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), stocks & shares investments (Stocks & Shares ISA), peer-to-peer lending (Innovative Finance ISA), or a combination there-in (Junior ISA, LISA).

The key factor here is that anything inside the wrapper is free of all personal tax liability.

Technically an ISA is considered a Taxed, Exempt, Exempt (TEE) savings plan, compared to a pension (another type of wrapper) which is considered Exempt, Exempt, Taxed. This is because money going into an ISA will come from taxed income, but any gains within the ISA and any proceeds taken from it are exempt from tax.

This rule doesn’t apply to the H2B ISA or LISA, which both receive some tax relief on contributions.

ISA types explained

Cash ISA

This is, at it’s simplest, 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.

S&S ISA (Stocks & Shares ISA)

This is any sort of “at-risk” investment contained within the ISA wrapper. It might be a stockbroking account where you can buy FTSE-100 shares, or an “investment platform” where you can buy index funds or actively managed funds.

The key is that there are no capital guarantees and up until recently you couldn’t hold cash for any meaningful length of time within them. This has been relaxed since the NISA regime was introduced.

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)

The Help to Buy ISA was the first attempt at an ISA that attracted up-front tax relief, but was replaced by the Lifetime ISA (LISA). This section has been kept for posterity.

The key advantage is that the government provides 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 funds must be used to buy a “first house”. 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 is £1,200 (topped up to £1,500 if rules are met), and must be made within 28 days of opening.
  • The maximum monthly contribution is £200 (topped up to £250 if rules are met).
  • The plan can last a maximum of 5 years, with a total maximum government top-up of £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.

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.

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, although there is some debate over how this will work inside an ISA.

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)

Contributing to an ISA

Putting new money into an ISA is considered a contribution. You can only contribute money into one Cash ISA and one S&S ISA each tax year. The tax year runs from 6 April to 5 April.

You can contribute up to £20,000 in one type of account or split the allowance across all types.


You can save £10,240 in a cash ISA and £5,000 in a stocks and shares ISA in a 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 have multiple ISAs 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.