The short answer
A Stocks and Shares ISA is a tax wrapper for your investments. You can pay in up to £20,000 a tax year, and everything inside it grows free of UK tax: no tax on dividends, no Capital Gains Tax when you sell and nothing to report on a tax return.
The tax you save grows with your pot. With £10,000 already invested, £300 a month and a 6% yearly return, an ISA could be worth £164,690 after 20 years. Holding the same investments outside an ISA would cost a basic rate taxpayer about £11,800 in tax, and a higher rate taxpayer about £20,770.
Key point
An ISA does not make your investments grow faster. It stops tax taking a share of the growth, which matters more the bigger your pot gets and the longer you invest.
How a Stocks and Shares ISA works
- You need to be 18 or over and live in the UK to open one.
- The allowance is £20,000 a tax year across all your ISAs. The tax year runs from 6 April to 5 April, and unused allowance does not carry over.
- You can split it. You can pay into more than one ISA in the same tax year, including more than one Stocks and Shares ISA, as long as the total stays within £20,000.
- You choose the investments. Most platforms offer funds, ETFs, shares and investment trusts. Some offer only a short list, so check before you open one.
- Withdrawals do not give you allowance back. If you take money out, paying it back in uses new allowance, unless your ISA is flexible and you replace the money in the same tax year.
- Moving provider? Transfer, do not withdraw. An ISA transfer keeps your money inside the tax wrapper. Withdrawing and paying in again would use up allowance.
How much tax an ISA saves
Outside an ISA, in a general investment account, two taxes apply to shares and funds. Dividends above the £500 dividend allowance are taxed every year, and gains above the £3,000 Capital Gains Tax allowance are taxed when you sell.
| Tax on | Basic rate | Higher rate | Additional rate |
|---|---|---|---|
| Dividends above £500 a year | 10.75% | 35.75% | 39.35% |
| Capital gains above £3,000 a year | 18% | 24% | 24% |
| Dividends and gains inside an ISA | None | None | None |
Dividend rates and allowances from GOV.UK for 6 April 2026 to 5 April 2027. For a basic rate taxpayer, any part of a gain that takes total income and gains above the basic rate band is taxed at 24%.
Both allowances are small compared with what a growing ISA pays out. A £100,000 portfolio yielding 2% pays £2,000 a year in dividends, four times the dividend allowance.
| Paying in | Basic rate | Higher rate | Additional rate |
|---|---|---|---|
| £300 a month, plus £10,000 already invested | £11,800 | £20,770 | £21,602 |
| £500 a month | £15,129 | £27,097 | £28,241 |
| The full £20,000 a year | £55,089 | £102,602 | £107,406 |
From the calculator: 6% yearly return, 2% of it paid as dividends, 0.25% fees, selling everything after 20 years. Includes dividend tax, the growth it would have earned, and Capital Gains Tax.
What a Stocks and Shares ISA could be worth
Regular saving adds up, and time does most of the work. These figures assume a 6% yearly return and 0.25% in fees, starting from nothing.
| Each month | After 10 years | After 20 years | After 30 years |
|---|---|---|---|
| £100 | £16,113 | £44,529 | £94,644 |
| £250 | £40,281 | £111,322 | £236,610 |
| £500 | £80,563 | £222,644 | £473,220 |
| £1,000 | £161,126 | £445,288 | £946,439 |
| £1,667, the full allowance | £268,543 | £742,147 | £1,577,398 |
Illustrations only. Returns are not guaranteed, they vary from year to year, and you may get back less than you put in.
Our compound interest calculator shows the same effect for savings accounts and investments held outside an ISA.
Making the most of your ISA allowance
- Use it or lose it. Each year’s £20,000 allowance disappears on 5 April if you do not use it. Money already in your ISA stays tax-free.
- Monthly or lump sum. Investing a lump sum early in the tax year gives it longer to grow. Paying in monthly spreads the risk of investing just before a fall.
- Bed and ISA. If you already hold investments in a general account, you can sell them and buy them back inside your ISA. Selling can trigger Capital Gains Tax if your gains are above £3,000.
- Couples get two allowances. Each adult has their own £20,000 allowance, so a couple can shelter up to £40,000 a year.
Why fees matter in an ISA
An ISA removes tax, but not charges. Platform and fund fees come off your return every year, and like tax they compound. In the calculator’s default example, cutting fees by 0.25% a year adds about £5,389 after 20 years.
