Individual Savings Accounts (ISAs) are a popular tax-efficient way for UK residents to save or invest money. But with an annual limit set by HMRC, many people wonder: Can I put £20,000 in an ISA every year?
In this guide, I’ll explain how ISA allowances work, whether you can contribute to multiple ISAs, and what happens if you exceed the limit. If you’re looking to make the most of your tax-free savings, this article will give you the clarity you need.
What is the ISA Allowance?
The ISA allowance is the maximum amount an individual can contribute to their ISAs within a single tax year without being taxed on the interest, dividends, or capital gains.
For the 2024/25 tax year, the ISA allowance remains at £20,000 per person. This limit is set by HMRC and applies to all types of ISAs combined.
Key Features of the ISA Allowance:
- Annual Reset: The allowance resets at the start of every tax year on 6 April, meaning any unused portion does not roll over.
- Individual Limit: The £20,000 allowance is per person, so couples can each contribute up to £20,000 separately, allowing a household to save £40,000 tax-free in one year.
- Applicable to All ISAs: The total contributions to all ISAs (Cash, Stocks and Shares, Innovative Finance, and Lifetime ISAs) must not exceed £20,000 in one tax year.
How the ISA Allowance Works?
- You can spread the £20,000 across multiple ISAs, such as putting £10,000 into a Cash ISA and £10,000 into a Stocks and Shares ISA.
- The Lifetime ISA (LISA) has a separate £4,000 limit, but this still counts toward the overall £20,000 cap.
- Junior ISAs (JISA) have a separate allowance of £9,000, which does not affect the £20,000 adult ISA limit.
Understanding the ISA allowance helps individuals maximise their tax-free savings and make informed investment decisions each tax year.
Can I split my £20,000 ISA allowance across multiple ISAs?
Yes, the ISA allowance can be divided among different types of ISAs as long as the total amount deposited does not exceed £20,000 in a single tax year.
The four main types of adult ISAs are:
- Cash ISA – A tax-free savings account with fixed or variable interest.
- Stocks and Shares ISA – An investment account that allows tax-free gains on stocks, bonds, and funds.
- Innovative Finance ISA – A tax-free investment in peer-to-peer lending or crowdfunding.
- Lifetime ISA (LISA) – A savings product for first-time homebuyers or retirement, with a government bonus.
Since April 2024, it is now possible to pay into multiple ISAs of the same type within the same tax year, which was previously restricted. For example, savers can now contribute to two different Stocks and Shares ISAs in the same year, provided the total remains within the £20,000 limit.
How Does the Lifetime ISA Affect My Overall Isa Allowance?
The Lifetime ISA (LISA) is a specific type of Individual Savings Account designed to help individuals save for either a first home purchase or retirement. While it has its own contribution limit, it still forms part of the overall £20,000 annual ISA allowance set by HMRC.
Key Features of a Lifetime ISA
- Available to individuals aged 18 to 39 at the time of opening.
- You can contribute up to £4,000 per tax year into a LISA.
- The government provides a 25% bonus on contributions (up to £1,000 per year).
- Funds can be used to purchase a first home (up to £450,000) or withdrawn at age 60 for retirement.
- Withdrawals for other purposes result in a 25% penalty, which could mean getting back less than what was deposited.
How It Affects the Overall ISA Allowance
- The £4,000 LISA limit is included within the £20,000 annual ISA allowance.
- If you contribute the maximum £4,000 into a LISA, you can only invest a further £16,000 across other ISAs (Cash ISA, Stocks and Shares ISA, or Innovative Finance ISA).
- Unlike a Junior ISA, which has a separate allowance, a LISA is counted within the adult ISA cap.
- Even though the government provides a bonus, it does not count toward the £20,000 allowance—only personal contributions are considered.
Example of ISA Allowance Usage with a LISA:
If someone has £20,000 to invest in ISAs, they could allocate it as follows:
- £4,000 in a Lifetime ISA (receiving a £1,000 government bonus).
- £10,000 in a Stocks and Shares ISA for investment growth.
- £6,000 in a Cash ISA for secure savings.
This allocation ensures the total contributions remain within the £20,000 ISA limit while maximising tax-free savings and government incentives.
Can I Contribute to Someone Else’s ISA?
While it is possible to deposit money into someone else’s ISA as a gift, the ISA allowance applies only to the account holder, not the person contributing the funds.
- If you gift money to a spouse or child for their ISA, it counts toward their £20,000 limit.
- Funds in an ISA cannot be held on behalf of someone else.
Junior ISA (JISA) Contributions
For children under 18, a Junior ISA (JISA) allows tax-free savings with a £9,000 annual limit.
- Parents or guardians can contribute, but the funds belong to the child.
- If a family has two children, £9,000 can be placed in each child’s JISA, separate from the parents’ allowances.
This means a family could potentially save up to £38,000 tax-free in one tax year (£9,000 per child + £20,000 per parent).
What Are the Isa Limits for Different Types of ISAS?
