What is your ISA allowance? 

An Individual Savings Account (ISA) is a tax-efficient wrapper that shields your savings and investments from UK income tax, dividend tax and capital gains tax. You can think of it as a protective shell around your money; any interest earned and any profits from investments inside the wrapper are completely free from tax, meaning you keep every penny of growth without any obligation to declare it on your tax return. 

The ISA allowance for the 2024/25 tax year is £20,000 per adult. The tax year runs from 6 April to 5 April the following year, meaning you have until the end of 5 April 2026 to use whatever remains of your current allowance.  

On 6 April, a fresh £20,000 resets automatically, regardless of how much you used the previous year. Any unused ISA allowance cannot be carried forward. If you only contribute £15,000 this year, the remaining £5,000 of your tax-free investing allowance is lost permanently. 

For basic-rate taxpayers, the Personal Savings Allowance currently permits £1,000 of interest tax-free each year. Higher-rate taxpayers receive just £500, and additional-rate taxpayers receive nothing at all. As savings rates have risen in recent years, far more people are breaching these thresholds, making the ISA wrapper more valuable than it has been in the past.  

It’s also worth noting that there is no cap on potential growth inside an ISA, because the £20,000 limit applies only to new contributions. If your investments grow from £20,000 to £50,000, £100,000 or even £1 million, the entire sum remains sheltered from tax. Transfers between ISA providers also do not count towards your allowance, meaning you can move savings built up over many years while still making £20,000 of fresh contributions in the same tax year. 

Types of ISA

Choosing the right ISA depends on your financial goals, time horizon and risk tolerance. Key types include:

Stocks & Shares ISA

A Stocks & Shares ISA allows you to invest in shares, funds, investment trusts, bonds and other assets within a tax-free wrapper. Any growth and income is sheltered from tax. This can suit those with a longer investment horizon of at least five years who are comfortable with the possibility that investments can fall as well as rise. You could get back less than you invest.

The tax advantage compounds significantly over time. Consider a higher-rate taxpayer investing £20,000 a year at 7% average annual returns. After 10 years, the difference between a taxable account and an ISA is around £25,000. After 20 years, that gap widens to approximately £130,000. After 30 years, the ISA could be worth around £2 million compared to roughly £1.6 million in a taxable account; a difference of £400,000, generated entirely by sheltering returns from tax.

Historically, equities have delivered average annual returns of around 7 to 10% over multi-decade periods, compared to cash savings rates of between 1 and 5%. Historical data shows that holding periods of five years or more have almost always produced positive returns in developed stock markets, though past performance is no guarantee of future results.

Cash ISA

A Cash ISA works much like an ordinary savings account, but any interest you earn is free from income tax. It typically suits those who need easy access to their money, have a shorter time horizon of one to five years, or prefer not to take investment risk. 

However, in periods of higher inflation, cash savings can actively lose purchasing power. For example, £20,000 earning 2% interest while inflation runs at 5% loses £600 in real value each year.

We do not offer a cash ISA, but we do pay variable rates of interest on uninvested cash held in our Stocks & Shares ISA account.

Lifetime ISA

The Lifetime ISA (LISA) is available to those aged 18 to 39. You can contribute up to £4,000 per year, and the government adds a 25% bonus on top, worth up to £1,000 annually. It can be used either to buy a first home or to access savings from age 60. 

The significant caveat is a 25% withdrawal penalty if you take money out for any other reason, which effectively eats into your own contributions as well as the bonus. The £4,000 LISA limit counts towards your overall £20,000 annual ISA allowance.

Junior ISA

A Junior ISA (JISA) is a tax-free savings and investment account for children under 18, with a separate annual allowance of £9,000 per child, independent of the adult £20,000 ISA allowance. All gains and income are completely free from UK tax, though the money cannot be accessed until the child turns 18.

A child can hold one Cash Junior ISA and one Stocks & Shares Junior ISA at the same time, but not two of the same type, and the £9,000 allowance is shared across both accounts. For example, if £4,000 is deposited into a Cash Junior ISA, up to £5,000 can be added to a Stocks & Shares Junior ISA in the same tax year. 

Given the long investment horizon before a child can access the funds, many families favour the Stocks & Shares version to maximise long-term growth potential.

A parent or legal guardian with an active investment account can apply for a Junior ISA on behalf of a child, while step-parents or foster carers can apply only if they hold legal guardianship. 

What can you invest in with a Stocks & Shares ISA?

Our Stocks & Shares ISA offers access to thousands of investment opportunities across the global markets, giving you the flexibility to build a portfolio suited to your personal goals and risk tolerance.

1. Individual company shares —stakes in specific businesses, from FTSE 100 firms like AstraZeneca and Tesco, to US technology companies like Apple and Microsoft, or even emerging market opportunities. However, concentrating too heavily in individual stocks carries risk, as any single company can underperform or fail entirely.
2. Exchange-Traded Funds (ETFs) — market indices like the S&P 500 or FTSE 100, providing instant diversification across hundreds of companies in a single investment. A simple global equity ETF can give you exposure to over 3,000 companies across dozens of countries. ETFs typically carry annual management charges of just 0.05% to 0.20%, making them among the most cost-efficient investment options available.
3. Investment trusts — are closed-ended funds run by professional managers that trade on the stock exchange. Unlike open-ended funds, they can take a longer-term view and hold less liquid investments. They often offer attractive dividend yields and can trade at a premium or discount to their underlying net asset value, a feature that experienced investors sometimes use to their advantage.
4. Bonds — both UK government bonds (gilts) and corporate bonds, provide more stable, income-focused options. Bonds typically move differently to stocks, providing portfolio stability when equity markets fall. Combining stocks and bonds (for example a 70/30 split) often produces a more stable portfolio than one that is 100% equities, though it may grow more slowly. 
5. Actively managed funds and unit trusts — employ professional fund managers who aim to beat the market. While they offer the potential for outperformance, they typically charge 0.75% to 1.5% annually compared to 0.05% to 0.20% for passive index funds. Over decades, this fee difference can significantly erode returns, so the juice has to be worth the squeeze.

