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Why ISAs make sense again

Publication date: 04 April 2024
Reading time: Two minutes

When interest rates are high, it’s more important than ever to use your available tax allowances in the most efficient way. With the announcement of a proposed UK ISA Opens in a new window (British ISA) in March’s Budget, attention is again on Individual Savings Accounts (ISAs). Simple in theory, there’s more to ISAs than you might realise.

If you’re a higher rate tax payer, the amount of interest you can earn on your savings without attracting tax is £500. If you’re in the highest tax bracket you’ll always pay tax on your savings in non-ISA accounts. However as an ISA is simply a savings account that you don’t pay tax on, you can earn interest tax-free.

There are five types of ISA - stocks and shares, cash, Lifetime, innovative finance and Junior with the new British ISA in the consultations phase and not yet available. 

There are restrictions

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No matter how many ISAs you have, you can only pay a maximum of £20,000* into them in total every financial year. This is your ISA allowance.

*Correct for the 2024/25 financial year, but doesn’t include the new UK ISA

Type Maximum you can save each year Can you open more than one? Good to know
Cash ISA £20,000 Yes. Much like a regular savings account, but you won’t have to pay income tax on any interest you earn.
Stocks and shares ISA £20,000 Yes, as above. Allow you to invest your money in funds and other types of investments, such as bonds and shares in individual companies. Anything you earn is free from capital gains tax.
Lifetime ISA £4,000 Yes, but you can only pay into one of them in each financial year. The government pays you 25% of your total savings, up to a maximum of £32,000. You can only use this ISA twice – for a mortgage deposit, and when you turn 60. You must be under 40 to open one, but you can make contributions up to your 50th birthday.
Innovative finance ISA £20,000 As above. Allows you, through your ISA provider, to lend to other investors. You then receive a proportion of the interest rate they’re charged.
Junior cash ISA / Junior stocks and shares ISA £9,000. This is separate from the adult allowance – so you could save £20,000 in your ISA, and £9,000 into your child's JISA in the same tax year. The child can have a cash JISA and a stocks and shares JISA, but only one of each type.
Opened and managed by a parent or guardian, specifically for their child, although anyone can pay into the account. The child can take control of the ISA at 18.
UK ISA* £25,000* Yes, with a different provider each tax year. Similar to a stocks and shares ISA, but your contributions will only be in invested in UK stocks in exchange for an increased total annual allowance.
*Proposed limit

Is there an upper limit to what I can put in each ISA?

As long as you stay within subscription limits each year, there’s no upper limit to what you can have in each account. However, bear in mind that only up to £85,000 per person or up to £170,000 for joint accounts is protected by the Financial Services Compensation Scheme Opens in a new window.

Your ISA allowance doesn’t include any gains or interest that’s added to your account balance.


It’s 4 April and Ian’s cash ISA account balance is £20,000 - £19,000 he has saved over the financial year, and £1000 he’s earned in interest. As he has only saved £19,000 he can still pay in £1,000 before the new tax year starts.

How many ISAs can I have?

There’s no defined upper limit on how many you can have in total. Until 6 April 2024 you could only open one of each type of adult ISA per tax year. Now, you will be able to pay into multiple ISAs Opens in a new window of the same type each year as long as you don't go over your annual ISA allowance.

Can I roll over my allowance from one year to the next?

No, so if you can, try to use your full allowance by 5 April.

Do I use my allowance up if I put in money then withdraw it?

Unless you have a flexible ISA, yes. If you invest £20,000 into your ISA on the first day of the financial year then instantly take it all out, you can’t pay anything into any ISA until 6 April the next year.

What happens if I save or invest more than the ISA allowance?

HMRC will get in touch to tell you what happens next.

Can I move my ISA balance between providers?

Yes but if you do, ask your new provider to manage the transfer to avoid losing the tax advantages. Remember that unless done in the correct way, moving your balance into a new ISA is the same as paying in from scratch so be sure to read guidance before withdrawing or moving ISA savings.

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