Compare savings accounts
Find the right savings account for you using the service provided by Experian Ltd
Compare and chooseBy clicking a retailer link you consent to third-party cookies that track your onward journey. If you make a purchase, Which? will receive an affiliate commission, which supports our mission to be the UK's consumer champion.
The term Isa stands for 'individual savings account', and allows you to save tax-free into a cash savings or investment account.
Isa accounts are offered by banks, building societies, insurers, asset managers and National Savings and Investments (NS&I).
This guide explains what the different types of Isas are and how they work, plus how to choose between an Isa and a savings account.
Find the right savings account for you using the service provided by Experian Ltd
Compare and chooseThere are five different types of adult Isas and a sixth, the UK Isa or British Isa is also set to be introduced. All of these Isas have the advantage of being tax-free. But that's where their shared similarities end.
The table shows you the key facts about each kind of Isa at a glance - you can find more details further down the page.
Cash Isa | Basic Isa | Savings account | £20,000 allowance. Tax-free interest. |
Stocks and shares Isa | Investment Isa | Investment account | £20,000 allowance. Tax-free gains, no further tax on dividends, tax-free interest. |
Innovative finance Isa | Peer-to-peer Isa | Peer-to-peer lending account | £20,000 allowance. Tax-free interest. |
Help to Buy Isa | H2B Isa | Savings account for first-time buyers | £3,400 in the first year; £2,400 thereafter. 25% top-up. Tax-free interest. Closed to new savers as of 30 November 2019. |
Lifetime cash Isa | Lisa | House deposit and/or retirement savings account | £4,000 allowance. 25% top-up. Tax-free interest. Only those aged 18-39 can open. |
Lifetime stocks and shares Isa | Lisa | House deposit and/or retirement investment account | £4,000 allowance. 25% top-up.Tax-free gains, no further tax on dividends, tax-free interest. Only those aged 18-39 can open. |
Junior cash Isa | Jisa | Savings account for under 18s | £9.000 allowance. Tax-free interest. |
What is it?
A cash Isa is essentially the same as a traditional savings account, except there are limits on the amount of cash you can deposit in each tax year, and you don't pay any tax when you earn interest.
There are three principle types of cash Isas:
How much can I save each tax year?
In 2024-25 you can pay in up to £20,000 into a cash Isa. This was the same in 2023-24.
How does it work?
You were previously only allowed to open and pay into one cash Isa in each tax year, but in April 2024 this rule was scrapped and you can now pay into multiple Isas of the same type in a single year.
Who can open it?
Anyone over the age of 18 can open a cash Isa.
What is it?
This is an investment account, where all capital gains and income are protected from tax.
How much can I save each tax year?
In 2024-25 you can pay in up to £20,000 into a stocks and shares Isa. This was the same in 2023-24.
How does it work?
You can either opt for a managed account, where you'll pay fees for your investments to be sorted for you. Or, you can choose where to invest your money - but you'll likely still pay a fee to the provider.
You should factor in your attitude to risk before choosing your investments, as you may get back less money than you put in.
Who can open it?
Anyone over the age of 18 can open a stocks and shares Isa.
What is it?
An innovative finance Isa - also known as an Ifisa - is an Isa that contains peer-to-peer loans.
How much can I save each tax year?
In 2024-25 you can pay in up to £20,000 into an innovative finance Isa. This was the same in 2023-24.
How does it work?
This kind of lending matches investors with borrowers who did not want to/could not get a traditional bank loan. These are usually individuals, businesses or property developers.
The borrower will offer a rate of interest when paying back the money you've invested.
Generally, the higher the interest rate, the higher the investment risk - you're not guaranteed to get all of your money back.
Who can open it?
Anyone over the age of 18 can open an innovative finance Isa.
What is it?
A government-backed cash Isa savings account to help first-time buyers get on the housing ladder, no longer open to new applicants.
How much can I save each tax year?
In the first month of being open, savers could deposit up to £1,200. You can then pay in up to £200 a month thereafter. So, in the first year you could have saved up to £3,400, and after that up to £2,400. Whatever you pay in will come out of your £20,000 Isa allowance.
How does it work?
The government pays a 25% bonus on what you save, up to a maximum of £3,000. The bonus is paid to your solicitor or conveyancer after you complete on your property purchase.
