ISA allowances explained: how much can you save?

How to make the most of these saving and investment accounts.

For a good number of years ISAs were the best places to put your savings. And then they weren’t! But with rising savings rates and changes to tax free allowances on investments, they’re well worth a look again.

And that’s prompted lots of questions over in our Facebook community, particularly about the annual allowances. So here’s everything you need to know about the limits on how much you can save.

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What is the ISA allowance?

The ISA allowance is the most you can add into an ISA each year. You cannot pay money into more than one of the same type of ISA each year, though you can pay into more than one different type (more in the box below).

How much is the ISA allowance?

The ISA allowance was just £7,000 when the accounts launched in 1999, but over time they increased. First in 2010 to £10,200, then gradually to the current level of £20,000, which was set in 2017.

2023/24 ISA allowance:

You can contribute up to £20,000 into ISAs in the 23/24 financial year.

2024/25 ISA allowance:

The allowance is likely to remain at the £20,000 level in 2024/25 too.

Can I put £20,000 into a Cash ISA and another £20,000 into a Stocks & Shares ISA?

That £20,000 is across all your ISAs combined. So it can all go into a single ISA, or it can be split across the different types of ISA – Cash, Stocks & Shares, Lifetime or Innovative Finance.

So for example if you wanted to pay into both a Cash ISA and a Stocks & Shares ISA in the same year, you’d need to make sure you don’t go over £20,000 in total. How you split it is up to you.

Does a Lifetime ISA count towards the ISA allowance?

The Lifetime ISA has it’s own £4,000 annual cap. However that is within the overall £20,000 ISA limit. That means if you put the full amount into a LISA, you’d have a cap of £16,000 to pay into any other types.

What is the Junior ISA allowance?

The Junior ISA annual allowance for 2023/24 is £9,000 a year. This is completely separate to the main ISA allowance.

When does an ISA allowance reset?

The ISA year is the same as the financial year, which runs from 6 April to 5 April the following year. So you get a brand new allowance to use when that year restarts.

That means you could potentially put £20,000 in to an ISA in the first week of April, and another £20,000 in a week later. But if you put £20,000 in on April 6, you’d need to wait a full year before you can add more money to your ISA.

Watch out for though for deadlines set by individual banks and investment firms who might require deposits and / or transfers to be in the account by late March.

What happens to an ISA allowance after a year?

Though the ISA allowance if for a year, it doesn’t mean your cash is only tax-free every 6 April. Money already put into an ISA retains it’s tax-free status year after year.

Is the ISA allowance only for new ISAs?

You don’t have to open up a new ISA to take advantage of each year’s ISA. If you have existing ISAs you can pay into them again if you want – though doing so will stop you also paying into a new ISA of the same type that same year.

When deciding whether you want to use a new or existing ISA particularly Cash ones, it’s well worth comparing the interest rates available. In most cases the better rates are for brand new accounts.

And watch out for regular monthly contributions that leave your account by standing order or direct debit. If one of these is paid after the new financial year begins you won’t be able to then pay into a different one (unless you transfer the entire balance over).

What happens to your allowance when your ISA matures?

If you’ve put your money into a fixed rate Cash ISA, this could mean your money is locked away for anything from one to seven years. But it’s still the case that the interest or gains are protected from tax even when the ISA matures.

What will happen is the money will likely be moved to an account with a much lower rate, but it’ll still be an ISA. If you want to get a better rate (that’s still tax free) you can transfer it over to a new ISA. Just don’t withdraw it!

Does transferring an ISA use my allowance?

Though there’s the limit of £20,000 that can be added to an ISA each year, this is just new contributions. If you have money in other ISAs from previous years you can transfer them over into new ISAs (via a transfer process) without it affecting the current year’s allowance.

So for example, if you have £15,000 in one ISA from last year, and £15,000 in a new ISA you opened and paid into this year, you can choose to transfer all or part of the old ISA over (perhaps for a better rate) and still be able to add in £5,000 more to the new ISA this year.

You don’t even need to transfer the old ISA cash into your new ISA. You can open a brand new separate ISA and transfer into that – just be sure not to add in any new cash to this additional ISA. You also need to check the new ISA you open accepts ISA transfers.

A quick warning. If you instead withdrew the £15,000 from your old ISA to a standard savings account, you’d only be able to add the further £5,000 to your ISA for the current financial year.

What happens if you don’t use your ISA allowance?

Once the new financial year comes around and the allowance resets, the previous allowance ends for new deposits. That means you can’t carry over any unused allowance to put more cash in the following year.

What happens if you go over your ISA allowance?

If you pay more than £20,000 into a single or mix of different ISA types in a financial year it’ll likely be returned to you – and you won’t receive any interest or gains made (if any) before than happens.

If it’s not spotted – perhaps it’s across both a Cash and Stocks ISA, it’ll be down to HMRC to spot. They’ll let you know what to do and potentially claim any money due back from you (such as tax on some of the interest earned).

You need to make sure you don’t withdraw the cash manually if you realise you’ve made this mistake – contact HMRC on its ISA helpline 0300 200 3300.

Can I put £20,000 in an ISA every year?

Yep, and if you can afford to add the full amount on a regular basis it’s not a bad idea to do so. With such large amounts of cash in savings or investments outside of an ISA, you’re likely to be paying tax on a fair chunk of your money. So putting the maximum in an ISA could help reduce this.

Plus, rules could change. Right now there’s the PSA on savings and various allowances on investing, but they could be reduced or scrapped (that’s already happening for the latter). If that happens, it means the returns on more your money outside of an ISA would be taxable.

So moving it into ISAs could be prudent as the future interest and gains will stay tax-free. Of course there’s no guarantee ISA rules won’t change too, but if they do it’d hopefully just be to new rather than existing contributions.

How much can you put in an ISA?

Though there’s the annual £20,000 limit, you can keep paying into existing or new ISAs each year. So if someone started with the full £20,000 at 18, and repeated this each year for 50 years, they’d have £1 million saved up – and that’s before the interest or growth that will have been compounding over the same period!

If you are adding lots to the same ISA year after year do check that your ISA itself doesn’t have its own cap on how much you can put in.

What happens if I have more than £85,000 in an ISA?

Though you can only save £20,000 in a year you can built up larger amounts over the years. Money in Cash ISAs is protected by the Financial Services Compensation Scheme (known as FSCS) up to a total of £85,000 (£170,00 for joint accounts) per financial institution (more on how FSCS works here).

If you go above this and the provider goes under, you’ll lose the excess cash. So if you do have more it makes sense to transfer some of the money into an ISA at a different bank or building society.

Don’t forget to also check statements to see if interest payments take you over the limit!