The table below outlines the maximum contributions allowed for each ISA type in the 2024/25 tax year:
| Type of ISA | Annual Allowance Limit |
| Cash ISA | £20,000 |
| Stocks and Shares ISA | £20,000 |
| Innovative Finance ISA | £20,000 |
| Lifetime ISA (LISA) | £4,000 |
| Junior ISA (JISA) | £9,000 |
- The £20,000 cap applies across all adult ISAs in a given tax year.
- Junior ISAs have a separate £9,000 limit, which does not impact the adult allowance.
What Happens if I Exceed the Annual ISA Allowance?
Exceeding the £20,000 annual ISA allowance can happen accidentally, especially if you contribute to multiple ISAs with different providers. While most ISA providers have systems in place to prevent over-contributions, mistakes can still occur. If you exceed the limit, HMRC may step in to correct the issue.
How Over-Contributing to an ISA Can Happen
- Depositing into multiple ISAs without tracking total contributions across different providers.
- Adding funds to a Lifetime ISA (LISA) without realising that the £4,000 cap counts toward the overall £20,000 allowance.
- Transferring funds incorrectly between ISAs, which could lead to double-counting in a tax year.
- Receiving third-party contributions that push your total over the limit.
What Happens if You Go Over the ISA Allowance?
- HMRC will assess the excess contributions and determine the next steps.
- Any amount deposited over £20,000 may lose its tax-free status, meaning any interest, dividends, or capital gains earned on the excess amount could be taxed.
- If you exceed the limit across multiple ISAs, HMRC may direct one of your providers to return the excess funds.
- You may be required to withdraw the excess amount, and any growth earned on that portion could be subject to tax.
Steps to Take If You Over-Contribute
- Review your contributions – Check all ISA accounts to confirm the total amount deposited in the tax year.
- Contact your ISA provider(s) – Many providers will be able to assist in correcting an over-contribution before it becomes an issue with HMRC.
- Notify HMRC if necessary – If the provider does not automatically correct the mistake, you may need to contact HMRC directly at 0300 200 3312 to discuss the next steps.
- Withdraw excess funds if advised – If instructed by HMRC or your ISA provider, remove the excess contribution to avoid penalties.
How to Avoid Exceeding the ISA Allowance in the Future
- Track your contributions carefully, especially if you have multiple ISAs with different providers.
- Use a single provider if possible, as this can make it easier to monitor deposits.
- Check provider statements regularly to ensure you’re staying within the limit.
- Understand how different ISAs work together, particularly how a Lifetime ISA contributes to the overall limit.
While most ISA providers will prevent an over-contribution at the time of deposit, it is important to stay aware of your total contributions throughout the tax year to avoid potential tax implications or administrative issues with HMRC.
Can I have more than one ISA at the same time?
Yes, individuals can hold multiple ISAs, including those from previous years, but there are rules on new contributions:
- It is possible to open and contribute to one of each ISA type per tax year.
- New rules allow contributions to multiple ISAs of the same type within the same tax year.
- ISA transfers do not count toward the £20,000 allowance.
For example, someone can hold a Cash ISA from 2022, a Stocks and Shares ISA from 2023, and a new Innovative Finance ISA in 2024, while continuing to contribute to all eligible accounts within the £20,000 limit.
Will the ISA Allowance Change in Future Tax Years?
The ISA allowance is set by HMRC and reviewed annually. While the £20,000 limit has remained unchanged since 2017, the government may adjust the cap based on economic conditions and policy changes.
- Any modifications to the allowance are typically announced in the Budget.
- It is important to check official HMRC updates before making large contributions.
Although past increases have been gradual, future changes could impact tax-free savings strategies.
What are the Tax Benefits of Saving in an ISA?
One of the biggest advantages of ISAs is the ability to grow savings and investments tax-free.
Tax advantages of an ISA:
- No income tax on interest earned in a Cash ISA.
- No capital gains tax (CGT) on investment growth in a Stocks and Shares ISA.
- No dividend tax on income from shares held in an ISA.
Compared to taxable savings accounts, ISAs offer a more efficient way to grow wealth, making them a valuable tool for long-term financial planning.
By understanding ISA rules and allowances, savers and investors can make informed decisions that maximise their tax-free savings potential.
Conclusion
So, can you put £20,000 in an ISA every year? Yes, but you need to follow HMRC’s rules on limits and contributions. By understanding the different ISA types and making the most of your tax-free savings, you can maximise your financial growth in the UK.
FAQs About
Can I withdraw money from my ISA and pay it back within the same year?
Only Flexible ISAs allow you to withdraw and redeposit funds within the same tax year without affecting your allowance.
Are there penalties for exceeding the ISA allowance?
Excess contributions may be taxed, and you may need to contact HMRC to resolve the issue.
How do I check my remaining ISA allowance for the year?
Most ISA providers display your remaining allowance in online banking.
Can I transfer my ISA to another provider without affecting my allowance?
Yes, ISA transfers do not count towards your annual £20,000 limit.
What happens to my ISA if I move abroad?
You can keep existing ISAs but cannot contribute unless you’re a UK resident.
Do different ISA providers have different rules on contributions?
Yes, some providers set minimum deposits or offer different interest rates.
What is a flexible ISA, and how does it work?
A Flexible ISA allows you to withdraw and repay money within the same tax year without using up your allowance.
