What is an ISA?
ISA stands for individual savings account. It’s a type of savings or investment account that shields any interest you make from tax, which means you could get more for your money.
There are four types of ISA:
A cash ISA: A cash-only savings account that works like a normal savings account. You can open easy access, fixed rate or notice cash ISAs
A stocks and shares ISA: Also known as an investment ISA, these accounts let you hold a range of assets, including cash, bonds, shares, funds and gilts
Innovative finance ISA: This type of ISA enables you to lend money to borrowers through peer-to-peer lending platforms
Lifetime ISA: You can use this to help you buy your first home or plan for retirement
How much can I save into an ISA?
You can currently save up to £20,000 into an ISA each tax year (6 April to 5 April). This is called your annual ISA allowance.
Lifetime ISAs work a little differently. With these, you can only save up to £4,000 each tax year, with the government adding a 25% bonus.
You can pay the full £20,000 into one type of ISA. Or you can split your annual allowance across different types of ISA. So you could pay £10,000 into a cash ISA, £6,000 into an investment ISA and £4,000 into a lifetime ISA, for example.
At the start of a new tax year, on 6 April, your allowance resets. You can’t carry over any remaining balance from one tax year to the next.
Can I pay into two ISAs in the same tax year?
Yes, you could pay into both a stocks and shares ISA and a cash ISA. Plus, as of this tax year, you can now split the allowance across multiple accounts of the same type. For example you open an easy access cash ISA and a fixed-term cash ISA.
The the exception is lifetime ISAs – you can only ever have one lifetime ISA in your name.
Can I move my money to another ISA?
Yes, you can transfer money held in one ISA to another provider. For instance, you might want to do this because you’ve found a more competitive interest rate. But don’t be tempted to withdraw the cash and pay it into a new ISA yourself because your money will lose its tax-free status.
Instead, your new ISA provider will ask you to fill out a transfer form with your existing ISA details, and it will carry out the transfer for you. Be aware that not all providers accept transfers from other providers, so check before you apply.
You can also transfer your savings to a different type of ISA (e.g. transfer a cash ISA to an investment ISA), or you can transfer them to the same kind of ISA.
If you want to transfer money you’ve invested in an ISA in the current tax year, you must move all of it. If you’re transferring money invested in previous years, you can either transfer all or a portion of it.
Do ISA transfers affect my ISA allowance?
If you’re transferring funds from previous tax years, this won’t impact your current ISA allowance. But it will affect it if you transfer funds from the current tax year.
Example:
Let’s say you want to transfer £2,000 from an ISA you opened in the previous tax year, and you haven’t used any of this year’s ISA allowance. You can make your £2,000 transfer and still pay £20,000 into your new ISA.
On the other hand, if you had paid £2,000 into a cash ISA in the current tax year and wanted to transfer that money to a cash ISA with a better interest rate, you’d have £18,000 left for the current year’s ISA allowance.
ISA flexibility
Some ISAs are called flexible ISAs. This means you can withdraw money from your ISA and pay it back within the same tax year without affecting your annual allowance.
You can do this with cash ISAs, investment ISAs and innovative finance ISAs. But not all providers offer this flexibility, so you need to check.
Let’s say you pay £10,000 into your cash ISA at the start of the tax year. A month later, you withdraw £5,000.
If your ISA is flexible, you can pay this £5,000 back into your ISA within the same tax year and still add another £10,000 to reach your annual allowance of £20,000.
But if your ISA isn’t flexible, you can’t pay the £5,000 back in – you can only pay in your remaining allowance of £10,000 before the end of the tax year. That’s because you have already used up £5,000 from your annual allowance.
What happens if I go over the ISA allowance?
Some ISA providers will stop you before you go over your ISA allowance. But if you have ISAs with multiple providers, it can be harder to keep track of what you’ve paid in where. If you realise you’ve exceeded your allowance, contact HMRC to let them know.
If you don’t realise you’ve gone over your ISA allowance, HMRC will contact you at the end of the tax year and inform you of what steps to take.
FAQs
Every tax year you can save up to £20,000 in one account or split the allowance across multiple accounts. The tax year runs from 6 April to 5 April. You can only pay into one Lifetime ISA in a tax year. The maximum you can pay in is £4,000.
Can I put 20k in an ISA every year? ›
Yes, you can add money to your Cash ISA every year, as long as the total amount does not exceed the ISA cap for 2024/25 of £20,000. There is no cash ISA limit. If you contribute to more than one type of ISA during the same tax year, this total amount of £20,000 must be split and shared across the ISA accounts.
