Finance glossary
ISA — Individual Savings Account
Also known as: Individual Savings Account
In simple terms
An ISA is a savings or investment account where the interest, income or growth is free of UK tax. Each tax year you can pay in up to a set limit, called your ISA allowance.
On this page
What does ISA mean?
ISA stands for Individual Savings Account. It is a “tax wrapper” around your savings or investments: any interest, dividends or capital growth earned inside it is free of UK income tax and capital gains tax.
There are several types — Cash ISAs, Stocks and Shares ISAs, Lifetime ISAs and Innovative Finance ISAs. You can split your annual allowance across them, within the rules.
How an ISA works
Each tax year (6 April to 5 April) you have an ISA allowance — £20,000 for the 2025/26 tax year. You can pay in up to that limit in total across your ISAs. The allowance does not carry over: anything unused is lost when the tax year ends.
Because gains stay inside the wrapper, you do not pay tax on them and generally do not need to declare them. You can also transfer ISAs between providers without losing the tax-free status, provided you use the provider’s transfer process rather than withdrawing the cash yourself.
How could this affect me?
An ISA shelters your returns from tax, which matters more as your savings grow or if you have used up your Personal Savings Allowance. For most basic-rate taxpayers with modest savings the benefit is small, but it grows over time.
Choosing between a Cash ISA and a Stocks and Shares ISA depends on your time horizon and appetite for risk — cash is safer but investments have historically grown more over the long term, with the risk of falls along the way.
Things to watch out for
- The annual allowance does not roll over — unused allowance is lost at the end of the tax year.
- Withdrawing from a non-flexible ISA and paying it back in still uses up your allowance again.
- To keep the tax-free status, always transfer between ISAs rather than withdrawing and reopening.
- A Cash ISA may pay less than a top ordinary savings account once your Personal Savings Allowance is taken into account.
Know your rights
- ISA rules — including the £20,000 annual allowance and tax-free treatment — are set by HMRC and the government (GOV.UK).
- Cash held with an authorised bank or building society is protected up to £85,000 per person, per institution, by the FSCS.
- You have a statutory right to transfer an ISA to another provider; they must not block a valid transfer request.
General information, not personal advice
Consumer Credit is an independent information service. We do not provide regulated financial advice or sell financial products. For advice on your own situation, speak to an appropriately authorised firm or a free service such as MoneyHelper. About Consumer Credit.
Sources
We checked this page against these official and authoritative sources.
- GOV.UK, Individual Savings Accounts (ISAs) (opens in a new tab). Accessed 22 Aug 2026.
- MoneyHelper, ISAs and other tax-efficient ways to save or invest (opens in a new tab). Accessed 22 Aug 2026.