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Your no-nonsense guide to ISAs
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What is an ISA?
ISA stands for Individual Savings Account.
Tell me in three words why ISAs are important?
Tax free growth.
Why does that matter to me?
You can keep any interest and returns you earn for yourself, rather than giving them away in tax.
Why would I owe tax?
Put simply, If you earn interest and returns over certain limits in accounts outside of ISAs, you will owe it to the government in tax. With ISAs, you don’t.
Who can open an ISA?
They are available to every UK resident, as long as you are over 18 years of age and pay tax here.
How much can I save and invest into an ISA?
The limit is £20,000 per tax year, which runs from 6 April to 5 April each year.
Can I use my ISA allowance from this tax year, next tax year
No you can’t. So it’s best to use it or you’ll lose it. Your limit refreshes on 6 April each year.
What is a tax year and when does it end?
A tax year is the 12-month period used by the government for tax calculations and allowances. In the UK, it starts on 6 April and runs to 5 April the following year.
How many ISAs can I have?
You can open as many ISAs as you like, just make sure you stay within your £20,000 limit per tax year across all of them.
How does the £20,000 limit work?
For example you could have in the same tax year:
£10,000 in a Cash ISA and £10,000 in a Stocks & Shares ISA
£5,000 in four different Cash ISAs
How you do it is up to you, just remember it’s not £20,000 per ISA, that’s your limit for all of them combined in a tax-year. When a new tax year starts (6 April) your £20,000 limit refreshes.
How many types of ISA are there?
There are four main types of ISAs:
Cash ISA - A savings account with tax-free interest.
Stocks & Shares ISA - Invest in markets without paying tax on returns.
Lifetime ISA (LISA) – Save for your first home or retirement with a government bonus.
Innovative Finance ISA – Invest in peer-to-peer lending with tax-free interest.
Each has different benefits, so the right one depends on your goals. (At Chip, we don't currently offer a Lifetime or Innovative Finance ISA).
So how are ISAs different from normal savings accounts?
Your savings and investments in ISA are protected from tax (often referred to as a tax wrapper), so you don’t pay it on savings interest you earn. They function in much the same way.
Tell me more about tax-free limits on savings
You can earn tax-free interest on savings—up to £1,000 for basic-rate tax payers and £500 for higher-rate taxpayers and tax-free. Any interest you earn above this is taxable, but ISAs remain completely tax-free.
Can you tell me about ISA transfers?
An ISA transfer lets you move money between ISAs without losing your tax-free benefits. This allows you to switch providers or change ISA types while keeping your savings or investments protected from tax.
Can’t I just transfer the money myself?
No, you must use the official transfer process to keep your tax-free status on the amount you transfer. Do this by requesting a transfer through your new provider.
Do transfers affect my annual ISA allowance?
No, moving money between ISAs doesn’t count as a new deposit, so it won’t eat into your £20,000 annual allowance.
I’ve seen ISAs described as ‘flexible’?
A flexible ISA allows you to withdraw money and replace it within the same tax year without affecting your annual ISA allowance. Both Chip’s ISAs are flexible.
How do flexible ISAs work?
Let’s say you deposit £20,000 (the full ISA allowance for the year).
Later, you withdraw £5,000—leaving £15,000 in your ISA.
With a Flexible ISA, you can redeposit that £5,000 later in the same tax year without using additional allowance.
I don’t have enough savings or investments at the moment to hit any limits, why do I need an ISA?
Maybe you won’t hit any limits now, but circumstances can change. Using your ISA allowance early means you’ll have existing money wrapped up against tax as your wealth grows or if you inherit a large lump sum.
Why has the landscape changed? Years ago ISAs were pointless…
When interest rates were at historic lows (e.g. 0.1% in March 2020), you would have had a lot of savings to hit your personal allowances. Now you can hit those limits with less than £20k in savings because interest rates are a lot higher (currently 4.50% in March 2025 with a peak of 5.25% in Summer 2024).
What about investing limits?
Another solid reason to get an ISA. Historically, capital gains and dividend limits were a lot higher, but cut to 2025 and these aren’t so generous. Wrapping your investments up in an ISA will protect your gains going forward, so that’s another thing you don’t have to worry about.
How can ISAs be part of a long-term wealth-building strategy?
ISAs help build long-term wealth by offering tax-free growth. Regular contributions and maximising your annual £20,000 allowance allow you to grow savings and investments in the most efficient way. Over-time, the tax savings can potentially run into hundreds of thousands of pounds.
What about inheritance?
There are rules around ISAs if you die and in regard to inheriting an ISA from your spouse or civil partner. The best place for information on that can be found here.
Build your own ISA
Decide how to allocate your ISA allowance
You’ve got £20,000 per tax year to save and invest. How to divide it is up to you. You can open as many ISAs as you like with other providers as long as you stay within your allowance.
When you invest with a Stocks & Shares ISA, your capital is at risk. The value of your investments can go down as well as up and you may get back less than your original investment.
Opening a Chip account takes just a few minutes. No forms, no fuss.
1. Download Chip
Head to the App Store or Google Play Store.
2. Create an account
Enter a few details and pass a quick check.
3. You're good to go!
Choose from our range of finance products.
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