How Much Can You Save in an ISA Each Year?

Individual Savings Accounts (ISAs) are a savings and investment framework established in the United Kingdom for tax-efficient saving and investing. ISAs allow money to grow without incurring UK income tax or capital gains tax on returns. Interest, dividends, or profits from investments held within an ISA are exempt from these taxes. Funds held within an ISA can also typically be withdrawn without further tax implications.

Annual ISA Allowance

For the 2025-2026 tax year, the total amount an individual can save across all their adult ISA accounts is £20,000. This is the maximum an individual can contribute within a single tax year, which runs from April 6th to April 5th of the following year. If the full allowance is not utilized by April 5th, it cannot be carried over to the next tax year.

The £20,000 annual allowance can be split across different types of adult ISAs. For instance, an individual could choose to put £5,000 into a Cash ISA, £4,000 into a Lifetime ISA, and the remaining £11,000 into a Stocks and Shares ISA, as long as the total remains within the £20,000 limit.

Specific ISA Type Limits

Several types of ISAs are available, each designed for different financial objectives and carrying specific rules that fit within the overall annual allowance.

Cash ISA

A Cash ISA functions much like a standard savings account, providing tax-free interest on cash deposits.

Stocks and Shares ISA

A Stocks and Shares ISA allows individuals to invest in a range of qualifying investments, such as funds, shares, and bonds, with any capital gains or dividends typically being free from UK tax. While offering the potential for higher returns, investments in a Stocks and Shares ISA carry the risk of value fluctuation.

Lifetime ISA (LISA)

The Lifetime ISA (LISA) is specifically designed to help individuals save for their first home or for retirement. Individuals must be aged 18 or over but under 40 to open a LISA, and contributions can be made until age 50. There is a specific annual contribution limit of £4,000 for a LISA, 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.

Junior ISAs (JISAs)

Junior ISAs (JISAs) are long-term, tax-free savings accounts for children under 18. The JISA has its own separate annual allowance, which is £9,000 for the 2025-2026 tax year, and this allowance is distinct from the adult ISA allowance. A child can hold both a Junior Cash ISA and a Junior Stocks and Shares ISA, with the £9,000 limit split between them if desired. Money in a JISA can only be accessed by the child once they turn 18.

Innovative Finance ISA (IFISA)

Finally, the Innovative Finance ISA (IFISA) allows individuals to invest in peer-to-peer lending and crowdfunding, with the interest or returns earned being tax-free. While potentially offering higher returns than cash, IFISAs involve lending money directly to borrowers and carry higher risks, as funds are typically not protected by standard financial compensation schemes.

Contribution Rules and Management

While an individual can hold multiple ISAs from previous tax years, there are guidelines for new contributions within the current tax year. As of April 2024, individuals are able to subscribe to more than one of the same type of ISA, such as multiple Cash ISAs or multiple Stocks and Shares ISAs, within the same tax year, provided the total annual allowance is not exceeded. However, it is important to note that some providers may still limit contributions to only one of each type of ISA with them per tax year. For Lifetime ISAs and Junior ISAs, contributions are generally limited to one of each type per tax year.

Accidentally overcontributing to the overall ISA allowance can lead to complications with the tax authority. If an individual exceeds the £20,000 annual limit, the excess funds will be subject to taxation, and the tax authority may contact the individual to rectify the mistake. In such cases, providers may return the excess amount to bring the account back within the rules.

Transferring ISA funds between providers or between different ISA types is a mechanism to consolidate savings or seek better rates without impacting the current year’s allowance. Funds transferred from ISAs opened in previous tax years do not count towards the current year’s allowance. However, if an individual transfers funds that were subscribed in the current tax year, the entire amount of that year’s subscription must be transferred in full to the new provider to maintain its tax-free status and ensure it still counts against the current year’s allowance. It is crucial to initiate transfers through the new ISA provider to ensure the tax-free wrapper is preserved; directly withdrawing and re-depositing funds can lead to the loss of tax benefits.