What is an ISA?
An ISA is a tax-free wrapper for savings and investments. Interest, dividends and gains inside an ISA are free of UK income tax and capital gains tax. The overall allowance is £20,000 per person for the 2026/27 tax year, and unused allowance does not carry over.
The allowance is shared across all ISA types. You can split it between them, and since April 2024 you can pay into more than one ISA of the same type in a tax year, other than lifetime and junior ISAs. Transferring money subscribed in an earlier tax year does not use any of the current year's allowance.
On death an ISA becomes a continuing account of a deceased investor, keeping its tax treatment while the estate is administered, and a surviving spouse or civil partner can claim an additional permitted subscription equal to its value — an allowance on top of their own.
The point most often missed: an ISA is free of income tax and capital gains tax, but it is not free of inheritance tax. It forms part of the estate like any other asset.