How to find the best cash Isa Cash Isa limits explained

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Isa limits have increased substantially since they were first introduced

Each tax year, the government sets an annual limit for the amount of money that savers can store in Isas.

For the 2016/17 tax year, the investment limit is £15,240.  

This limit can be made up of cash, stocks and shares, or even a third type of Isa - the innovative finance Isa - which was introduced on 6 April 2016 for peer-to-peer (P2P) lenders.

The annual Isa allowance usually rises each year in line with the September Consumer Prices Index (CPI), rounded to the nearest £120. 

However, the government announced it will be boosted to £20,000 from April 2017. 

All UK residents aged 16 or over can have a cash Isa, although you must be 18 before you can open a stocks and shares Isa. Crown employees serving overseas or individuals married to such employees are also eligible to open Isas.

Find out more: Which? savings and Isa comparison tables - compare the best deals on the market 

Using your cash Isa allowance

You can invest a maximum of £15,240 in an Isa during the 2016/17 tax year, which runs from 6 April 2016 to 5 April 2017. 

This can be done in one lump sum, or via multiple payments over the course of the year if your Isa provider allows this. Unused allowances don't roll over to the next year.

You can spread your allowance between a cash Isa, a stocks and shares Isa, or an innovative finance Isa, in any way you wish, provided the combined total doesn't exceed your annual limit. 

All funds deposited in an Isa will continue to earn tax-free interest year after year until it is withdrawn. 

Withdrawing cash - new flexible rules for 2016

Previously, if you withdrew funds from your Isa and subsequently replaced some, or all, of that money, the replacement always counted as new Isa money. 

So, for example, if you put £10,000 into a cash Isa, then withdrew some or all of it, you would have only been able to invest a further £5,240 throughout that tax year. 

However, in his 2015 Budget, Chancellor George Osborne announced that savers would be able to take out and then put money back into their cash Isa without it counting towards their annual tax-free Isa entitlement for that tax year. 

So, for example, if you put £10,000 into a cash Isa this year, then withdraw £5,000, you can replace that £5,000 and still invest a further £5,240 (the remainder of your annual allowance) throughout the tax year. 

These changes were introduced on 6 April 2016, although Isa providers are not obliged to offer this facility so you should always check before withdrawing any money. 

It's worth noting that fixed-rate cash Isas require you to keep your money in the account for a certain period of time, or you could face a penalty.   

Which? Comparison Table: Instant-access cash Isas - compare the best deals on the market

Junior Isa limits

Children under the age of 18 can save cash tax-free in a Junior Isa. The annual allowance for Junior Isas is currently £4,080.

Junior Isas will not be eligible for the new rules on flexible withdrawals mentioned above. 

Find out more: Junior Isas- we've compared the top deals on offer

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Last updated:

April 2016

Updated by:

Chiara Cavaglieri


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