UK Tax-Free Savings Allowances 2025 — ISA, Pension, NS&I

ISAs — one £20,000 allowance, several account types

The overall ISA allowance is £20,000 a tax year, frozen since 2017/18 and confirmed frozen through April 2031. This is a single combined limit across all your ISAs in a year — Cash ISA, Stocks & Shares ISA, Innovative Finance ISA, and Lifetime ISA together, not £20,000 for each type separately. Interest, dividends and capital gains inside any ISA are entirely free of UK tax and do not need to be declared.

Lifetime ISA — a subset of the £20,000, with a government top-up

The Lifetime ISA (LISA) allows up to £4,000 a year, which counts towards, rather than sitting on top of, the overall £20,000 ISA limit — putting £4,000 into a LISA leaves £16,000 of headroom for other ISAs in the same year. The government adds a 25% bonus on top of what you contribute, up to £1,000 a year on the maximum £4,000 contribution. You must make your first LISA payment before turning 40. Withdrawals are only penalty-free for a first home purchase or from age 60 — an early withdrawal outside those circumstances triggers a government withdrawal charge that can claw back more than just the bonus.

Pensions — tax relief, not simply "tax-free"

A pension works differently from an ISA: contributions attract Income Tax relief at your marginal rate (so a higher-rate taxpayer effectively gets more relief per pound contributed than a basic-rate taxpayer), rather than the money simply never being taxed. Growth inside the pension is largely free of Income Tax and Capital Gains Tax while it stays invested, but — unlike an ISA — withdrawals in retirement are generally taxable (beyond the tax-free lump sum available at the point of taking benefits), which is a materially different structure from an ISA's fully tax-free withdrawals at any time.

NS&I Premium Bonds — tax-free prizes, not tax-free growth

Premium Bonds pay no interest at all; instead, you're entered into a monthly prize draw with prizes ranging from £25 up to £1 million. Every prize is entirely free of Income Tax and Capital Gains Tax, regardless of size — a £1 million prize is exactly as tax-free as a £25 one. There is a maximum holding of £50,000 per person; you cannot buy your way to a larger prize pool beyond that ceiling.

Worked example

A saver puts £4,000 into a Lifetime ISA and £10,000 into a Stocks & Shares ISA in the same tax year.

• LISA government bonus: £4,000 × 25% = £1,000
• Combined ISA subscriptions for the year: £4,000 + £10,000 = £14,000
• Remaining ISA headroom for the year: £20,000 − £14,000 = £6,000, available in a Cash ISA, an Innovative Finance ISA, or added to either of the two accounts already used.

The £1,000 government bonus does not count against the £20,000 ISA limit — the limit applies to what the saver personally subscribes, not to the government top-up added afterward.

FAQ

Q: If I put £4,000 into a LISA, do I still have a separate £4,000-or-more allowance for other ISAs? A: No — the LISA contribution counts inside the same overall £20,000 limit, leaving £16,000 (before any other ISA use) rather than adding a fresh allowance on top.

Q: Are pension withdrawals tax-free like ISA withdrawals? A: No — beyond the tax-free lump sum available when you start taking benefits, ongoing pension withdrawals in retirement are generally taxable as income, unlike an ISA where withdrawals at any time are entirely tax-free.

Q: Can I hold more than £50,000 in Premium Bonds to increase my prize chances? A: No — £50,000 is the maximum holding per person; you cannot exceed that limit regardless of how much you'd like to invest.

Sources

Figures verified against HMRC/NS&I guidance as of 30 July 2026:

• gov.uk / HMRC — ISA allowance guidance (£20,000 overall limit, frozen since 2017/18 and confirmed frozen through April 2031, combined across ISA types)
• gov.uk — Lifetime ISA rules (£4,000 within the overall limit, 25% government bonus up to £1,000, under-40 first-payment rule, withdrawal charge outside qualifying circumstances)
• gov.uk / MoneyHelper — Pension tax relief (relief at marginal rate on contributions; taxable withdrawals beyond the tax-free lump sum, unlike an ISA)
• NS&I — Premium Bonds (all prizes free of Income Tax and Capital Gains Tax; £50,000 maximum holding per person)