best type of ISA to have?
There’s no one-size-fits-all answer because the best ISA depends entirely on your circumstances and goals. The key is matching the ISA type to your timeline and risk tolerance. At AJ Bell, many customers use multiple ISA types simultaneously to meet different goals.
Example of savings goals
- Long-term growth (five years or more): Investing in a Stocks and shares ISA can outperform cash over time.
- First home or retirement: If you’re under the age of 40 and saving for your first home or retirement, a Lifetime ISA is an option, with a 25% government bonus on money you pay in.
- Child’s future: Opening a Junior ISA early gives time for their money to grow tax-free.
Read more about which ISA is best
Are ISAs going to be taxed?
ISAs remain tax-efficient for the 2026/27 tax year and beyond. While there’s always speculation about potential changes to ISA tax benefits, the government has maintained their tax-free status. This makes ISAs one of the most valuable tools for UK savers and investors.
Learn more about the ISA rules
Can you have multiple ISAs?
Yes, you can have multiple ISAs, and many people do.
However, your total contributions across all ISAs cannot exceed £20,000 (this includes £4,000 for a Lifetime ISA). For a Junior ISA, this contribution limit is £9,000.
How to open an ISA account
Before opening an ISA account, it is important to understand the ISA rules and requirements.
To open an ISA account, you must be a resident in the UK for tax purposes. The account is individual – it can only apply to one person and cannot be shared or opened jointly with a partner.
You also cannot open an ISA on behalf of someone else, with one exception: a Junior ISA account must be opened for a child under the age of 18 years old by a parent or guardian.
Still unsure if an ISA is for you? Hear from our customers
Sometimes the best way to understand whether an ISA is for you, is to hear from people who actually use them. We’ve spoken to several AJ Bell customers about their ISA experiences, and their insights might help you decide which approach works best.
Charlene Young, Head of Technical explains ISAs in 2026 for UK savers and investors, covering how Individual Savings Accounts work, the key tax-free benefits, and the £20,000 annual ISA allowance. Hear expert answers to common questions on ISA withdrawals, flexible ISAs, and the practical checks to make before the 2026 ISA deadline so you can make the most of your tax-free savings and investing.
ISAs in 2026: should you get one?
If you’re saving or investing in the UK, there’s one question that comes up every year - should I be using an ISA?
As the clock ticks toward the end of the tax year, let’s break down what you need to know if you’re thinking about an ISA in 2026. In this video I’ll cover what ISAs are, why they matter, and how using ISAs can help you grow your wealth over the long‑term.
How do ISAs work?
An ISA - that’s short for individual savings account - is a tax wrapper. Think of it as a protective bubble around your savings or investments that helps to keep them protected from taxes.
Inside that bubble:
- Any interest is tax‑free
- Your dividends are tax‑free
- Your investment growth is also tax‑free
- And crucially, once your money is inside an ISA, it stays protected for life.
The key ISA benefits
There are three big benefits for everyday investors:
1: No tax paperwork
You don’t need to tell HMRC about your ISA income or gains or declare them on your self-assessment tax return.
2: A £20,000 allowance across ISA types
Every tax year, UK adults get an overall £20,000 ISA allowance that can be spread across different types. This allowance runs in line with the UK tax year, so from 6 April one year to 5 April the next.
If you don’t use your full allowance before the end of the tax year, you lose it. This is important if you’re thinking about using the full amount before the ISA deadline.
The payment limit for Lifetime ISAs is £4,000 a year and this is included within the overall £20,000 allowance.
3: Flexibility
There are different types of ISAs for cash savings, investing, or a mix of both.
The flexibility on offer means you can spread your allowance across the different ISA types. You might be investing for the long term to grow your wealth or looking for a home for your short term cash savings.
How ISAs save you tax
First up, income tax.
Let’s say you have £20,000 earning 5% interest.
Inside an ISA:
- You receive £1,000
- You keep £1,000
Now let’s compare that what happens outside of an ISA.
If you’re a basic‑rate taxpayer, you get a tax-free personal savings allowance of up to £1,000. After that, you might lose 20% of the interest to tax.
With no savings allowance left, to take home £1,000, you’d need a rate closer to 6.25%.
If you’re a higher‑rate taxpayer, you get a savings allowance of £500. If you’ve already used that allowance, you’d need an interest rate closer to 8.3% just to end up in the same place.
Now let’s talk about dividends.
Over recent years, the UK dividend tax‑free allowance has been shrinking, and it now stands at just £500 a year.
The basic and upper rates of income tax on dividends above this allowance will also rise by two percentage points from 6 April this year.
That means:
- More investors will pay tax on dividend income
- Even modest portfolios could face annual tax bills
Inside an ISA?
Dividends remain completely tax‑free.
By moving investments into an ISA now, you lock in that protection — even as the rules tighten later.
This is especially relevant for:
- Income‑focused investors
- Those building long‑term portfolios
- Anyone who doesn’t want to deal with dividend tax admin
Capital gains tax
We’ve talked about tax-free income returns, but an ISA also shelters any investments growth from tax, meaning you keep more of your returns.
This is important, as the amount of tax-free gains you can make each year when you sell investments outside of ISAs now stands at just £3,000.
Can you withdraw money from an ISA?
Another big draw of ISAs is that you can get your hands on your money tax-free. You can withdraw cash from Stocks and shares ISAs at any time.
ISA withdrawals are tax-free and there is no limit to how much you can take out.
You can only make withdrawals in cash; this might mean selling some of your investments in an investment ISA.
The AJ Bell ISA is not a flexible ISA, so any money you take out of your ISA cannot be replaced in the same tax year if you’ve already reached your annual ISA allowance for the tax year.
Although some cash ISAs are easy to access, some accounts might limit the number of withdrawals you can make in a year without losing interest.
Fixed rate cash ISAs do not usually allow withdrawals until the end of the fixed term (known as maturity). Accounts that will let you access your cash might require you to close the account and deduct an interest penalty. You should check with your provider what rules will apply.
Lifetime ISA withdrawals work slightly differently. Government rules mean a 25% penalty charge will apply if you withdraw money before age 60, unless you are purchasing your first eligible home. This may mean you get back less from your Lifetime ISA than you put in, especially in the short term.
Cash ISA limits are changing
From April 2027, people under 65 will only be able to pay in up to £12,000 of their overall allowance into Cash ISAs.
Those aged 65 and over will be able continue paying in the full £20,000 annual allowance to Cash ISAs if they want to.
HMRC has also said it will introduce rules to stop under 65s getting around the rules. These could include preventing transfers into cash ISAs from other ISA types, but we don’t have the rules just yet.
Final thoughts: should you get one?
For most of us ISAs aren’t about clever tricks - they’re about keeping more of what you earn.
With tax rates rising and allowances remaining frozen, getting cash and investments wrapped up early can quietly make a big difference over time.
If you’re eligible and haven’t used your allowance yet, it’s worth taking a serious look before the tax year closes and the allowance is lost.
Get your money working for you
More about ISAs
From tips to boost your ISA savings, to understanding which ISA account is best for you, read more about these tax-free accounts.
Open an ISA
Invest up to £20,000 tax free each year with our most popular ISA account. Get started by investing as little as £25 per month.
Transfer an account
Thinking of moving an ISA over to us? It’s easy. We'll just need a few details of your current provider, then we’ll do the rest.
Important information: These articles are for information purposes only and are not a personal recommendation or advice. Tax and ISA rules apply. We don't offer advice, so it's important you understand the risks. If you're not sure, please speak to a financial adviser.