This FAQ aims to answer common questions relating to ISAs.

Further reading can be found at:

What is an ISA?

The simplest explanation is that an ISA (Individual Savings Account) is a “tax-wrapper”.

Think of it like tin-foil. An ISA can be wrapped around a savings account (Cash ISA, Help-to-buy ISA, Cash LISA), stocks & shares investments (Stocks & Shares ISA), peer-to-peer lending (Innovative Finance ISA), or a combination there-in (Junior ISA, LISA).

Anything inside the wrapper is free of personal liability to income tax and capital gains tax.

Money going into an ISA is considered to have been taxed already, because you don’t get tax relief on money going into it.

Help-to-buy ISAs and LISAs do receive a contribution bonus, which is similar to tax relief, but it is a fixed amount whatever your tax situation.

ISA money isn’t free of inheritance tax. On death, the funds are considered part of your estate. If somebody dies leaving a surviving spouse or civil partner, the survivor inherits an “Additional Permitted Subscription” allowance equal to the ISA values held on the date of death. This isn’t quite the same as inheriting ISAs, but it is close.

There is an overall ISA contribution limit of £20,000 each tax year, although there are some quirks and things to watch out for, explained below in the Contributions and Transfers section.

ISA types explained

Cash ISA

A Cash ISA is simply a savings account wrapped inside an ISA. This means that all interest is paid free of tax, and any proceeds taken out will also be free of tax.

There are as many varieties of Cash ISA as there are savings accounts – you could have instant access, a fixed term (e.g. 1 year), a notice account (e.g. 30 days notice for a withdrawal).

Importantly, the ISA rules require you to have access to your cash at any time, where-as standard deposit accounts don’t. Therefore even a fixed-term or notice account will still allow instant withdrawals, though there may be a hefty interest penalty for this.

Cash ISAs have become mostly useless because of the following two factors:

  1. The personal savings allowance was introduced in April 2016, which means basic-rate taxpayers can receive £1,000 in savings interest before paying tax on it. Higher-rate taxpayers have a PSA of £500 and additional-rate taxpayers don’t get one.
  2. Interest rates have been at historic lows for the past decade, meaning the chance of your cash savings being subject to income tax is pretty low.

One exception to this is the “use it or lose it” nature of the ISA allowance (see below for more details). If you have the spare cash to fill an ISA allowance but aren’t sure if you can commit the funds to longer-term investments, it can often still be a good idea to use your ISA allowance.

S&S ISA (Stocks & Shares ISA)

This is any sort of “at-risk” investment contained within the ISA wrapper. It might be a stockbroking or trading account where you can buy and sell shares or funds, or an automated “robo-investing” account where things are done automatically for you.

The key is that there are no capital guarantees – money within a Stocks & Shares ISA is at risk in some sense.

Any capital gains from these investments will be free of Capital Gains Tax and any income payments or dividends will be free of income tax.

H2B ISA (Help to Buy ISA) (no longer available to new savers)

The Help to Buy ISA was replaced by the Lifetime ISA (LISA). This section has been kept for information as people may still hold them.

The key advantage was that the government provided tax relief on contributions. This means that, as long as the conditions are met, the government tops up every £80 contributed by £20. The rules are outlined as follows:

  • The H2B ISA counts as a Cash ISA, and unless your H2B provider offers a “split account”, you can’t subscribe to a Cash ISA in the same year you pay into a H2B ISA.
  • The funds must be used to buy a “first house” to use the bonus. The value must be lower than £250,000 outside London and £450,000 inside London. It does not need to be a new-build.
  • The maximum initial contribution was £1,200 (topped up to £1,500 if rules are met), and must have been made within 28 days of opening.
  • The maximum monthly contribution is £200 (topped up to £250 if rules are met.
  • The maximum government top-up is £3,000 (So total value £15,000 + interest, with £12,000 of contributions).
  • The minimum plan value to receive the top-up is £1,600.
  • One ISA per person, so a couple both saving for their first house together can each have one (but only if it is the first house for both of you).
  • If one of a couple already owns a house, the other can save using the H2B ISA and receive the bonus on a joint purchase.
  • To receive the bonus, a conveyancing solicitor must claim it as part of a property transaction.
  • You can take the money out whenever you want, but won’t receive the bonus.
  • You can transfer a H2B ISA to a LISA and keep the bonus.
  • You will stop being able to contribute to a H2B ISA in November 2029.

LISA (Lifetime ISA)

The LISA replaced the H2B ISA and is a whole different ISA category. After initial fanfare it didn’t land particularly well with banks or savers, which means there is a limited choice of both cash and S&S options.

It has a contribution of £4,000 per year and is also subject to the overall £20,000 ISA contribution limit, and receives a “bonus” of 25% of each contribution.

You must be aged 18 – 40 to open one, and can’t contribute after age 50.

It can be used with the bonus to buy a property worth up to £450,000 if you’re a first time buyer, or withdrawn tax-free after age 60.

If money is withdrawn for any other reason the withdrawal will be subject to a 25% penalty (temporarily reduced to 20% in the 2020/2021 tax year).