What is the maximum amount you can put in a ISA? ›
The Government puts a cap on how much you can put into your ISA or ISAs in any tax year (from 6 April – 5 April). The ISA allowance for 2024/25 is set at £20,000. The ISA limit for Junior ISAs is £9,000 for 2024/25.
Can I put 50000 in a cash ISA? ›
ISAs are a simple way to grow your money in a tax-efficient manner. You can invest up to £20,000 in your ISA each year, whether it's a cash ISA, an innovative finance ISA, or a stocks and shares ISA, and you can watch your money grow within your tax-free wrapper, including any income you build up.
What happens if you pay more than $20,000 in an ISA? ›
As £20000 is the maximum you can put into any combination of ISA's in a tax year, you will need to contact the ISA provider, who you saved £2000 with, so that they can repay the sum to you and bring you back in line with the ISA rules.
Can I have $40,000 in an ISA over 2 years? ›
There is no limit to how much money can be in an ISA. The ISA allowance limit applies to how much you can pay in during each tax year (6 April to 5 April the following year). So, as long as you've paid in no more than £20,000 within a single tax year, there's no reason you can't have more than £20,000 in an ISA.
Can I put 200k in an ISA? ›
Or pay in as much as you like, up to the £20,000 ISA allowance for the tax year 2024/2025. Remember, the value of a stocks and shares ISA can go down as well as up, and you may get back less than you've paid in.
What happens if you put too much in your ISA? ›
In situations where you have saved in excess of this sum in your ISAs in the tax year, you will need to discuss with your ISA providers, the removal of the excess from your ISA, incuding any interest the excess generated, and return it to you. The excess interest is taxable and should be declared.
Is an ISA tax free? ›
You do not pay tax on: interest on cash in an ISA. income or capital gains from investments in an ISA.
Is an ISA worth it? ›
For short-term goals such as an emergency fund or a holiday, ISAs and savings accounts can still be a good place to save up. For long-term savings such as retirement, however, you should consider investing to help your money grow over time.
Junior ISA Loophole
Before April 6, 2024, 16 and 17-year-olds could save up to £29,000 a year in ISAs by using both the Junior ISA and adult cash ISA allowances. But now, only those 18 and older can open cash ISAs. This means 16-year-olds can't access adult cash ISAs anymore, closing that loophole.
Can you have millions in an ISA? ›
There are already over 4,000 ISA millionaires³ in the UK, taking an average of 22 years to get there. Achieving millionaire status through ISAs is not a mere fantasy; it is a feasible goal with the right strategy and discipline.
Can I put 100000 into a cash ISA? ›
You can also access money in an ISA whenever you wish. The catch, if you want to invest £100,000, is that you can only invest £20,000 in an ISA each year. You can, however, sell other investments in future years and rebuy them in your ISA in a process known as Bed and ISA.
What are the new rules for cash ISA 2024? ›
1.1 Increase the age for opening cash ISAs from 16 to 18 years old and over. From 6 April 2024 it will not be possible for anyone aged 17 and under to subscribe to more than one cash ISA . This is a mandatory change with transitional arrangements.
How much money is safe in an ISA? ›
Which ISA might be right for you?
| Help to Buy: ISA (Cash ISA) | Investment ISA |
|---|
| Eligible age to open ISA | N/A | 18+ |
| How much can be saved? | £200 per month (£1,200 in month of account opening) | Up to £20,000 per tax year (2024/2025) |
| ISA allowance for the 2024/2025 tax year is £20,000 | ISA allowance for the 2024/2025 tax year is £20,000 |
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ISA providers are required to send information to HMRC about customers who have opened ISAs or contributed to them that year. Don't try to sort it yourself. Keep the account open and don't withdraw your money. Contact HMRC's ISA helpline to explain what's happened – 0300 200 3300.
Can I put $20,000 in an ISA every year on Reddit? ›
I'm a bit confused by your question, but between April and April, you can make as many deposits as you want into one ISA, up to £20K a year. After the tax year ends, you can do the same, up to £20K into one ISA. The amount in your ISA doesn't matter, whether it grows or shrinks, you can deposit up to £20K.
Can I put 20000 in an ISA every year Nationwide? ›
How to open and manage your account. You can open this account with a minimum of £1 up to a maximum of the annual ISA allowance (currently £20,000 for tax year 2024/2025).
How many times can you transfer an ISA in a year? ›
You can transfer some or all savings from the current tax year's ISA or previous years. There's no limit on the frequency of transfers.
Do I need to open a new ISA every year? ›
You don't need to open a new Cash ISA every tax year. Once the end of the tax year approaches, your existing cash ISA will roll into the next year.
