As you can see there are four different types of ISA out there for you to choose from and one for the kids. Let's take a look at what to consider for each of the different types of ISA. 

Cash ISAS

Cash ISAs are offered by high street banks and building societies. The key consideration with the cash ISA is whether you want an easy access or fixed term ISA. With easy access you can withdraw your money when you want to pay for a holiday, unexpected emergencies etc. and by and large they are very flexible and easy to mange. However, they'll typically have lower rates of interest than fixed term ISAs and rates can fluctuate which is not bad if they go up but not so good if they go down. 

Stocks and Shares ISA

The Stocks and Shares ISA is a type of Individual Savings Account (ISA) that allows you to invest in the stock market and other financial products, with all capital gains and income (like dividends) earned inside the ISA being tax-free. The benefits of a a Stocks & Shares ISA are that you are able to hold a wide range of investments within the tax efficient ISA wrapper so if your investments generate a capital gain these gains are shielded from capital gains tax. The types of assets that can be held in a Stocks and Shares ISA range from shares in companies, unit trusts and investment funds, investment trusts, exchange traded funds (ECTS), corporate bonds and GILTs (government bonds). 

Example. 

Jayne is a basic rate tax payer and invest  £20,000 into various assets and these assets generate a 20% return in the tax year 2025/6 of £4,000, as these gains are held within the ISA  Jane pays no tax. If these assets were held outside of an ISA Jayne would be liable to pay 18% on the gain over the threshold. The threshold for 2025/26 is £3000 so she'd be liable for £180 (18% CGT rate for basic rate tax payers).

Innovative Finance ISA 

The  Innovative Finance ISA (IFISA) is a type of Individual Savings Account (ISA)  that allows you to lend money through peer-to-peer (P2P) lending platforms or invest in other debt-based securities, while earning tax-free interest on your returns. For example, many IFISA allow lending to be facilitated through a peer to peer lending platform to individuals or small businesses. 

In addition, it allows greater diversification when choosing assets than a traditional stocks and shares ISA. The attraction of this type of ISA is that typically the returns are greater than the standard cash ISA but the trade off is higher risk. The key risks to be aware of is default, potential liquidity issues and lack of Financial Services Compensation Scheme (FSCS) protection. If you lend money there's a chance the company you've lent to can't pay/won't pay you back (default), liquidity refers to the ability to sell your assets, sometimes no one wants to buy what is on sale. Think of selling snow to eskimos or sand in the desert to the bedouin. These two activities would be very illiquid. 

LIfetime ISA

The big idea behind lifetime ISAs was to help first time buyers get together a deposit, a secondary goal was to have them supplement a pension. As such, they can only be accessed for a house deposit or from the age of 60. To open one you need to be aged between 18-39 and you can put in up to £4,000 per tax year and the government will chip in 25% of what you put in. You can only pay into one Lifetime ISA in a tax year. 

In addition, if you're looking at houses that are £450,000 or more then the LISA can't be used so you may want to factor in when you'll likely purchase a property and the general trend of house prices. I spoke to a few people  who ended up withdrawing cash and paying the penalty as they decided on purchasing their dream house and it happened to be over £450,000. In July 2025 the Treasury Select Committee have looked at LISAs and have compiled a report with recommendations mainly focussing on  the rules concerning the £450,000 threshold rule for property, the withdrawal charge, the complexity of the product and value for money. Therefore, reform may be on the horizon if the treasury implements any of these recommendations. 

JISA 

The Junior ISA is for those little bundles of joy (bundle of terror in my case) for when they grow up into the big bad world of adulthood. These can be set up by a parent of guardian of the little one and the annual limit is £9,000 and is totally separate from the adult ISA allowance, i.e. you can max out your allowance of £20,000 as an adult and put in £9,000 to the JISA. 

JISAs are available as Stocks & Shares JISA's and as cash JISAs. When considering the level of risk you wish to accept before investing a key factor is the timeline. Typically, the longer the time horizon the more risk you can afford to take as you have the luxury of waiting for the market to recover from any slumps along the way.  Therefore, if your child is very young you may feel able to take more risk as the stock market will typically improve from any major corrections given enough time.

Key Rules

• You can pay into more than one ISA of the same type per year
• Partial transfers between ISAs opened in the same year may be allowed (check with the provider)
• More flexible transfers between different ISA types and providers (check with the provider)
• Providers report only actual subscriptions (not just open accounts)

ISA Transfers

• You can transfer ISAs to another provider without losing tax benefits
• Always use the official transfer process (do not withdraw and redeposit)
• Lifetime ISA transfers before age 60 may trigger a 25% withdrawal charge

Tips for ISA Savers and Investors

• Maximise your allowance: Use as much of the £20,000 limit as possible before 5 April 2026 — the allowance doesn't roll over
• Check with your provider if the ISA is 'flexible' if you think you may withdraw and put money back in the same tax year 
• Diversify: Combine different ISA types to match your goals and risk level
• Check fees: Particularly important with Stocks & Shares and Innovative Finance ISAs
• Compare providers: Interest rates and platform fees vary significantly
• For Lifetime ISAs: Make sure your withdrawal plans align with the rules to avoid penalties and if using for a house purchase factor in house price trajectory and keep an eye out for any news of reform
• Don't withdraw to bank account and then deposit with another provider - use the transfer process of the bank, building society or investment platform. 

What happens to my ISA when I die? 

Upon death, the ISA becomes a 'continuing ISA'and retains its tax free status until whichever of the following things happen first: 

• The administration of your estate is complete 
• The ISA is closed by the executor 
• 3 years and 1 day have elapsed after your death

Whilst the clock ticks the investments will continue to rise and fall with the market and cash will continue to earn interest etc. but no further subscriptions can be made. 

With Stocks & Shares ISAs an important consideration for an executor and beneficiary are twofold. The first is whether to instruct the ISA provider to sell the investments and pay the proceeds to the beneficiary or administrator. If the investments are sold prematurely before a recovery in the market then this could be costly. Equally, if not sold prior to the market losing significant value it could cost the beneficiary. Therefore, it is important to consider the general outlook of the market with a maximum time frame of three years and more specifically to evaluate the assets within the deceased ISA and what sectors these assets are invested.

For example, broadly speaking, someone managing a deceased ISA in January 2025 that contained assets with exposure to gold would have missed out on a lot of upside had they instructed the ISA provider to sell In January 2025 instead of holding off as gold stocks have, by and large increased in value due to trade jitters, geopolitical risks and inflationary pressure resulting in asset managers seeking refuge in gold. 

The second consideration is whether the ISA should be transferred to a surviving spouse or civil partner and if indeed it is possible. This is important as the surviving spouse or civil partner can inherit the ISA allowance value of the deceased either at the date of death or when it is closed. 

Example. 

Mr & Mrs Smith have been married for 40 years - Mr Smith has a Stocks & Shares ISA with 'ISAs R US' worth £80,000 on the date of his death. Mrs Smith doesn't have an ISA of her own. Sadly, he dies and names Mrs Smith as his sole beneficiary. Mrs Smith opens an ISA with 'ISA'S R US' and has her late husband's ISA value transferred to her as at his date of death. This is known as her Additional Permitted Subscription (APS) and means her ISA allowance for the tax year is her £20,000 + £80,000 = £100,000. 

Moreover, by using the Additional Permitted Subscription (APS) Mrs Smith may be able to avoid inheritance tax on her late husband's ISA If the late Mr Smith's total estate is above the IHT threshold (£325,000 as of 2026), his ISA may be subject to 40% IHT, this can be avoided by transferring it to his spouse.