Individual savings accounts (ISAs) can be a really useful way to save or invest your money tax-efficiently, as returns are free of income tax and Capital Gains Tax.
They are particularly useful given that tax thresholds have been frozen for several years and allowances have been cut, dragging more people into the tax net.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “ISAs are set to save us an estimated £9.4 billion in income tax and Capital Gains Tax this tax year. This has shot up by more than a fifth (22%) in the past year – up from £7.7 billion, thanks to a perfect storm driving potential tax bills up.
“This includes everything from cuts in the capital gains tax and dividend tax allowances to higher capital gains tax rates on stocks and shares, frozen tax thresholds boosting the level of each tax, positive stock market growth and robust interest rates.”
Aside from the tax benefits they offer, one of the best things about ISAs is that you can spread your yearly allowance over more than one type of ISA as well. For example, you might decide to save some of your allowance in a cash ISA and then possibly invest the rest in a stocks and shares ISA which has the potential to offer higher returns in return for you accepting a higher level of risk, as there’s a chance you could get back less than you put in.
In this article, we’ll explain how ISAs work and how many accounts you can open in any one tax year.
How do ISAs work?
An ISA is essentially a tax-efficient wrapper for your money in which you can hold savings or investments. You can deposit a certain amount of money into your ISA or ISAs each year (£20,000 in the 2024/25 tax year, and the same amount in the 2025/26 tax year which begins on April 6), without having to pay tax on any interest or returns generated.
There are several types of ISA to choose from. The main ones are cash ISAs and investment ISAs, though there are also innovative finance ISAs, which invest in peer-to-peer lending. To learn more about the basics of ISAs and understand how each type works, read our article Everything you need to know about ISAs.
Can I have multiple ISAs?
You can have as many different ISAs as you like, as long as you are eligible for them.
Some ISA types have age limits on who can use them (junior ISAs are for children under 18 for example, while Lifetime ISAs are specifically for those aged between 18 and 40). Outside of this, you can have as many ISAs as you want, including multiple accounts of the same type.
In the previous 2023/24 tax year, you could spread this allowance over the three different kinds of ISA (cash, stocks and shares or innovative finance ISAs) but you couldn’t pay into more than one of the same type. So, for example, you could deposit £10,000 into a cash ISA and £10,000 into a stocks and shares ISA, but not £10,000 into two different cash ISAs.
However, the rules changed in April 2024 so that you can now open and make a deposit into multiple accounts of the same ISA type in a single tax year, meaning you have much more freedom over how you use your allowance. For example you might want to pay into a variable rate Cash ISA and a fixed rate ISA, or you may want to build a diversified investment ISA portfolio, investing in several stocks and shares ISAs across various different geographical areas and asset classes.
This effectively means that there is no limit to the number of different types of ISA you can spread your allowance over this tax year, although you may prefer not to hold numerous accounts as this can make it more challenging to stay on top of your paperwork.
You can also have a Junior ISA for your child, but this will be in their name, not yours. The Junior ISA allowance is separate to your annual ISA allowance, and you can pay in up to £9,000 on behalf of your child this tax year.
However many ISAs you decide to opent, you can’t pay in more than your annual ISA allowance in a given tax year. Most providers will stop you if you try to do this, although if you have ISAs with multiple providers it can be harder for them to catch. If you think you have deposited more than your annual allowance in a single tax year you should contact HMRC by calling their helpline on 0300 200 3300.
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1Annual Equivalent Rate correct as of 11 April 2025 and subject to availability. Terms and conditions apply. 2The annual ISA allowance is £20,000 per tax year (6 April to 5 April). ISA and tax rules apply.
Can I transfer money from one ISA to another?
Yes, as long as the ISA you want to move to allows transfers in. Most ISA providers will have a service that allows you to transfer your pot from a different provider to theirs if you so choose. You might do this to benefit from better interest rates, to consolidate your savings in one account, or because you’ve found a new provider offering lower dealing charges and a broader range of investments.
You should always do an official transfer, and never withdraw your money from one ISA to put in another manually. Doing so means that your money will lose its tax-free status.
There are certain rules around ISA transfers that you should be aware of, however. If you put money into an ISA and then decide you want to transfer it in the same tax year, you can do so, but you will need to transfer the entire amount – so both the capital and interest received. You can’t just transfer some of the money in this account to another provider.
If you have money in an ISA from a previous tax year that you would like to transfer, then you can do this, and either transfer all of it or only some of it if you wish.
Read more about how ISA transfers work in our article ISA transfers: what are the rules?
How many ISAs do I need?
There’s no one answer to this question. The types of ISAs that suit you best – and the best number to have – will depend on your financial situation, your goals and how keen you are to take risks with your money. In most cases, it is usually not worth the hassle of having more than one type of each ISA, and you may not even feel the need for more than one ISA overall.
Remember that ISAs aren’t the only way to save tax-efficiently. Investments made into your pension are not subject to either Capital Gains Tax (CGT) or income tax either.
You also get tax relief on the money you pay in. This means that if you’re a basic rate taxpayer, for every £80 you contribute, you’re actually putting away £100 as the taxman automatically refunds you the £20 in income tax it would have taken.
Higher-and additional rate taxpayers can claim a further £20 or £25 back respectively through HMRC via their self-assessment tax returns. Learn more in our article How pension tax relief works.
Bear in mind, however, that you can usually access money held in an ISA at any time, whereas the earliest you can take money out of your pension is age 55 (rising to 57 in 2027).
If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide independent advice firm Fidelius to offer Rest Less members a free initial consultation* with a qualified financial advisor. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
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