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Jennifer Irvine
Senior Technical Support Consultant

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What is an ISA?

Published  03 November 2026
   13 min read

ISAs were introduced by the UK government in 1999 as a tax-efficient way to save or invest, with no UK income or capital gains tax. There are several types of ISA available, offering flexibility to suit a range of savings goals. In this article we discuss what an ISA is, flexible ISAs, the range of ISAs available and subscription limits.

Key facts

  • An ISA is a tax-advantaged savings account introduced in 1999.
  • No UK income tax or capital gains tax on returns.
  • Withdrawals are tax-free.
  • Must be held by one individual (no joint accounts). 

What is an Individual Savings Account (ISA)? 

Introduced by the UK government in 1999, ISAs are a tax-advantaged savings product that is free from UK income and capital gains tax with no tax paid when money is withdrawn.  

An ISA must be held in the name of a single individual; ISA joint accounts are not permitted. 

ISA subscriptions

Under ISA regulations, the money paid into an ISA is known as a subscription. 

What is the maximum subscription you can pay into an ISA? 

Since 6 April 2017, the overall annual ISA limit of £20,000 can be split between any combination of a Cash ISA, a Stocks and shares ISA, an Innovative finance ISA and a Lifetime ISA as the individual wishes but a maximum of £4,000 can be paid into a Lifetime ISA. A maximum of £9,000 can be paid in to a Junior ISA.

Each year the government announces the ISA subscription limits for the following tax year.

Prior to 6 April 2024, it was not possible to contribute to multiple ISAs of the same type in the same tax year, for example if you had already contributed to a stocks and shares ISA you couldn’t then contribute to another stocks and shares ISA in the same tax year. This restriction was removed on 6 April 2024 and you can now subscribe to multiples of the same type of ISA up to the overall £20,000 subscription limit.

ISA regulations allow individuals to subscribe by lump sum, or by regular or irregular periodic payments, provided the subscription limits are not exceeded. The ISA manager may impose conditions, such as a minimum lump sum subscription.

Subscription by transfer of shares  

Shares can be directly transferred into an ISA (including a Lifetime ISA) if they have been acquired by the individual from a Schedule 3 SAYE option scheme or a Schedule 2 share incentive plan. Shares cannot be directly transferred into an ISA in any other circumstances.  

  • Individuals must transfer shares from a Schedule 3 SAYE option scheme into an ISA within 90 days of the exercise of option date.
  • Individuals must transfer shares from a Schedule 2 share incentive plan into an ISA within 90 days after the shares ceased to be subject to the plan.
  • Where a withdrawal period applies, the transfer of the shares to the ISA cannot take place until after the end of the withdrawal period. 

The ISA manager must be willing to accept the transfer of shares into their ISA. How to manage ISA subscriptions - Subscription by transfer of shares.

What are the different types of ISA?  

There are a few different types of ISA. They all have different eligibility criteria, subscription and age limits, investment options, financial protection and some offer a government bonus.   

Changes were proposed in the 2025 and 2026 Autumn Budget to some ISA limits and to certain types of ISAs. See our section on What changes to ISAs are happening? for more details.

Cash ISA

These can be used to invest savings in bank and building society accounts and some National Savings and Investment products. Any interest is free from tax. The minimum age to open a cash ISA is 18.  

Stocks and shares ISA 

These can be used to invest in investments such as stocks and shares, corporate bonds, government bonds, unit trusts, life assurance policies, OEICs. A full list of possible investments can be found at Stocks and shares ISA investments for ISA managers. Any income and capital gains are free from tax. The minimum age to open a stocks and shares ISA is 18. 

Lifetime ISA

These were introduced to help first-time buyers save for a deposit for a first home. A lifetime ISA can be opened for somebody between the ages of 18 or over and under 40, but they can continue to subscribe up to age 50. These ISAs can be used to invest in cash and stocks and shares.  

The government adds a 25% bonus to the pot each year up to a maximum of £1,000 so the maximum that can be paid is £4,000 a year. The £4,000 counts towards the total annual maximum ISA subscription limit of £20,000. If the funds aren’t used for a property purchase, they can be accessed without a charge from age 60, if the individual has a life expectancy of less than 12 months or if they die.

If withdrawals are taken for any other reason or if it is transferred to another type of ISA before age 60, a penalty of 25% of the value of the fund applies. The one exception is where a first-time buyer withdraws their Lifetime ISA savings to purchase a property costing more than £450,000. Before the Budget on 29 October 2026 the 25% charge applied in this circumstance, from that date the charge reduced to 20%. The £450,000 property price cap remains unchanged.

It is only possible to use the lifetime ISA to buy a first home without the 20%/25% charge if the following applies: 

  • The house costs £450,000 or less.
  • The property is bought at least 12 months after the first payment into the lifetime ISA.
  • A conveyancer or solicitor is used in the purchase - the ISA manager will pay the funds directly to them.
  • The home is bought with a mortgage1.

