HAVE YOU FULLY UTILISED THIS WRAPPER THAT SHIELDS YOUR SAVINGS AND INVESTMENTS FROM TAX?

An Individual Savings Account (ISA) is highly effective for anyone looking to save or invest money in a tax-efficient way. An ISA functions as a wrapper that shields your savings and investments from tax. Any interest, capital gains or dividends earned within an ISA are completely tax-free, enabling your money to
grow more efficiently than it would in a standard savings account.

For the 2025/26 tax year, every eligible UK resident has an annual ISA allowance of £20,000. You can choose to save or invest the full amount in a single ISA or spread it across multiple ISAs, based on your financial goals. The flexibility of the ISA system means there is probably an option suited to your needs, whether you’re saving for a short-term aim or investing for your long-term future.

UNDERSTANDING YOUR OPTIONS

There are different types of ISAs available. The most common is the Cash ISA, which functions similarly to a regular savings account but provides the key advantage of tax-free interest. For those willing to accept a higher level of risk in exchange for the potential for better returns, a Stocks & Shares ISA allows investment in a wide range of assets, including funds, bonds and individual company shares, without incurring Capital Gains Tax or Dividend Tax.

The Lifetime ISA (LISA) has also been in the spotlight following the Autumn Budget 2025. While the current LISA still allows you to save for your first home or retirement and offers a government bonus, the government has announced a consultation to replace it with a new, simpler product aimed solely at first-time buyers.

Other specialised ISAs include the Innovative Finance ISA (IFISA), which involves peer-to-peer lending. Each type has its own rules and benefits, so it is important to understand which one suits your personal circumstances and savings goals.

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This article is for information purposes only and does not constitute tax, legal or financial advice. Tax treatment depends on individual circumstances and may change in the future. For guidance, seek professional advice. The value of investments can go down as well as up, and you may get back less than you invest.