Who can open it?
No one anymore - the scheme closed to new savers on 30 November 2019. Existing savers with a Help to Buy Isa can continue to use it.
What is it?
A government-backed savings scheme to help people buy their first home and/or save for retirement. There are cash Isa as well as stocks and shares options.
How much can I save each tax year?
Up to £4,000 each year, which will come out of your £20,000 Isa allowance.
How does it work?
The government pays a 25% bonus on whatever you save up to a maximum of £1,000 each year. The bonus is paid into your lifetime Isa account each month.
If you use the money for retirement, you can only pay into the account until you're 50 years old, and must wait until you're 60 to withdraw it.
Who can open it?
Anyone aged between 18-39. You must be a first-time buyer to put the money towards a property.
What is it?
An account for young people aged under 18. There are options to save in cash or stocks and shares.
How much can I save each tax year?
Up to £9,000. This won't come out of your Isa allowance as the money is your child's, not your own.
How does it work?
You can pay into a Junior Isa each year until your child turns 18, at which time it will convert into an adult Isa and they'll gain control of the money that's been saved.
Who can open it?
Parents and legal guardians can open a manage a Junior Isa for the children they're responsible for.
What is it?
Announced in the March Spring Budget but not yet launched at time of writing, the UK Isa will promote investment in UK equities.
How much can I save each tax year?
Up to £5,000, and this is separate from the £20,000 allowance spread across other types of Isa.
How does it work and who can open it?
Details are thin on the ground as the government is still consulting on how it will work.
We'll update this guide when we know more.
Isas were originally available as mini Isas (cash only, or stocks and shares only) and maxi Isas (cash, and stocks and shares).
TOISA stands for TESSA-only Isa. These accounts were originally created for people who had invested in TESSAs (Tax-Exempt Special Savings Accounts) - an older type of tax-free savings vehicle which was phased out of existence when Isas were introduced.
PEP stands for Personal Equity Plan. These were tax-efficient savings products that allowed people to invest in stocks and shares, but new investment in PEPs was stopped in 1999 to coincide with the introduction of Isas.
In April 2008, all of these products were reclassified as either cash or stocks and shares Isas.
The introduction of the personal savings allowance in 2016 took a lot of the potency out of the Isa's tax-free advantage.
Even the highest interest rates on the market would require a savings pot of many thousands of pounds before coming close to breaching the £1,000 personal savings allowance that basic-rate taxpayers receive.
However, for those with large savings pots, or who are additional-rate taxpayers and therefore do not receive any kind of personal savings allowance, an Isa is a great way to save paying tax on savings interest.
What's more, if you're saving over a long period of time - where your savings compound and grow as interest builds on interest - Isas protect you from ever having to pay tax in the future, even if you get a pay rise that reduces your personal savings allowance.
If you have a stocks and shares Isa, you'll also be spared from tax charged on traditional dividends if you exceed the £500 annual dividend allowance.
Money held within any kind of Isa is counted as savings, and therefore it can affect your entitlement to benefits.
Funds held in lifetime Isas can be particularly problematic, as having money saved means you could receive less in benefit payments, but you'll be penalised with a hefty withdrawal penalty if you remove money for any reason other than buying your first home or when you're over 60.
If you claim Universal Credit, any savings of more than £6,000 are assumed to give you a certain income (regardless of whether you actually receive any income from your savings or not), and this income - when added to any other sources - could reduce your Universal Credit payments.
If you have less than £6,000 saved, this won't have any effect on your payments.
If you have more than £16,000 in savings, you won't be able to claim Universal Credit at all.
Find the right savings account for you using the service provided by Experian Ltd. Compare and choose accounts
Some stocks and shares Isa providers also offer a cash Isa, however most people will still use a specialist for each.
This will enable you to secure the best cash Isa rates from a bank or building society, while investing in a stocks and shares Isa through an investment platform, such as AJ Bell or Hargreaves Lansdown.
Holding cash in a stocks and shares Isa is usually only temporary until you decide where to invest it. If you have a large cash balance which you don't intend to reinvest later, it's still advisable to transfer this to a cash Isa with a bank or building society to get the best deal.
See our reviews of the best stocks and shares Isas.