How Much Can Be Put Into an ISA? Rules and Limits
Discover how much you can put into an ISA. Understand the annual allowances, various ISA types, and key rules for tax-efficient saving.
Individual Savings Accounts (ISAs) offer a tax-efficient way for individuals to save or invest money, allowing earnings to grow free from income tax, capital gains tax, and dividend tax within certain limits. These accounts are specific to the United Kingdom, designed to encourage residents to build savings and investments.
Understanding the Annual ISA Allowance
The primary limit governing contributions to ISAs is the annual allowance, which applies across all types of ISAs an individual holds. For the 2024/2025 tax year, this allowance is £20,000. A person can contribute up to this total amount into one or multiple ISA accounts combined within a single tax year.
The tax year in the UK runs from April 6th to April 5th of the following year. This allowance is personal to each individual and resets at the beginning of every new tax year. Any unused allowance from a previous tax year does not carry over, meaning it is forfeited if not utilized by the tax year end.
Specific ISA Types and Their Limits
The overall annual ISA allowance can be allocated across various ISA types, each designed to serve different savings or investment goals. A Cash ISA is suitable for holding savings where interest earned remains tax-free. A Stocks & Shares ISA allows individuals to invest in assets like company shares, funds, and bonds, with any profits or dividends also growing tax-free. Both Cash and Stocks & Shares ISAs utilize a portion of the main £20,000 annual allowance.
The Lifetime ISA (LISA) helps individuals aged 18 to 39 save for their first home or retirement. It has an annual contribution limit of £4,000, which counts towards the overall £20,000 ISA allowance. The government adds a 25% bonus to contributions, up to a maximum of £1,000 per year.
The Junior ISA (JISA) is for children under 18. It has its own separate annual allowance of £9,000 for the 2024/2025 tax year, and this limit does not affect the parent’s or guardian’s adult ISA allowance.
Other ISA types include the Innovative Finance ISA (IFISA), which permits investments in peer-to-peer lending, and the Green ISA (GISA), focused on environmentally friendly investments. These also fall under the main £20,000 annual ISA allowance.
Rules for Maximising Your Contributions
As of April 6, 2024, new regulations allow individuals to contribute to multiple ISAs of the same type within a single tax year, except for Lifetime ISAs and Junior ISAs. This means one could contribute to several Cash ISAs or multiple Stocks & Shares ISAs, provided total contributions across all accounts do not exceed the overall annual allowance. Contributions to a Lifetime ISA are restricted to one per tax year, and a child can only have one Junior Cash ISA and one Junior Stocks & Shares ISA at any given time.
Transferring funds between ISAs does not count towards the current year’s annual allowance. Moving money from an existing Cash ISA to a Stocks & Shares ISA, or from one provider to another, preserves the tax-free status of the funds without impacting the new year’s contribution limit. It is important to initiate transfers through the new ISA provider to ensure the tax-free wrapper is maintained, rather than withdrawing and re-depositing funds.
Accidentally contributing more than the annual allowance or specific sub-limits has consequences. If an individual over-contributes, the excess amount will not retain its tax-free status. HM Revenue and Customs (HMRC) may require tax to be paid on any interest, dividends, or gains generated from the over-contributed funds.