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ISA Types UK 2026: Which One Is Right For You?

From Cash ISAs to Lifetime ISAs, Junior ISAs to Innovative Finance ISAs — understand every UK ISA type, compare allowances, and choose the right wrapper for your savings goals.

£20,000Annual ISA Allowance
£9,000Junior ISA Allowance
£4,000LISA Max Per Year
25%LISA Government Bonus

What Is an ISA?

An ISA — Individual Savings Account — is a tax-efficient savings and investment wrapper available to UK residents. The key benefit of an ISA is that any interest, dividends, or capital gains earned within it are completely free from UK income tax and capital gains tax. You never have to declare ISA income or gains on a self-assessment tax return.

ISAs were introduced in April 1999 as a replacement for PEPs (Personal Equity Plans) and TESSAs (Tax-Exempt Special Savings Accounts). Over the subsequent decades, the annual allowance has grown considerably — from £7,000 in 1999 to £20,000 today — and new ISA types have been introduced to serve different savings goals.

In the UK, there are currently five main ISA types available to adults: the Cash ISA, Stocks and Shares ISA, Lifetime ISA, Innovative Finance ISA, and the legacy Help to Buy ISA (now closed to new applicants). The Junior ISA is available for children under 18. Understanding each type's rules, advantages, and restrictions is essential to making the most of your annual allowance.

ISA Tax Benefits at a Glance
No income tax on interest or dividends. No capital gains tax on investment growth. No need to declare ISA income on your tax return. The tax benefits carry over year after year — your ISA pot grows tax-free indefinitely.

Annual ISA Allowance 2025/26

The annual ISA allowance for the 2025/26 tax year is £20,000 per person. This is the maximum you can contribute across all your ISAs in a single tax year (6 April to 5 April). The Lifetime ISA has a separate sub-limit of £4,000, which counts towards the £20,000.

From April 2024, HMRC updated the rules to allow savers to open and contribute to multiple ISAs of the same type in the same tax year — for example, holding two different Cash ISAs simultaneously. However, your total contributions across all ISA types must still not exceed £20,000 per year.

Unused ISA allowance cannot be carried forward to the next tax year. If you do not use your full £20,000 by 5 April each year, that allowance is lost forever. This makes it important to plan your contributions and use your allowance efficiently.

Cash ISA

Savings

Cash ISA

A Cash ISA is essentially a tax-free savings account. Your money earns interest and your capital is protected (up to £85,000 per bank per FSCS scheme). Unlike a regular savings account, you pay no income tax on the interest — which matters most for higher-rate (40%) and additional-rate (45%) taxpayers who have exhausted their Personal Savings Allowance.

Cash ISA Key Features

  • Capital is fully protected (up to FSCS limits)
  • Instant access, notice, or fixed-rate options available
  • Interest rates vary by provider — compare regularly
  • Suitable for short-term goals, emergency funds, and risk-averse savers
  • No minimum investment period required (for easy-access accounts)
Cash ISA vs Personal Savings Allowance
Basic-rate taxpayers get a £1,000 Personal Savings Allowance (PSA). Higher-rate taxpayers get £500; additional-rate taxpayers get £0. If your savings interest exceeds your PSA, a Cash ISA shelters any excess from tax. Use our Cash ISA Calculator to see your potential savings.

Stocks and Shares ISA

Investing

Stocks and Shares ISA

A Stocks and Shares ISA allows you to invest in equities, bonds, funds, ETFs, investment trusts, and other assets within a tax-free wrapper. Any growth (capital gains) and income (dividends) generated are completely tax-free, regardless of how large your ISA pot grows.

Stocks and Shares ISA Key Features

  • Tax-free growth on capital gains and dividends
  • Wide range of investments: UK and global shares, funds, ETFs, bonds
  • Higher long-term return potential than Cash ISAs (but with risk)
  • Ideal for goals 5+ years away — time in the market reduces risk
  • Platform fees typically 0.15%–0.45% per year plus investment fund charges

Read our detailed Stocks and Shares ISA Guide for platform comparisons, investment strategies, and historical performance data.

Lifetime ISA (LISA)

LISA

Lifetime ISA

The Lifetime ISA was introduced in April 2017 and is designed for two specific purposes: buying a first home or saving for retirement. The standout feature is the 25% government bonus — for every £4,000 you contribute, the government adds £1,000, up to a maximum bonus of £1,000 per year.

Lifetime ISA Rules and Restrictions

LISA Withdrawal Penalty
The 25% withdrawal penalty is applied to the total withdrawal amount (your contributions plus the bonus). This means withdrawing early costs you 6.25% of your own contributions. Only use a LISA if you are confident it will be used for a first home purchase or retirement.

Help to Buy ISA (Closed)

The Help to Buy ISA closed to new applicants in November 2019. Existing account holders can continue contributing until November 2029 and claim their bonus until November 2030. The H2B ISA offered a 25% government bonus on contributions (up to £3,000 total bonus) for first-time home buyers. If you have one, consider whether transferring to a LISA makes sense for your situation.

Junior ISA (JISA)

Under 18

Junior ISA

A Junior ISA (JISA) is a tax-free savings and investment account for UK-resident children under 18. Parents, guardians, or family members can contribute, making it an excellent way to build a nest egg for a child's future education, first car, deposit, or any other purpose they choose at 18.

