Individual Savings Account (ISA)
Published / Last Updated on 15/05/2023
What is an Individual Savings Account (ISA)?
An ISA a tax-free individual savings account where the individual investor has an annual savings allowance that does not pay any taxes on interest (if cash), dividends (if stocks and shares) or capital gains tax (if stocks and shares).
- Cash ISAs tend to be available from banks and building societies.
- Stocks and Shares ISAs can invest in property, government bonds, corporate bonds, directly held stocks and shares, collective ‘stocks and shares’ investment funds such as unit trusts, investment trusts and open-ended investment companies (OEICS).
- Cash ISAs and Stocks and Shares ISAs are interchangeable and can be transferred between each other without losing any allowances.
Current ISA Allowance for Adults 2026
- 06/04/2026 to 05/04/2027 = £20,000.00
- Any Combination - Your ISA allowance can now be invested in any combination of stocks, shares, and cash. There are no longer any set limits between the two areas, just an overall annual allowance.
- Withdrawals – if you make partial withdrawals of this year’s ISA allowance after you have paid in, you can still make it back up to your total ISA allowance for the current tax year. This never used to be the case. That said, if you make withdrawals from previous tax years ISA contributions, you cannot carry it forward and then go back in and fill it back up, you can only do this for the current year’s ISA.
History of the ISA
In the 1980’s, the conservative government launched two tax free savings vehicles:
- The Personal Equity Plan (PEP) had a yearly savings allowance, invested in stock and shares as well as collective stocks and shares funds and was income tax free on dividends capital gains tax free on sale, disposal, or cashing in.
- The Tax-Exempt Special Savings Account (TESSA) has a yearly savings allowance, invested in bank and building society type savings accounts and was income tax free on interest when cashing in.
In 2008, the Labour government under Gordon Brown replaced the ‘conservative’ PEP and TESSA and replaced them with the Individual Savings Account (ISA). There were two routes to ISA:
- MAXI Stocks and Shares ISA – all your allowance could be invested in 1 stocks and shares ISA each year.
- 2 MINI ISAs – a Mini Stock ISA and a Mini Cash ISA, you were allowed to invest 50% of your total yearly ISA allowance in each.
In 2011, the Conservation/Liberal coalition government replaced the Labour Child Trust Fund (CTF) with the Junior ISA (JISA). This could be a Junior Cash ISA or a Junior Stocks and Shares ISA.
Watch/Read JISA Video: Junior ISA
In 2014, Conservation/Liberal coalition then launched the New Individual Savings Account (NISA), which is technically where the current ISA rules stand with one annual allowance for Adults that can be split in any combination of cash or stocks/shares and a Junior ISA allowance for children (up to Age 18).
