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30 Oct 2024

Cash Isa rules and allowances

How to invest your Isa allowance in line with the latest rules, plus your most common Isa questions answered by Which? Money experts.

Danielle Richardson

In this article

What is the Isa allowance in 2024-25?

For the 2024-25 tax year, everyone has an Isa allowance of £20,000 – this is the maximum amount you're allowed to pay into Isas between 6 April 2024 and 5 April 2025. This Isa allowance is unchanged from 2023-24.

If you don't use your annual Isa allowance before the end of each tax year, you'll lose it - and it will start anew on 6 April.

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How does the Isa allowance work?

Savers can deposit the full £20,000 into a cash, stocks and shares or innovative finance Isa, or any mix of the three types.

If you're saving up to buy property, there is also the Help to Buy Isa (no longer open to new applicants) and, for those aged 18-40, the lifetime Isa. Both of these Isas have lower annual limits - but, whatever you pay in will be taken from your £20,000 allowance.

The graph below shows the maximum amount you can pay into each type of Isa within one tax year, up to a total of £20,000.

All UK residents aged 18 or over can have a cash Isa or a stocks and shares Isa.

Crown employees serving overseas or individuals married to such employees are also eligible to open Isas.

Will taking money out affect my Isa allowance?

Isa rules aren't just about how much you pay in; some accounts are flexible, meaning that you can withdraw money from an Isa account and replace it, without the replacement counting further towards your Isa allowance.

The only condition is that you top up your Isa in the same tax year the withdrawal was made.

If you put it back in the next year, it will count towards your new annual allowance. This also applies to cash held in a stocks and shares Isa and Innovative Finance Isa, but not Junior Isas or lifetime Isas.

But there are a few extra caveats, depending on when the money in the Isa was saved.

You can withdraw money from this account, and - as long as you put it back before the end of the current tax year, and replace exactly the same amount - it won't go towards your current tax year Isa allowance.

So, for instance - you paid £20,000 into a cash Isa two years ago, and you take out £3,000. You can replace the £3,000 (and no more), as well as using up your full £20,000 allowance from the current tax year, meaning you can pay in £23,000.

You can make a withdrawal from this account, and as long as you replace it by the end of the current tax year, it won't count towards the current year's Isa allowance.

For example, you've paid £15,000 into a cash Isa account in the current tax year. You withdraw £5,000.

You can then deposit £10,000 into the account; the £5,000 you previously withdrew, and an additional £5,000 that would take the total deposited amount up to £20,000.

Withdrawals you make in this case are firstly taken from whatever money you've deposited in the current tax year. If you withdraw more than you've deposited in the current tax year, then it will be taken from money you've deposited in previous tax years.

When you come to pay the money back in - which, again, you must do before the end of the current tax year - this works the other way around; money you deposit is first used to refill cash Isas from previous years, and then your cash Isa from the current tax year.

So, say you paid in £20,000 in the previous tax year, and have so far deposited £5,000 in the current tax year. You then make a withdrawal of £15,000.

The first £5,000 is taken from the cash you've deposited in the current tax year, and the remaining £10,000 will be taken from the £20,000 of the previous tax year.

Paying the money back, the £10,000 from the previous year is 'topped up' first, then the £5,000 from the current tax year. After that, you'd still have £15,000 left of the current year's Isa allowance to use.

This flexibility is not compulsory and isn't available on all Isas, so you should always check with your provider before withdrawing any money.

If your Isa isn't flexible, it means that any cash you withdraw loses its tax-free status as soon as it leaves the Isa 'wrapper' (account), and even just paying the cash back into the account would count further towards your Isa limit.

It's worth noting that fixed-rate cash Isas require you to keep your money in the account for a certain period of time, so you may face a penalty if you access the money early.

How many Isas can I have?

There's no specific limit for how many Isas you can hold overall and you can now pay into multiple Isas of the same type in the same tax year.

There are limits on some types of Isa, however.

You can have several cash Isas, stocks and shares Isas, innovative finance Isas and lifetime Isas, and only pay into one each year - but you can only have one Help to Buy Isa at a time.

How many Isas can I pay into in one year?

You can now pay into more than one type of Isa in the same tax year.

This means you can make new deposits into multiple cash Isas (A Help to Buy Isa counts as a cash Isa option), stocks and shares Isas, innovative finance Isas and lifetime Isas.

If you've paid into, say, a cash Isa and see a better rate on the market, you may be able to take advantage of it by transferring your Isa savings to the new provider (note that not all Isas accept transfers - so check before you apply).

You are also now able to transfer part of your account balance from one Isa provider to another, rather than being forced to transfer the lot (as was the case in previous tax years). This means you can keep some funds with your existing provider and retain that account if you wish.

What are the limits for Help to Buy Isas and lifetime Isas?

Help to Buy Isas

Help to Buy Isas closed to new savers on 30 November 2019, but people with existing Help to Buy Isas can continue to save into them.

If you're saving up for a property deposit you receive a £50 bonus for every £200 saved in the Isa. There is a maximum government bonus of £3,000 on £12,000 of savings.

You can open your Help to Buy Isa with a one-off deposit of £1,000 to kick things off, and then add £200 per month thereafter.

This means that in the first year of opening a Help to Buy Isa you can save up to £3,400, and then £2,400 each year afterwards.

Lifetime Isas

The lifetime Isa is for adults aged 18-39 only, designed to help them buy their first home or save for retirement.

You can pay in up to £4,000 in each tax year, and the government will add a £1 bonus for every £4 you save - so, that's a bonus of up to £1,000 a year. You can only add savings up to the age of 50.

Find out more in our guide to lifetime Isas.

What is the Junior Isa allowance?

In the 2024-25 tax year, the annual limit for contributions to Junior Isas is £9,000 (unchanged from the 2023-24 tax year).

Parents and guardians can pay into Junior Isas up to the limit - what they pay in does not come out of their own Isa allowance, as the Junior Isa belongs to the child.

Once the child turns 18, the Junior Isa account will be changed to an adult Isa, and the individual can decide on what they want to do with the money.

Junior Isas are not eligible for new rules on flexible withdrawals.

Find out more in our guide to the best Junior cash Isas.

What happens to my Isa allowance when I die?

If you're married or in a civil partnership, your spouse can inherit the Isa allowance you've built up through saving into these tax-free accounts - regardless of whether they actually inherit the money in your Isas.

They will get an additional Isa allowance equivalent to your Isa savings Isa at the time of your death, and is referred to as an 'additional permitted subscription', or APS allowance.

The rules are quite complex, so we'd advise reading our guide on Isa inheritance.

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What happens if I exceed my Isa allowance?

Because it's possible to have several Isas with different providers, there is a risk that you might pay in too much during a single tax year.

At the end of the tax year, records for individuals will be checked, so HMRC will know that you've paid in too much money. You may be let off with a warning letter if it's the first time this has happened but it's best to check yourself.

Where HMRC decides to take action, your Isa provider may be instructed to remove over-subscriptions and tax any income or growth related to that money.

HMRC advises against trying to correct the mistake by drawing money out - you can call its Isa helpline instead on 0300 200 3300.

Cash Isa rules and allowances

What is the Isa allowance in 2024-25?

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How does the Isa allowance work?

Will taking money out affect my Isa allowance?

The Isa only has cash from previous tax years

The Isa only has cash from the current tax year

The Isa contains cash from previous tax years and the current tax year

Remember - not all Isas are flexible