ISAs

An ISA (Individual Savings Accounts) lets you to save or invest a certain amount each year without paying tax on any interest or capital gains you earn.

Each tax year, you have an annual allowance for how much you can put in an ISA. For the 2026/27 tax year, the ISA allowance is £20,000. The tax year runs from 6 April to 5 April the following year.

If you don’t use all your ISA allowance in the same tax year, it can’t be rolled over to the next year. You use it or lose it.

Technically yes, but not for cash ISAs.

In the November 2025 Budget, the Chancellor announced that the allowance for cash ISAs would drop to £12,000 from April 2027 for those aged 65 or under. But the stocks and shares ISA allowance will remain at £20,000, and this will be your overall combined ISA limit.

There are many different types of ISA, with accounts available to save money as:

Cash – where there’s no risk to your capital (subject to FSCS protection limits). Investments – where your capital is at risk if things go badly.

The two main types of cash ISAs are:

Easy access cash ISAs – the standard type of ISA. They’re typically more flexible, allowing access to your money at any time, but tend to offer lower interest rates than fixed-rate ISAs. Rates are usually variable, meaning they can go up or down.

Fixed-rate cash ISAs – you get a fixed interest rate by agreeing to lock your money away for a fixed term. The longer the term, the better the interest rate tends to be.

With investments, most people open:

Stocks and shares ISAs – instead of simply depositing cash, this type of ISA allows you to invest in various stocks, with the dividends and interest earned remaining tax free. These are riskier than other types of ISA, because they can decrease in value, depending on how your investments turn out.

The following are specialist ISAs, with eligibility dependent on your circumstances. Junior ISAs and Lifetime ISAs can be run as either cash or stocks and shares. Help to Buy ISAs are cash only.

Junior ISAs – a great way to help save towards your child’s future. Once they turn 18, the money is theirs to spend how they like: for example, on university fees, their first car or even a house deposit.

Lifetime ISAs (LISAs) – a successor to the Help to Buy ISA, LISAs can be opened by 18-40 year olds who want to save towards either their first home, worth up to £450,000, or retirement.

Help to Buy ISAs – designed to help first-time buyers save towards their first home. These are no longer available to new applicants.

There are four main types of ISA – cash ISAs, stocks and shares ISAs, innovative finance ISAs and Lifetime ISAs. You can save up to £20,000 in one type of account or split your allowance across some or all of the other types. But you’ll need to make sure you stick to all the rules so you don’t lose the tax advantages.

• The maximum amount you can add to a Lifetime ISA is £4,000 a year.

• Cash ISAs work in much the same way as regular savings accounts. Interest rates vary between providers and you can choose between instant access or fixed-rate ISAs. With a fixed-rate ISA, your money is tied up for a fixed term. You’re only allowed to open one cash ISA in each tax year.

• Stocks and shares ISAs allow you to invest in the stock market through funds, bonds and individual shares. You won’t have to pay tax on any profits or dividends. While investments are riskier than cash, shares typically outperform cash over the long term so they could give you better returns. Always remember, though, that the value of your investments can go down as well as up and that how they’ve done in the past isn’t a guarantee of how they’ll perform in the future. This all means that you could get back less than you paid in.

• Innovative finance ISAs enable you to earn tax-free interest through peer-to-peer lending. Essentially, you take on the role of a bank by lending to individuals, businesses or property developers through an online platform. It can give you higher returns than a cash ISA but it’s also riskier as there’s a chance the borrower could default on their loan, so you may get back less or even lose what you had invested.

• Lifetime ISAs are designed to help young people save up for either a deposit on their first home or for their retirement. You can open one if you’re 18 or over and under 40, and you can save up to £4,000 a year up to the age of 50. You’ll get a 25% bonus from the Government every year you make a deposit. However, you can only withdraw from a Lifetime ISA if you’re buying your first home, or if you’re over 60 years old, or are terminally ill with less than 12 months to live. Otherwise there will be a withdrawal charge.

This really depends on what you’re saving for and your attitude to risk. A cash ISA may be more appealing to a cautious saver who wouldn’t want to risk losing their money. Cash ISAs in the form of an instant access account may be an option if you’re saving for a short-term goal or need access to your cash in an emergency. The downside is that interest rates tend to be very low. Stocks and shares ISAs and innovative finance ISAs are riskier, but they could give you better returns than cash over the long term.

If you’re an adult under 40 and saving to buy your first home, a Lifetime ISA could be worth considering as you get a 25% bonus, up to a maximum of £1,000 a year – basically free money for saving. However, you’ll have to pay a penalty if you withdraw the money for something other than a property deposit or retirement.

Opening an ISA is pretty easy. Most ISA providers will let you open your account either in branch, online or over the phone. You’ll need to be at least 16 to open an account, and you can’t have exceeded your total ISA allowance for the year already.

To apply, you’ll just need to fill in some personal details like your name, address, job, National Insurance etc. along with some forms of ID. You won’t need to go through with a credit check though. ISAs aren’t credit products (they don’t have an overdraft) which means your credit score won’t be considered as part of your application.

To find the right ISA for you, you can compare ISAs using Compare the Market’s comparison service.

At Compare the Market, we currently only compare cash and Lifetime ISAs. You don’t need anything to compare ISA rates, but you will need some basic personal details if you decide to apply, including:

• your National Insurance number

• your address

• your occupation

• details of any current ISA you want to switch into the new ISA