Individual Savings Accounts (ISAs) are tax-free savings accounts.

There are four different types of ISAs:

• cash ISAs;

• stocks and shares ISAs;

• innovative finance ISAs; and

• lifetime ISAs.

Individuals must be at least 18 to invest in an ISA.

Cash ISAs may be with a bank or building society or with National Savings and Investments. Stocks and shares ISAs can include shares in companies, unit trusts and investment funds, corporate bonds, government bonds and long-term asset funds.

Lifetime ISAs can include cash and stocks and shares. They can only be used to save for a deposit for a first home or for retirement.

Innovative finance ISAs can hold peer-to-peer loans, crowdfunding debentures, funds where the notice or redemption period means that they cannot be held in a stocks and shares ISA or crypto-asset exchange traded notes.

A separate ISA, the junior ISA, allows a parent or a guardian with parental responsibility to save for a child who is under the age of 18 and living in the UK.

There is no tax to pay on interest on a cash ISA or on income and capital gains from investments in a stocks and shares ISA.

ISA allowance

For adults, the ISA allowance is £20,000 for 2026/27. This is the total amount that can be invested in ISAs of any type. However, the maximum that can be deposited in a lifetime ISA is capped at £4,000 a year and an individual can only have one lifetime ISA.

Example

John wishes to invest £20,000 in ISAs in 2026/27. He is using a lifetime ISA to save for retirement and can invest £4,000 of his allowance in his lifetime ISA. He also invests £10,000 in a cash ISA and £6,000 in a stocks and shares ISA.

The savings limit for Junior ISAs is set at £9,000 for 2026/27.

Changes ahead

Although the ISA limit will remain at £20,000 for 2027/28, individuals under the age of 65 will only be able to invest a maximum of £12,000 in a cash ISA. To use their full allowance, individuals under 65 will need to make non-cash investments of at least £8,000 in other types of ISA (stocks and shares, lifetime or innovative finance). The £12,000 cap will not apply to individuals aged 65 and over who will continue to be able to invest their full allowance in a cash ISA if they so wish.

Individuals under the age of 65 who wish to make the most of the opportunity to invest in cash ISAs may wish to consider investing the full £20,000 limit in a cash ISA in 2026/27 while they still can.