Individual Savings Accounts (ISAs) let you save or invest without paying tax on the interest, dividends, or capital gains you earn. But the tax-free benefit only applies up to an annual allowance, and the rules about splitting it across different ISA types trip a lot of people up, especially those who hold more than one ISA.
The overall annual allowance
Each tax year (6 April to 5 April), you can pay up to £20,000 in total across all your ISAs. This is a personal allowance — a couple gets £20,000 each, for a combined £40,000 between them. The allowance doesn't roll over: unused allowance is lost forever once the tax year ends, and a new £20,000 allowance opens up on 6 April.
How the allowance splits across ISA types
The £20,000 is a combined limit across the main ISA types, not £20,000 per type:
- Cash ISA — no limit on how much of your £20,000 can go here
- Stocks & Shares ISA — same, up to the full £20,000 if you choose
- Innovative Finance ISA — peer-to-peer lending investments, again shares the same overall limit
- Lifetime ISA (LISA) — capped separately at £4,000 a year, which counts towards (not on top of) your overall £20,000 allowance
So, for example, you could put £4,000 into a Lifetime ISA and split the remaining £16,000 however you like between a Cash ISA and a Stocks & Shares ISA in the same tax year.
Worked example
| ISA type | Amount paid in |
|---|---|
| Lifetime ISA | £4,000 (maximum for this type) |
| Cash ISA | £10,000 |
| Stocks & Shares ISA | £6,000 |
| Total used | £20,000 (full allowance used) |
Paying into multiple ISAs of the same type
Rules changed in recent years to allow you to pay into more than one ISA of the same type (for example, two different Cash ISAs) within the same tax year, as long as your total contributions across all ISAs stay within the £20,000 limit. Previously you were restricted to just one of each type per year — check with your provider, as some older account terms may still reflect the historic rule.
What happens if you pay in too much
If you accidentally exceed the £20,000 allowance — for example by contributing to ISAs with two different providers without realising you'd already used your allowance elsewhere — HMRC will usually identify the breach from provider reports and can remove the excess (plus any related tax advantage) or ask you to fix it directly. It's not usually an immediate penalty for a genuine mistake, but it does create administrative hassle and you may lose the tax-free wrapper on the excess amount. If you spot the mistake yourself, contact HMRC or your ISA provider promptly.
Common mistakes
- Assuming each ISA type has its own separate £20,000 allowance (only the Lifetime ISA sub-limit works differently, and even that counts towards the total)
- Forgetting contributions already made earlier in the tax year with a different provider before opening a new ISA
- Not using the allowance before the 5 April deadline and losing it permanently
- Confusing "transferring" an existing ISA balance (which doesn't use new allowance) with "contributing" new money (which does)
What to do next
Keep a simple running total of what you've paid into ISAs each tax year across all providers, and plan any large lump-sum contributions with the 5 April deadline and the £4,000 LISA sub-limit in mind.