How much can I save in an ISA?

What is an ISA?

An ISA, or an individual savings account, is a way to save or invest your money without paying tax on the interest, dividends or capital gains you earn. 

You can open an ISA with banks, building societies, credit unions, stock brokers, insurers, asset managers, peer-to-peer lending services, crowdfunding companies and National Savings and Investments (NS&I). 

ISAs are flexible and can help you reach different financial goals. Whether you’re saving for a home, building a nest egg for the future or growing your investments, there are various options to suit your needs. 

How much can you save in an ISA?

Each tax year, the UK government sets an annual limit that you can deposit into ISAs. This is called the ISA allowance.   

The annual ISA allowance for the 2025/2026 tax year is £20,000.  

This means you can save up to £20,000 across different types of ISAs, including: 

• Cash ISAs: Save money with a fixed or variable interest rate 

• Stocks and shares ISAs: Invest in funds, shares or other assets to try and grow your money 

• Innovative finance ISAs: Earn returns by lending money through peer-to-peer platforms 

• Lifetime ISAs: Save up to £4,000 per year towards your first home or retirement 

You can split your allowance across different ISAs. For example, you could save £10,000 in a cash ISA and another £10,000 in a stocks and shares ISA. But the total can’t go over £20,000 in one tax year. 

Read more: What is an ISA and how do they work? 

 

Why you should consider using your full ISA allowance 

If you can, it’s a good idea to use all or as much of your ISA allowance as possible each tax year. This can help you grow your savings or investments faster while keeping them tax-free.  

Here are some reasons why it’s worth considering: 

1. You’ll save on tax 

As we mentioned earlier, an ISA is a tax-free way of saving or investing. This means you don’t pay any income tax, capital gains tax or dividend tax on the money you put away. This makes it one of the most efficient ways to save, especially if you pay higher rates of tax. 

2. Your money will grow 

The earlier you start saving into an ISA, the longer your money has to grow. Over time, the benefits of compound interest (earning interest on your interest) or investment growth can really add up. What’s more, ISAs give you the flexibility to save for the long term while protecting your money from tax, making them ideal for building a solid financial future. 

3. If you don’t use it, you’ll lose it 

Your ISA allowance resets at the start of every tax year. If you don’t use it, you lose it, and you can’t carry any unused allowance over to the next year. Saving or investing as much as you can within your allowance helps you make the most of the tax-free benefits. Even if you can’t use the full amount, putting aside what you can still helps. 

4. You can protect your money from tax changes 

ISAs are tax-free now, offering a way to shield your savings from the effects of tax changes that might impact other types of savings or investments. But while ISAs provide a secure and reliable option for saving under current rules, it’s important to remember that tax regulations can change over time.  

Please note: Tax rules can and do change. Their impact on you will depend on your individual circumstances, which can also change. Investments in ISAs can fall in value, just like any others. You may get back less than you invest. 

What are the other benefits of ISAs? 

The biggest advantage of an ISA is that you can save or invest your money without paying any tax. But there are other benefits too, including: 

1. A choice to suit your needs 

There are four main types of ISAs, so you can choose the one that best fits your goals. Or, if you want to start putting away money for your retirement, a lifetime ISA might work for you. 

You can also mix and match ISAs to meet your needs. For instance, you could use part of your allowance for a Lifetime ISA to save for retirement and the rest in an innovative finance ISA for long-term investments. This flexibility helps you make the most of your savings, no matter what your goals are. 

2. Flexible withdrawals 

Some ISAs offer flexible withdrawals, meaning you can take money out and put it back in within the same tax year without affecting your annual allowance. For example, with a flexible cash ISA, you can withdraw money to cover unexpected expenses and top it back up when you're able. 

This could be a good choice if you need to access your money while still benefiting from the tax-free savings an ISA provides. 

3. Government bonuses 

Certain ISAs, like lifetime ISAs, come with extra benefits from the government. For example, if you save £4,000 in a lifetime ISA, the government will add £1,000 as a bonus. That’s free money to help you reach big goals like buying your first home or saving for retirement. 

These bonuses can make a big difference and give your savings a noticeable boost over time. 

How to make the most of your ISA 

Decided to open an ISA? Whichever type you’re going for, there are a few key things you can do to help you get the most out of your savings or investments. For example: 

1. Plan ahead 

Think about what you want to save or invest for. Is it something short-term, like a holiday, or long-term like a house deposit or even a retirement fund? Work out how much you can put aside and pick the ISA that works best for your goals. For example, cash ISAs are great for saving, while stocks and shares ISAs can be good for growing your money over time. 

2. Start early 

The sooner you open an ISA, the more time your money has to grow tax-free. Even saving small amounts regularly can make a big difference over time. Starting early gives you more freedom to make the most of your ISA allowance with any last-minute rush.  

3. Mix and match 

You don’t have to stick to just one type of ISA. You can split your allowance between different ISAs to suit your needs. For example, a cash ISA is handy for money you might need soon, while a stocks and shares ISA is better for long-term goals. Mixing things up can help you balance safety and growth. 

4. Compare your options 

Not all ISAs are the same. Some providers offer better rates or features than others, so it’s worth shopping around. Take a bit of time to compare what’s out there and make sure your ISA is still working hard for you. 

5. Don’t wait until the end of the tax year 

You may be tempted to wait until the last minute to use up your ISA allowance, but starting early in the tax year has its perks. It’s less stressful, gives you more time to spread out your savings and lets your money grow tax-free for longer. 

Key takeaways 

• ISAs let you save or invest your money without paying any tax on the growth. You can save up to £20,000 per tax year in ISAs, split across cash ISAs, stocks and shares ISAs, innovative finance ISAs and lifetime ISAs 

• Try to use as much as your ISA allowance each year. You’ll save on tax and your money will grow faster. If you don’t use it, the allowance doesn’t carry over into the new tax year 

• When opening an ISA, compare different providers to find the right option for you. Starting early and planning ahead can help you make the most of your savings or investments