Should I open an ISA?
Capital at risk. The value of investments can fall as well as rise, and you may get back less than you put in. Past performance is not a guide to future returns.
Some links on this page are referral links. If you use them, we may earn a commission at no extra cost to you. This never affects how we rate products. How we make money
Important: This guide provides general information, not personalised financial advice. Financial products, rates and eligibility rules can change, so check the provider’s current terms before applying. Some links are referral links — we may earn a commission. You can check a firm’s details on the FCA Register.
FSCS protects eligible deposits up to £120,000 per person, per authorised institution.
Quick answer
An ISA is worth considering if you want your interest or investment growth to be free of UK tax. The ISA allowance for the 2026/27 tax year is £20,000 (GOV.UK, checked 4 October 2026), and money stays tax-free for as long as it remains in the ISA.
See also: ISA Allowance Rules Explained: A Simple UK Guide
If your savings interest is well within your Personal Savings Allowance, an ordinary savings account paying a higher rate might suit you better for now. Many people use both.
Which ISA might fit?
| ISA type | Suits | Key point |
|---|---|---|
| Cash ISA | Tax-free interest on savings | Easy-access or fixed rates; FSCS protection applies |
| Stocks and shares ISA | Long-term investing | Value can fall as well as rise |
| Lifetime ISA | First home or later life, opened aged 18 to 39 | £4,000 a year limit within your £20,000, with a government bonus |
| Innovative finance ISA | Peer-to-peer lending | Higher risk; generally not FSCS-protected |
Allowances as of 3 October 2026. Tax treatment depends on your circumstances and can change.
Who it’s for
- Savers whose interest might go over the Personal Savings Allowance
- Higher-rate and additional-rate taxpayers
- Anyone saving or investing for the medium to long term
Who should skip it
These are general points to weigh up, not advice. You may want to look elsewhere if:
- You need every penny accessible and the ISA rate is lower than a non-ISA option that’s already tax-free for you
- You’re thinking of investing but don’t have an emergency fund yet
- You’re under 18 — look at Junior ISAs instead
Full explanation
Start with your goal. Money for emergencies or the next few years usually belongs in cash.
Money for five years or more might be invested, if you’re comfortable with risk. Our ISAs guide covers each type in more detail.
Then look at tax. Interest outside an ISA counts towards your Personal Savings Allowance: £1,000 for basic-rate, £500 for higher-rate and nothing for additional-rate taxpayers. Our ISA vs savings account guide works through an example.
The government has announced that from 6 April 2027, people under 65 will be able to put up to £12,000 a year into cash ISAs within the £20,000 overall allowance.
Already have an ISA? Transfer it rather than withdrawing, to keep the tax-free status. See how to transfer an ISA.
Never withdraw cash yourself when transferring an ISA — always use your new provider’s official ISA transfer service to preserve your tax-free status.
The catch
The allowance resets each tax year and unused allowance can’t be carried forward. Withdrawals from a non-flexible ISA can’t be replaced. Stocks and shares ISAs carry investment risk, and Lifetime ISAs have a government withdrawal charge if you take money out for anything other than a first home, after age 60 or terminal illness.
Compare cash ISAs or check your allowance.
Some links in this table are referral links. We may earn a commission if you use them, at no extra cost to you. Rankings are based on our review methodology, not commission.
FAQs
Is it worth opening a cash ISA?
It can be, especially if your savings interest could exceed your Personal Savings Allowance. If not, compare rates with non-ISA accounts.
How much can I put in an ISA this year?
The ISA allowance for the 2026/27 tax year is £20,000, shared across all your ISAs.
Can I have more than one ISA?
Yes. You can hold ISAs from previous years and split this year’s allowance across different ISAs.
Can I lose money in an ISA?
Not in a cash ISA, beyond the FSCS limits. In a stocks and shares ISA, the value of investments can fall.
What happens to my ISA if I move abroad?
You can usually keep it, but you generally can’t pay in while you’re not UK resident. Check the rules on GOV.UK.
Get our weekly email
The Friday Finance Lowdown — five minutes of the money stuff worth knowing.
Free to join. See our privacy policy for how we handle your email address.