Junior ISA Key Features

Compounding Power
Investing £200/month in a Stocks and Shares JISA from birth at an assumed 7% annual return gives a pot of approximately £79,000 by the child's 18th birthday — all tax-free. Use our ISA Calculator to model different scenarios.

Innovative Finance ISA (IFISA)

Higher Risk

Innovative Finance ISA

The Innovative Finance ISA (IFISA) allows you to hold peer-to-peer (P2P) loans and other alternative finance investments within an ISA wrapper. Any interest earned is tax-free, potentially offering higher returns than a Cash ISA — but at significantly higher risk.

IFISA Key Features

ISA Types Comparison Table

ISA Type Annual Limit Age Restriction Government Bonus Capital Protected Best For
Cash ISA £20,000 18+ No Yes (FSCS) Short-term goals, low risk
Stocks & Shares ISA £20,000 18+ No No Long-term wealth building
Lifetime ISA £4,000 18–39 (open) 25% (max £1,000/yr) Depends on type First home or retirement
Junior ISA £9,000 Under 18 No Depends on type Child savings
Innovative Finance ISA £20,000 18+ No No Higher-risk P2P lending

Which ISA Should You Choose?

Choose a Cash ISA If...

Choose a Stocks and Shares ISA If...

Choose a Lifetime ISA If...

Choose a Junior ISA If...

How to Transfer Between ISAs

You can transfer your ISA to a different provider or even a different ISA type at any time, without it counting towards your annual allowance. The golden rule: always use the official ISA transfer process. Never withdraw money and re-deposit it — doing so uses up your annual allowance.

ISA Transfer Rules

Useful Calculators

ISA Calculator Cash ISA Calculator S&S ISA Guide

Frequently Asked Questions

How much can I put in an ISA in 2025/26?

The annual ISA allowance for 2025/26 is £20,000 per person. This can be split across multiple ISA types — for example, £10,000 in a Cash ISA and £10,000 in a Stocks and Shares ISA. The Lifetime ISA has a sub-limit of £4,000 per year, which counts towards the £20,000 total. The Junior ISA allowance is separate at £9,000 per child.

What is the difference between a Cash ISA and a Stocks and Shares ISA?

A Cash ISA holds your money in a savings account earning interest, with your capital protected by the FSCS. A Stocks and Shares ISA invests in the stock market, potentially offering higher returns over the long term but with the risk of losing money. Both are tax-free wrappers, meaning no tax is paid on interest or gains generated within them. The right choice depends on your time horizon and risk appetite.

What is a Lifetime ISA and who can open one?

A Lifetime ISA (LISA) is available to UK residents aged 18-39. You can save up to £4,000 per year and the government adds a 25% bonus (up to £1,000/year). The money must be used to buy your first home (up to £450,000 purchase price) or for retirement from age 60. Withdrawals for any other reason incur a 25% penalty charge, which effectively costs you 6.25% of your own contributions.

Can I have more than one ISA at the same time?

Yes. From April 2024, HMRC updated the rules to allow you to open and contribute to multiple ISAs of the same type in the same tax year. You can simultaneously hold a Cash ISA, Stocks and Shares ISA, Lifetime ISA, and Innovative Finance ISA, as long as your total contributions across all ISAs do not exceed £20,000 in the tax year (with the LISA limited to £4,000 of that total).

What is a Junior ISA and when can the child access the money?

A Junior ISA (JISA) is a tax-free savings account for UK-resident children under 18. The 2025/26 annual allowance is £9,000 per child. It can be a Cash JISA or Stocks and Shares JISA. The child cannot access the money until their 18th birthday, at which point the account automatically converts to an adult ISA and the young person gains full control. Anyone can contribute to a child's JISA, not just the parents.

Can I transfer my ISA to a different provider?

Yes. You can transfer your ISA to a different provider at any time without losing your tax-free status or it counting towards your annual allowance. Always use the official ISA transfer process — never withdraw and re-deposit. Your new provider manages the transfer. You can also transfer between ISA types (e.g., Cash ISA to Stocks and Shares ISA). LISA transfers can only go to another LISA without triggering a penalty.

What is an Innovative Finance ISA?

An Innovative Finance ISA (IFISA) holds peer-to-peer loans or other alternative finance investments within an ISA wrapper, making any interest earned tax-free. These carry significantly more risk than Cash ISAs — borrowers may default and your capital is not protected by the FSCS. IFISAs are typically suited to experienced investors who understand P2P lending and can accept the risk of capital loss.

What happens to my ISA if I die?

When an ISA holder dies, the ISA retains its tax-free status until either the administration of the estate is complete or the account is closed. From 6 April 2018, a surviving spouse or civil partner can inherit the ISA's tax-free status through an Additional Permitted Subscription (APS), allowing them to invest an equivalent amount in their own ISA without it counting towards their annual allowance. This preserves the tax benefits for couples.

MB
Mustafa Bilgic
Financial Content Writer | UK Calculator

Mustafa specialises in making UK tax and personal finance topics accessible to everyday readers. He covers ISAs, inheritance tax, pensions, and investment strategies across the UK Calculator network.