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The Friendly Guide to ISAs

This Friendly Guide to ISAs explains exactly what ISAs are, the different kinds that are available, and how they can help you and your family save and invest for the future.

What is an ISA?

ISA stands for Individual Savings Account and is a tax-free way to save and invest for the future. There are four different types of ISA that you can save or invest in, and you can have one of each in each tax year.

What kinds of ISA are there?

Cash ISA

A savings account that allows you to put money aside tax-free. This means that the taxman can’t touch any interest you earn on your savings.

Investment ISA

Invests in a range of assets, such as funds, bonds, property or stocks and shares and grows free of tax (other than tax that's already paid, i.e. on dividends from UK shares).

Innovative Finance ISA

Lets you lend to others through a peer-to-peer loan, without paying tax on the interest you earn.

Lifetime ISA

Intended for a deposit for a first home or to save towards retirement with a government bonus added to your contribution until age 50.

What is the ISA allowance?

Your ISA allowance for the current tax year is £20,000.

The tax year runs from the 6th April each year. The Government sets the ISA limits and rules, so they can change. To be eligible for this tax-efficient allowance, you have to over the age of 18 years (16 for a Cash ISA), and a resident of the United Kingdom.

Each year you can split your total allowance in any way you like between a Cash ISA, Investment ISA and Innovative Finance ISA, and up to £4,000 of the limit in a Lifetime ISA. You can’t carry any of your ISA allowance forward into the next tax year so, if you haven’t used your full allowance by the 5th April, you simply lose it.

Find the right ISA for you

Scottish Friendly can't give advice, so we can't tell you which type of ISA is best for you. The table below should help you see the main differences and work out what suits your needs best.

Remember, you can have one of each type of ISA in each tax year, so you might want to split your money between them as long as you keep within the annual ISA limit.

  Cash ISA Investment ISA Innovative Finance ISA Lifetime ISA

How much can I save or invest each year?

£20,000 less any amount paid into the other three types of ISA in the current tax year.

£20,000 less any amount paid into the other three types of ISA in the current tax year.

£20,000 less any amount paid into the other three types of ISA in the current tax year.

£4,000 or if you've paid in more than £16,000 between the other types of ISA the remainder of your allowance.

Who can get one?

UK residents aged 16 and over.

UK residents aged 18 and over.

UK residents aged 18 and over.

UK residents aged 18 to 39.

Is there risk involved?

No. The value of your initial investment cannot decrease. However, the current low rates of interest could mean that the return on your money could struggle to outpace inflation.

Yes. While the long-term potential returns are greater, the value of your investment can go down as well as up and you could get back less than you have paid in.

Yes. While the rate of interest can be higher, there is no guarantee with the money you lend and you could get nothing back.

Yes and no. Lifetime ISAs can be in cash and stock & shares so the risk depends on the type you choose.

Can I switch between ISAs?

You can transfer funds between Cash ISAs or from a Cash ISA into an Investment ISA, Innovative Finance ISA or Lifetime ISA.

You can transfer funds between Investment ISAs or from an Investment ISA into a Cash ISA, Innovative Finance ISA or Lifetime ISA.

You can transfer funds between Innovative Finance ISAs or from an Innovative Finance ISA into a Cash ISA, Investment ISA or Lifetime ISA.

You can transfer funds between Lifetime ISAs.

Frequently asked questions

Find out more about our range of Investment ISAs

We offer a range of Investment ISAs to suit your needs.

Why choose Scottish Friendly?

  • Established 1862

    We've been helping customers to invest for over 150 years.

  • We're a mutual

    That means any profits are used to benefit our members - people like you.

  • You're protected

    Your money is protected by the Financial Services Compensations Scheme.