- 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 tax-free.
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 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-free 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.
We caught up with three AJ Bell customers to better understand their ISA experiences.
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.