2. How ISAs work

There are 4 types of Individual Savings Accounts (ISA):

  • cash ISA
  • stocks and shares ISA
  • innovative finance ISA
  • Lifetime ISA

You don’t pay tax on:

  • interest on cash in an ISA
  • income or capital gains from investments in an ISA

If you complete a tax return, you don’t need to declare any ISA interest, income or capital gains on it.

Putting money into an ISA

Every tax year you can put money into one of each kind of ISA. The tax year runs from 6 April to 5 April.

You can save up to £20,000 in one type of account or split the allowance across some or all of the other types.

You can only pay £4,000 into your Lifetime ISA in a tax year.

Example You could save £15,000 in a cash ISA, £2,000 in a stocks and shares ISA and £3,000 in an innovative finance ISA in one tax year.

Example You could save £11,000 in a cash ISA, £2,000 in a stocks and shares ISA, £3,000 in an innovative finance ISA and £4,000 in a Lifetime ISA in one tax year.

Your ISAs won’t close when the tax year finishes. You’ll keep your savings on a tax-free basis for as long as you keep the money in your ISA accounts.

What you can include in your ISAs

Cash ISAs can include:

Stocks and shares ISAs can include:

  • shares in companies
  • unit trusts and investment funds
  • corporate bonds
  • government bonds

You can’t transfer any non-ISA shares you already own into an ISA unless they’re from an employee share scheme.

Lifetime ISAs may include either:

  • cash
  • stocks and shares

Innovative finance ISAs include:

  • peer-to-peer loans - loans that you give to other people or businesses without using a bank
  • ‘crowdfunding debentures’ - investing in a business by buying its debt

You can’t transfer any peer-to-peer loans you’ve already made or crowdfunding debentures you already hold into an innovative finance ISA.

If you have questions about the tax rules for ISAs, you can call the ISA Helpline.