Platform fees range from nothing at app-based platforms to 0.35% a year at some traditional ones, and some cap the fee on shares and ETFs. Our UK broker fees calculator shows what each platform would charge for your pot, and our guide to the best Stocks and Shares ISAs compares the wider features.
ISA changes from April 2027
New rules start on 6 April 2027. The overall allowance stays at £20,000 and the Stocks and Shares ISA limit does not change, but:
- Cash ISAs are capped at £12,000 a year for savers under 65. From the tax year you turn 65, you can still put the full £20,000 into Cash ISAs.
- Interest on cash held in a Stocks and Shares ISA will face a flat 22% charge, paid by your ISA provider to HMRC.
- Transfers from a Stocks and Shares ISA into a Cash ISA will not be allowed. Transfers the other way are still possible.
- Money market funds will count as cash-like, so a Stocks and Shares ISA cannot be held entirely in them.
Shares, funds, ETFs, investment trusts and bonds, including gilts, are not affected.
How the calculator works
The calculator follows the same money into two accounts, month by month. In the ISA, dividends and growth stay invested with no tax. In the general account, dividends above £500 a year are taxed at your band’s dividend rate, and the general account figure assumes you sell everything at the end and pay Capital Gains Tax on gains above £3,000.
- Returns are steady. Real returns rise and fall, so treat the result as a guide.
- Your tax band stays the same. A large gain can push part of it into a higher rate, which the calculator does not model.
- Tax is paid from the investments. Dividend tax is taken from the general account each year, so less of your money keeps growing.
- Top-ups stop at the allowance. We cap ISA payments at £20,000 a year. Selling in stages to use the £3,000 allowance each year would lower the Capital Gains Tax, and is not modelled.
Tax rates and allowances are for 2026 to 2027, checked against GOV.UK on 21 October 2026:
- ISA allowance and tax treatment: GOV.UK: Individual Savings Accounts
- Dividend allowance and rates: GOV.UK: Tax on dividends
- Capital Gains Tax rates: GOV.UK: Capital Gains Tax rates
- Capital Gains Tax allowance: GOV.UK: Capital Gains Tax allowances
- ISA changes from April 2027: HMRC: ISA reform 2027 factsheet
Frequently asked questions
How much can I put in a Stocks and Shares ISA?
Up to £20,000 in the 2026 to 2027 tax year, which runs from 6 April 2026 to 5 April 2027. The £20,000 covers all your ISAs together, so you can put it all in one Stocks and Shares ISA or split it across several ISAs. Any allowance you do not use is lost at the end of the tax year.
Is a Stocks and Shares ISA tax-free?
Yes. You pay no UK tax on dividends, interest or capital gains from investments held in an ISA, and you do not need to report them on a tax return. From 6 April 2027, interest paid on uninvested cash held in a Stocks and Shares ISA will face a flat 22% charge, collected by your ISA provider.
How much will my ISA be worth in 20 years?
It depends on what you pay in and how your investments perform. At a 6% yearly return with 0.25% fees, £250 a month grows to about £111,322 after 20 years, from £60,000 paid in. £500 a month grows to about £222,644. Returns are not guaranteed and can be lower, or negative in some years.
How much tax does an ISA save?
With £10,000 already invested and £300 a month added for 20 years at a 6% return, an ISA saves about £11,800 for a basic rate taxpayer and £20,770 for a higher rate taxpayer, compared with the same investments in a general account. The saving comes from dividend tax along the way and Capital Gains Tax when you sell.
Can I have more than one Stocks and Shares ISA?
Yes. You can split your £20,000 allowance across more than one ISA, including more than one Stocks and Shares ISA in the same tax year, as long as the total you pay in stays within £20,000.
What happens if I do not use my ISA allowance?
It is lost. The allowance resets on 6 April each year and unused allowance does not carry over, though money already in your ISA stays tax-free for as long as you keep it there.
Can I lose money in a Stocks and Shares ISA?
Yes. The ISA protects you from tax, not from falls in value. The investments inside it can go down as well as up and you may get back less than you put in, especially over short periods.
What changes for ISAs in April 2027?
From 6 April 2027 the overall ISA allowance stays at £20,000, but savers under 65 can put no more than £12,000 of it into Cash ISAs. The Stocks and Shares ISA limit does not change. Transfers from a Stocks and Shares ISA into a Cash ISA will not be allowed, and interest on cash held inside a Stocks and Shares ISA will face a 22% charge.