ISAs in the UK: £20,000 tax-free a year and the 25% Lifetime ISA bonus
An Individual Savings Account lets you save and invest free of tax on interest and gains — up to £20,000 a year. A separate type, the Lifetime ISA, adds a 25% government bonus toward a first home or later life.
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An ISA (Individual Savings Account) is a wrapper for savings and investments in which interest, dividends and gains are free of tax. In the 2026-27 tax year you can put in up to £20,000 across your ISAs. That is one overall limit for all your ISAs together, however you split the money between the types.
What types of ISA are there?
There are four: a cash ISA (like an ordinary savings account but with tax-free interest), a stocks and shares ISA (for investing in shares and funds), an innovative finance ISA (for peer-to-peer lending) and a Lifetime ISA. You can open an ordinary ISA from age 18 if you are a UK tax resident (with exceptions for armed forces and Crown servants abroad).
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A Lifetime ISA (LISA) is for buying a first home or saving for age 60 and beyond. You can pay in up to £4,000 a year, which counts toward the £20,000 limit. The government adds a 25% bonus — up to £1,000 a year. You must make your first payment before you are 40, and you can keep paying in and earning the bonus until you are 50.
When can you take the money out without a penalty?
You can withdraw from a LISA without loss only in three cases: to buy a first home costing £450,000 or less (not until 12 months after your first payment, through a solicitor and with a mortgage), from age 60, or if you are terminally ill with less than 12 months to live. In any other case a 25% withdrawal charge applies. That charge takes back not just the bonus but some of your own money too, so a LISA suits only its intended goals.
What to remember
The £20,000 limit resets each tax year and does not carry over — you cannot top up an unused amount later. Money in a cash ISA is usually protected by the FSCS up to £85,000 per person per bank. Cash ISA rates and investment ISA terms vary between providers — compare before opening. Always check the current limits and rules on GOV.UK.
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