ISA Guide UK 2025/26 — Types, Limits & Tax Benefits

What is an ISA?

An Individual Savings Account (ISA) lets you save or invest up to £20,000 per tax year completely tax-free. No income tax on interest, no capital gains tax on growth, no tax on dividends. It is one of the most valuable tax wrappers available in the UK.

Types of ISA

Cash ISA

A savings account where interest is tax-free. Good for short-term savings and emergency funds. Rates typically 4-5% in 2025/26.

Stocks and Shares ISA

Invest in funds, shares, and bonds tax-free. Better for long-term growth (5+ years). No CGT on gains, no tax on dividends.

Lifetime ISA (LISA)

For first-time buyers or retirement. Save up to £4,000/year and get a 25% government bonus (£1,000/year max). Must be aged 18-39 to open. 25% penalty for non-qualifying withdrawals.

Innovative Finance ISA (IFISA)

Peer-to-peer lending within an ISA wrapper. Higher risk but potentially higher returns.

2025/26 ISA Allowance

£20,000 total across all ISA types. You can split this however you like (e.g. £10K Cash ISA + £10K S&S ISA). The allowance resets each April 6th and cannot be carried forward.

Compare ISA vs Pension with our ISA vs Pension Calculator.