A key concept to remember when getting started is diversification. Diversification mitigates risk by spreading capital across various geographies, sectors, and asset classes, ensuring that a downturn in one area doesn't derail your entire portfolio. 

How to split your allowance across multiple ISAs

Since April 2024, the rules around holding multiple ISAs have become considerably more flexible. You can now open and contribute to multiple ISAs of the same type in the same tax year (for example, two different Cash ISAs or two different Stocks & Shares ISAs) provided your total contributions across all ISAs do not exceed £20,000.

You might now hold a fixed-rate Cash ISA for funds you will not need for 12 months and an easy-access Cash ISA for your emergency reserve, while separately contributing to a Stocks & Shares ISA for long-term growth. Provided the total stays within £20,000, all of this is permitted in a single tax year.

The Lifetime ISA has its own annual limit of £4,000, which counts towards the £20,000 ceiling. Maximising a LISA leaves £16,000 for other ISA types.

For Junior ISAs, the £9,000 annual allowance is separate from the adult limit and is shared across any Junior ISAs the child holds. A parent or guardian can open Junior ISAs for multiple children simultaneously, with each child's accounts typically viewable and manageable from a single parent dashboard.

Practical steps to use your allowance before 5 April

Before doing anything, log in to your existing accounts and check your year-to-date contributions. You're personally responsible for staying within the £20,000 limit across all providers. 

Once you know where you stand, decide on your goal. Goals more than five years away generally suit a Stocks & Shares ISA; shorter-term goals like a house deposit are better served by a Cash ISA.

When you're ready to act:

• Move early; depositing capital can be instantaneous but might take a few days depending on how you deposit
• You can open a new ISA online with as little as £1 to secure that year's allowance, then top up later
• Consider building an emergency fund covering several months of expenses outside your ISA before investing

If your existing ISA is earning a poor return, or you want to switch from Cash to Stocks & Shares, you can transfer without losing your tax-free status, but only through the official process. It’s important to remember that if you withdraw and redeposit yourself then the money loses its tax-free history and counts against your current £20,000 allowance:

• Always instruct your new provider to request the transfer directly from your existing provider
• Transfers can take up to 30 working days, so plan ahead
• Check for early exit penalties on fixed-rate ISAs before initiating
• Transfers of previous years' savings don't affect your current annual allowance

If you hold investments in a taxable General Investment Account (GIA), a Bed and ISA lets you sell those investments and repurchase them inside a Stocks & Shares ISA, sheltering all future gains from capital gains and dividend tax. 

Shares can't move directly; they must be sold, with the proceeds transferred and then repurchased inside the ISA. This takes between 48 and 72 hours, during which prices can fluctuate.

Before proceeding, be aware of the costs and implications:

• The initial sale may trigger capital gains tax if profit exceeds the £3,000 CGT allowance (2025/26)
• Repurchased shares count towards your £20,000 annual ISA allowance
• You may face 0.5% stamp duty on UK shares and a £1 PTM levy depending on transaction size
• Funds often transact once daily, so you could miss dividends or voting rights tied to specific dates
• If a stock is suspended, repurchase may not be possible

Common mistakes to consider

The final rush before 5 April can lead to costly errors. Knowing the most frequent pitfalls will help you protect your allowance and your returns:

• Not using your allowance at all — the single biggest ISA mistake. Missing contributions early in life dramatically reduces long-term returns through lost compound growth. Even partial contributions matter; some is always better than none
• Withdrawing instead of transferring — never withdraw ISA money to move it to a different provider yourself. Doing so strips that money of its tax-free history and counts against your annual allowance when redeposited. An official ISA transfer preserves your full £20,000 limit regardless of how much you move
• Exceeding the annual limit — contributing more than £20,000 across all ISAs in a single tax year breaches HMRC rules.
• Leaving it too late — processing times catch people out every year. Bank transfers, new account applications and platform onboarding all take time. Lifetime ISA holders should be especially careful as missing the deadline by a single day can mean losing up to £1,000 in government bonus payments
• Panic selling during market downturns — Stocks & Shares ISA holders should expect markets to fall 10–20% every few years, and occasionally 30–40% in major crises. Selling during declines locks in losses and prevents participation in recoveries, though this can be psychologically challenging
• Paying too much in fees — a 1% annual fee difference can cost over £75,000 across 30 years on a £200,000 portfolio growing at 7%. Compare platform charges, fund management fees (look for the OCF or TER figure), trading commissions and foreign exchange fees. Low-cost passive index funds typically offer the best value for long-term investors. 
• Poor diversification — diversified funds spread investments across hundreds or thousands of companies, reducing the impact of any single failure