What is an ISA?

How ISAs work

Think of an ISA as a protective tax wrapper for your savings and investments. Any money you place inside this wrapper is completely shielded from tax, so you keep all the interest you earn and every penny of profit from your investments.

While other tax-advantaged accounts exist, ISAs stand out for their combination of flexibility and a high allowance. With our Stocks & Shares ISA, there are no restrictions on withdrawals — giving you full tax benefits and total flexibility, something you won’t find anywhere else in the world.

You can choose from different types of ISAs depending on how you want to save or invest your money:

Stocks and Shares ISAs

• Let you invest in the stock market tax free
• Potential for higher returns than cash, but your money can go down as well as up
• Wide range of investments including shares, ETFs and bonds
• Ideal for long term goals (5+ years)

Cash ISAs

• Work like regular savings accounts but with tax free interest
• Perfect for emergency funds or short term savings goals
• Your money is protected up to £85,000 by the FSCS
• Interest rates are typically lower than inflation

Other ISA types

• Lifetime ISAs — for first time home buyers or retirement (under 40s only)
• Innovative Finance ISAs — for peer-to-peer lending (higher risk)
• Junior ISAs — for children under 18 (£9,000 annual limit)

Importantly, we offer leading rates of interest on uninvested cash held within our Stocks & Shares ISA.

Key benefits of ISAs

• Tax efficiency — No income tax on interest, no capital gains tax on profits, no tax on dividends from UK companies
• Flexibility — most ISAs let you withdraw money whenever you need it. With flexible ISAs, you can even put money back in the same tax year without it counting toward your annual allowance
• Annual allowance — you get a fresh £20,000 allowance every tax year (6 April to 5 April). You can split this across different ISA types, but you can't carry over unused allowance
• No limits on growth — there's no limit to how much your ISA can grow. Even if your investments are worth millions, they remain tax-free

Who can open an ISA?

• Cash ISAs — UK residents aged 16 and over
• Stocks and Shares ISAs — UK residents aged 18 and over

For any ISA, you must have a National Insurance number.

Recent ISA rule changes (2024/25)

• You can now hold multiple ISAs of the same type (except Lifetime and Junior ISAs)
• Partial ISA transfers are now allowed, so you don't have to transfer everything
• Under-18s can no longer have multiple cash ISAs
• Long term asset funds can now be held in Innovative Finance ISAs

Should you choose cash or stocks and shares?

Choose a Stocks and Shares ISA if:

• You're saving for long term goals (5+ years)
• You want the potential for higher returns
• You're comfortable with some investment risk
• You want to beat inflation over time

Choose a Cash ISA if:

• You need access to your money within 5 years
• You want guaranteed capital protection
• You're building an emergency fund
• You prefer predictable returns

Importantly, you can choose to your £20,000 allowance between cash and stocks and shares ISAs based on your financial needs. 

Getting started with ISAs

The most important step is to start using your ISA allowance. Whether you choose cash or investing, the tax benefits compound over time, making ISAs incredibly powerful for long term wealth building.

Remember: you can't carry over unused ISA allowance to the next tax year, so it's worth using at least some of your allocation before 5 April each year.

Costs and Fees

• Commission-free trading on all shares*
• 0.7% forex conversion fee for international shares
• Custody fee — £8/month

*Other fees may apply

Ready to start your ISA journey?

Open a Stocks and Shares ISA with IG - invest in over 13,000 global stocks and ETFs commission-free

You can trade on our online platform, or download the IG Invest App.

If you prefer a hands-off approach, we offer our IG Smart Portfolio account, which matches you to a suitable ISA portfolio based on your risk tolerance. We’ll invest on your behalf and charge a small fee for the service.

Key ISA facts

• Annual allowance — £20,000 (2024/25 tax year)
• Tax year runs — 6 April to 5 April
• No tax — on capital growth, interest or dividends
• Flexible access — you can withdraw and deposit flexibly with us
• Fresh allowance — every tax year, your allowance resets

*Tax treatment depends on individual circumstances and may be subject to change in the future.

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