What are ISAs, who are they for and when should I consider one?

MoneyPlus Features Team

Want to know more about what ISAs (Individual Savings Account) can offer when it comes to saving? Our straightforward guide explains what ISAs are – and when you might want to consider one.

What are ISAs? While recent research suggests some people aren’t quite sure, they’re actually quite easy to understand.

ISAs are a tax-efficient way to save.

Where it can get a bit more complicated is that there are quite a few different ones to choose from, whether you’re saving for a wedding, getting onto the property ladder, building a nest egg for the kids or topping up your income in retirement.

What are ISAs?

An ISA is a type of account which lets you save anything up to £20,000 a year without paying tax when you take your money out.

A cash ISA lets you earn a bit of interest on top of what you save – and a stocks and shares ISA is where you put your money into different types of investments.

When you invest your money, it has more potential to grow in value than saving into a cash ISA, but the value can go down as well as up and you could get back less than was paid in.

What are the ISA rules?

You’re normally only allowed to open and pay into one cash ISA and one stocks and shares ISA in each tax year. But you can transfer what you’ve saved so far to a different ISA if you want to and you can carry on saving into your new ISA.

You can split your ISA allowance across the two types – cash and stocks and shares – as long as you’re within your £20,000 limit.

A quick and easy way to save: a cash ISA

If you’re looking to save money over a short time, say for a rainy day fund, a holiday or a wedding, a cash ISA could be an option.

When you have your money squirrelled away, you’re less likely to spend it on other things.

Got time to invest: a stocks and shares ISA

Education fees, property deposit… if it’s the potential for growth you’re looking for and you can save for longer, say five years or more, you might want to consider investing your money in a stocks and shares ISA.

This type of ISA lets you put your money in different types of investments, usually through investment funds, but you can also invest direct into things like shares and bonds.

Investments can go down as well as up in value, though, so you could get back less than you paid in. That’s an important difference between saving and investing.

If you like the sound of giving your money the potential to grow but aren’t sure where to start with choosing funds or investments, many stocks and shares ISAs offer ready-made investment options. Or, if investing is something you’re comfortable with, you can pick your own.

Try our ISA calculator to give you an idea how much an ISA could be worth in the future.

One for the children: a Junior ISA (JISA)

We all want our kids to get the best possible start. If you’re a parent or guardian who wants to build up a nest egg for them, perhaps to help with university fees, a home deposit or enough to fund a gap year, a junior ISA lets you save up to £4,368 per child each tax year.

This could be in a cash JISA, or a stocks and shares one – or you can split the allowance across both if you want.

Do keep in mind that the Junior ISA belongs to the child and they can spend it how they want from age 18. If you use the full allowance every year, that could turn into quite a sum of money to hand over at that age.

Or save into your own ISA for them instead so that you keep control.

To find out more visit the Money Advice Service website or, which has guidance on how to open one.

One to help get on the property ladder: a Lifetime ISA

The number of first-time home buyers is at its highest since 2007. So a Lifetime ISA could be one for you if you’re between 18 and 40 and trying to save for your first home, or want to top up your pension savings.

You get a bonus of £1 on top of every £4 you save and you can save up to £4,000 a year, taking your yearly total up to a maximum of £5,000.

But there are certain things you need to be aware of to make the most of a Lifetime ISA.

The government bonus is paid every year until the age of 50. To keep your bonus and take your money out penalty free, you’ll need to use your savings to buy your first home by then, or wait until you’re age 60 to take it out.

There are cash and stocks and shares Lifetime ISA options. If you go down the stocks and shares route, your money is invested, so it can go down as well as up in value and it may be worth less than you paid in.

Find out more about Lifetime ISAs on the government’s website.

Another option if you’re saving to buy your first home, the Help to Buy ISA, closes to new savers at the end of November 2019. You can’t have both a Help to Buy ISA and a Lifetime ISA.

Time to save

If you’re considering an ISA, you still have time left to make the most of tax-efficient saving until the new tax year starts in April 2020 – when you can start saving again with a new allowance.


The information here is based on our understanding in October 2019 and should not be regarded as financial advice. Your own circumstances will have an impact on tax treatment, and tax and legislation may change.