1An individual cannot use their Lifetime ISA savings to buy a home if they’re getting a private mortgage from: 

  • Their relative (a parent, grandparent, child, grandchild or sibling).
  • Someone who is married or in a civil partnership with their relative.
  • Their spouse or civil partner.
  • A relative of their spouse or civil partner.
  • Someone who is married or in a civil partnership with a relative of their spouse or civil partner.

Help to buy ISA  

Since 30 November 2019, it is no longer possible to open a new help to buy ISA. It is possible to continue to subscribe to an existing help to buy ISA until November 2029. The 25% bonus can be claimed up until November 2030.

These were also introduced to help first-time buyers buy a house with a maximum value of £250,000 (or £450,000 in London). If the individual is buying with someone else, they can also have a help to buy ISA. The house they buy must be the only home they own, and they must intend to live in it. When the individual comes to buy their house their solicitor or conveyancer will apply to the government for the extra 25% bonus. The maximum government bonus available is £3,000 if £12,000 is paid. 

The maximum first payment could have been up to £1,200 with a maximum of £200 a month. It was not possible to pay in to both a help to buy ISA and a lifetime ISA. 

The minimum age to open a help to buy ISA was 18. 

Innovative finance ISA

Introduced by the government in April 2016, these ISAs allow the individual to invest in cash, crowdfunding debentures, alternative finance arrangements, peer-to-peer loans and less-liquid investments.  
 
The minimum age to open an innovative finance ISA is 18. 

Junior ISA

A parent or guardian with parental responsibility can open a junior ISA for a child and pay in up to £9,000 each tax year. The child can withdraw money from age 18 although they can take control of the ISA when they reach age 16. Children aged 16 and 17 can open their own Junior ISA. 

There are two types of Junior ISAs: a Cash Junior ISA and a Stocks and Shares Junior ISA. A child is only allowed to have one of each type throughout their childhood. However, holding either type is entirely optional.

A Junior ISA automatically turns into an adult ISA when the child turns age 18.  

It is not possible to hold both a Junior ISA and a child trust fund; if a Junior ISA is opened the money from a child trust fund must transfer to that Junior ISA. 

What is a flexible ISA?

When an ISA is described as flexible this means that the individual can take cash out of their ISA and replace the withdrawn money during the same tax year, without the replacement counting towards their annual subscription limit.  

The following ISA types can be flexible, but it is up to the ISA manager whether they offer flexible versions:

  • Cash ISA
  • Stocks and shares ISA
  • Innovative finance ISA
  • Lifetime ISAs and Junior ISAs cannot be flexible.   

Why would this matter?

This is best shown with an example. If an individual had paid £20,000 into their non-flexible ISA and urgently needed £15,000, they could take this from their ISA, but they would have to wait until the next tax year to replace the £15,000 they had withdrawn. If their ISA was flexible, they could immediately replace the £15,000 and still be within the £20,000 annual subscription limit.  

Withdrawals made from a flexible ISA during a tax year reduce the total value of current year subscriptions. These current tax year subscriptions may be replaced by subscribing to the same ISA or any other ISA in that same tax year.   

If the amount withdrawn exceeds the current tax year’s subscriptions, the excess is treated as a withdrawal of previous year funds and can only be replaced as a replacement subscription to the same ISA. Previous tax year withdrawals are replaced first before current tax year subscriptions.  

Different ISA types: An overview

We’ve summarised the main different types of ISA in the table below. 

ISA type 

Eligibility 

Maximum subscription each tax year1

Investment options 

Government bonus 
Cash ISA  18+ £20,000 a year  Deposit accounts  None
Stocks and Shares ISA  18+ £20,000 a year  Stocks, shares, unit trusts and OEICs  None
Lifetime ISA3  18-39 (inclusive) for set up but can subscribe up to age 50.  £4,000 a year  Deposit accounts, stocks, shares, unit trusts and OEICs Maximum £1,000 a year (25%) 
Help to buy ISA  18+ Initial subscription £1,200 then £200 a month2 Deposit accounts  Minimum - £400  Maximum- £3,000 
Junior ISA3  Up to 18 £9,000 a year  Deposit accounts, stocks, shares, unit trusts and OEICs  None
Flexible ISA3 18+ £20,000 a year  Deposit accounts, stocks, shares, unit trusts and OEICs  None
Innovative finance ISA 18+ £20,000 a year  Peer to peer lending 
Crowdfunding 
Debentures 
Cash 		 None

1The overall maximum subscription to all ISAs is £20,000. 
2The minimum Government bonus is £400 so it is necessary to pay in at least £1,600 before a bonus is awarded.  
3Lifetime ISAs, Junior ISAs and Flexible ISAs can be Cash ISAs or Stocks and Shares ISAs. 