We have a complete LISA article with much more detail here: Lifetime ISA (LISA)

IFISA (Innovative Finance ISA)

This is an ISA specifically intended for “peer-to-peer (P2P) lending” (see this Which article for an explanation of P2P lending).

P2P lending proceeds are currently taxed as income. This means that for those already utilising P2P lending, the IFISA appears to be useful.

Despite going live in 2016 the uptake was low, both with providers and investors. Another article from Which explains how they work and who offers them

Importantly, capital is fully at risk in these schemes, and there is currently no FSCS (financial services compensation scheme) protection.

JISA (Junior ISA)

A Junior ISA can be opened for anybody under age 18 by a parent or guardian. It can either be Cash or Stocks & Shares, and replaced Child Trust Funds.

Children between 16 and 18 can open one themselves in addition to having their own Cash ISA.

  • The annual JISA contribution limit is £9,000 as of April 2020.
  • The JISA can be controlled by the child when they turn 16, and converts into a standard ISA when they turn 18.
  • Once open, anybody can contribute (grandparents, for example).
  • Funds within a JISA are exempt from the rules around interest on parental gifts (any interest earned over £100 PA in the child’s name, where the funds were gifted by the parents, are considered taxable income on the parents).
  • You can transfer a Child Trust Fund into a JISA, if the receiving provider allows it (not all do).

Contributions and transfers


Contributing/putting new money into an ISA is considered a subscription. You can only subscribe money into one of each type of ISA each tax year. The tax year runs from 6 April to 5 April.

There is an overall contribution limit of £20,000 to all ISA types (with the exception of Junior ISAs, which confusingly have a separate limit – it is possible for a 16 year old to have a junior ISA with a contribution of £9,000 and a cash ISA with a contribution of £20,000).


Transfers between ISAs do not count as subscriptions, but to count as a transfer you must follow the proper process.

This means contacting the new provider and asking them to transfer in the other ISA.

Withdrawing from one ISA to pay into another does not count as a transfer.

If you transfer an ISA that you have contributed to in the current tax year, you can carry on contributing to the new ISA. This is the only time you can contribute to two different accounts of the same type of ISA in a tax year.

Contributions and Transfers Table

ISA typeWhat counts as subscriptionContribution Limits per tax year (as at 2020/21)Can transfer to…Can transfer from…Notes
Cash ISANew cash contribution£20,000S&S ISA
LISA (subject to exit charge)
H2B ISANew cash contribution excluding bonus£1,200 upfront, £200 per month (£3,600 year 1, £2,400 later years), all excluding bonusLISAN/ACan hold this as well as a LISA, but can only receive bonus on one or the other.
New accounts can’t be opened.
Stocks & Shares ISANew cash contribution£20,000Cash ISA
Cash ISA
LISA (subject to exit charge)
IFISANew cash contribution£20,000Cash ISA
Cash ISA
LISA (cash or Stocks & Shares)New cash contribution excluding bonus£4,000 excluding bonusCash ISA (subject to exit charge)
S&S ISA (subject to exit charge)
H2B ISACan only hold subscribe to cash OR stocks and shares LISA in each tax year.
Can hold as well as a H2B ISA but can only receive bonus on one or the other.
Junior ISA (cash or Stocks & Shares)New cash contribution£9,000 NoneChild Trust FundNot counted in overall £20,000 limit.
Can be controlled by the owner from age 16.
Automatically converts to Cash or S&S ISA on 18th birthday, doesn’t count as a subscription in that year.


You can save:

– £10,000 in a cash ISA

-£6,000 in a stocks and shares ISA

– £4,000 in a Cash LISA (picking up an additional £1,000 bonus)

With a total subscription of £20,000 in that 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. You can own multiple ISAs of each type at the same but you can only contribute to one of each type each tax year.

A Help to Buy (H2B) ISA is considered a Cash ISA so generally you cannot contribute to both in the same tax year. The exception to this is where the ISA provider has a provision to allow it.

Transferring an existing ISA

You can transfer your Individual Savings Account (ISA) from one provider to another at any time.

For previous years ISAs, you can choose to transfer all or part of your savings and this does not count as a contribution.

If you want to transfer the current year’s contributions to a different ISA you must transfer all of it.

It is possible to transfer between S&S and Cash ISAs, and the plan is to allow H2B ISAs to transfer to LISAs once released.

You can transfer to a brand new ISA, or one which is already open. You can also partially transfer an ISA – there is no need to transfer the full amount.

ISA Flexibility

Some providers offer “Flexible ISAs”. The rules allow you to withdraw any amount from a flexible ISA and retain the ISA wrapper as long as it’s put back in within that tax year.


Withdraw £100,000 from your flexible Stocks & Shares ISA to temporarily cover the purchase of an investment property, whilst you wait for lending to be approved.

For the rest of that tax year the ISA account has a temporary increase to its contribution limit of £100,000. You could return some or all of the funds to the ISA within that tax year.

What happens to an ISA if you move abroad to another country.

If you are not “Tax Resident” in the UK then you cannot contribute money to an ISA. You can still move money within your ISA and you do not have to pay tax on it in the UK. ISAs do not have any tax protection in other countries and are considered as foreign savings accounts. You will need to declare dividends, income etc in the country in which you are tax resident.