What changes are happening to ISAs in April 2027?

In the Budget on 26 November 2025, the Government announced some changes to ISAs which would have applied from 6 April 2027. The proposed changes were as follows:

  • Anyone under age 65 would only be able to put up to £12,000 a year into a Cash ISA.
  • Those aged 65 and over could still save up to £20,000 in a Cash ISA.
  • A lifetime ISA would be replaced by a new first-time buyer product.

However, in the Budget on 28 October 2026, the Government announced the proposed changes to cash ISAs would not be implemented from 6 April 2027.

It was confirmed that the limits on Junior ISAs and Child Trust Funds will stay at £9,000 until April 2031 and Lifetime ISAs will also remain unchanged, with an annual limit of £4,000 until April 2031.

The Government also announced that they will be introducing a First-Time Buyer ISA from April 2029.

  • the product will allow annual contributions up to £4,000 and provide a 25% government bonus, in line with the Lifetime ISA
  • the cumulative bonus will be capped at £20,000 and be calculated on the final account balance. The bonus will be added to the final account balance, not paid annually.
  • individuals will be able to hold only one First-Time Buyer ISA at a time.
  • Help to Buy ISA holders will be able to transfer their full balance into a First-Time Buyer ISA outside the annual subscription limit between 6 April 2029 and 1 December 2030.
  • transfers from Lifetime ISAs will not be permitted, but both a Lifetime ISA and First-Time Buyer ISA can be used towards the same purchase.
  • transfers from other ISAs will be permitted up to £4,000 and transfers out, of any amount, will be permitted
  • the £450,000 property price cap will be retained for both the Lifetime ISA, Help to Buy ISA within London (and £250,000 outside) and First Time Buyer ISA.

Also announced was a change to the Help to Save scheme, this is not an ISA, but a government supported savings scheme aimed at individuals on lower incomes who receive Universal Credit. From April 2028 it will move to a multi-provider model. This means that banks, building societies, credit unions, ISA providers and other financial institutions will be able to provide Help to Save accounts.

Your questions answered

This section aims to answer common questions about ISAs, including how withdrawals work, what happens in cases of bankruptcy, and the transitional rules for younger savers. 

It is possible to take money out of an ISA tax-free at any time. However, depending on the type of ISA there may be consequences in doing so. Unless the ISA is a flexible ISA, a withdrawal will use up some of that year’s subscription but cannot be replaced. 

If an ISA is flexible, you can make a subscription and withdraw funds up to the original subscription amount, then repay them into the same ISA within the same tax year. Any repayment up to the value of the initial subscription will not be treated as a new subscription. 

For Lifetime ISAs, unless an individual is taking out money to buy their first home, they will face a 25% charge on withdrawals. The only other circumstances where the 25% charge also does not apply is if the individual is over 60 or terminally ill. Or if the property purchase is over £450,000 where the charge is reduced to 20%.

Some ISAs have tie in periods which means interest on the savings may be lost.

The Terms and Conditions for the ISA will explain when payments can be made and whether there are restrictions or charges applied. 

If an individual with an ISA becomes bankruptcy, the ISA must be closed. This happens from the date the trustee’s appointment takes effect, or in the case of the Official Receiver, it is the date they become the trustee. This is because ISA regulations only allow ISA investments to be in the beneficial ownership of the individual with the ISA. However, under the Insolvency Act, a bankrupt's estate vests in a trustee immediately on his appointment taking effect. 

If the individual has a Lifetime ISA, the 25% withdrawal charge must be deducted and paid to HMRC when the account is closed. The only exceptions to this are where the individual is aged 60 or over, or on the death or terminal illness of the individual. 

How to close, void or repair an ISA

Before 6 April 2024, individuals aged 16 and 17 were eligible to open and contribute to a Cash ISA. However, since that date, only those aged 18 or over can open and contribute to an ISA. There were, however, transitional rules in place for those aged 16 and 17 years on 5 April 2024 until 5 April 2026. 

The transitional rules were: 

  • If a person was aged 16 or 17 on 5 April 2024 and did not already hold a Cash ISA, they could still apply for and contribute to one Cash ISA in any tax year.
  • Those aged 16 or 17 who already held a Cash ISA before 6 April 2024 could continue to subscribe or transfer. 

When a fixed-term product matured: 

  • The funds could be transferred into a new Cash ISA.
  • A new or continuing product could be offered, provided this was allowed under the original account’s terms and conditions. 

The ISA manager could accept transfers from existing Cash ISAs held by 16 or 17 year olds. However: 

  • All current-year subscriptions must be transferred.
  • The original ISA account must be closed. 

An ISA manager could choose whether or not to offer Cash ISAs to individuals within the transitional arrangements. 

Disclaimer

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. Also it may not reflect the options available under a specific product which may not be as wide as legislations and regulations allow.

All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.