Which is the Best ISA for me?

Asking “which ISA is best for me” is really about matching the ISA type to your goal, time horizon and tolerance for risk. You can choose from five main different ISAs, each with different rules, allowances and risks.

Below we explain how ISAs work, what has changed for 2025,26, and how to decide which ISA or mix of ISAs suits you.

Although the ISA system can appear complex, with five different types available, the principle is straightforward. An ISA is simply a savings or investment account that allows your money to grow free from UK income tax, dividend tax and capital gains tax.

Outside an ISA, profits above the annual capital gains allowance and income above the dividend allowance are taxable. By holding investments within an ISA, these charges do not apply.

For the 2025/26 tax year, ISA allowance is £20,000 in total, spread across any combination of ISAs. Each ISA type is designed to be tax-efficient, but it is important to note that ISA balances are normally included in your estate for inheritance tax purposes. Only transfers to a spouse or civil partner via the Additional Permitted Subscription rules are exempt.

INVEST IN A STOCKS AND SHARES ISA WITH MONEYFARM

What types of ISAs are there?

The different types of individual savings accounts available are:

• Cash ISA
• Stocks and shares ISA
• Lifetime ISA
• Innovative Finance ISA
• Junior ISA.

Each ISA account can play a part in reliable financial planning according to your individual circumstances and financial goals, but to apply for any of the types of ISA, you must be a UK resident.

The table below summarises the main characteristics of each ISA type.

Cash ISA

Cash ISAs are tax-free savings accounts, and they are an attractive choice for savers looking to save for short-term needs and emergencies. A cash ISA is also an option if you’re looking to build a nest egg for retirement. However, interest rates are not as high as with some other types of ISA accounts, so it might not be the best ISA, but you can withdraw money early and replace funds from some cash ISAs, such as flexible cash ISA, without affecting your annual ISA allowance limit.

The Cash ISA interest rate is lower than inflation or investment-based ISAs over time., and that is because this type of ISA is less risky. If you are totally risk averse,  the Cash ISA could be the best ISA for you.

Since April 2024, you can contribute to more than one ISA of the same type in a single tax year, and you are also allowed to transfer part of your ISA balance to another provider if required.You can choose between easy-access cash ISAs and fixed-rate cash ISAs. Easy access cash ISA can be the best ISA for people who want instant access to their money, while fixed-rate cash ISA might be the best ISA for people who want short-term maturity and better interest rates. You do need to be aware, however, that the better interest rate comes at a price, and that price is having your money locked away generally for between one and seven years. If you do have to access your money, it will cost you.

If you are saving for your child’s education, the best ISA to choose would be the tax-free Junior cash ISA account. Cash ISAs are among the best ISA accounts for people with low-risk appetites. Different cash ISA providers offer different interest rates. Finding providers with the best ISA rates is essential if you want to open a cash ISA account.

Lifetime ISA

A Lifetime ISA could be the best type of ISA if you are saving for a deposit to buy your first home. It can also be used to save for later life, with funds accessible from age 60.  Adults under the age of 40 can open up a lifetime ISA. You can contribute up to age 50, and withdrawals are tax-free if used for a first home or after age 60.  The government adds 25% (up to £1,000 per year) to all investments made inside a LISA. With the government stimulus, this means that if you put £4,000 in your LISA every tax year, you’ll get a £1,000 tax-free bonus.

You can choose whether to invest in stocks and shares or cash via lifetime ISAs. If you are saving for your first home, a Lifetime ISA can be used for properties worth up to £450,000.  If, however, you are saving long-term for retirement, a stocks and shares LISA could be a better option.

The LISA has its own annual contribution cap of £4,000, which counts towards the overall £20,000 ISA allowance. 

Innovative Finance ISA

Innovative Finance ISAs are a great way to invest in peer-to-peer lending or crowdfunding using your tax-free ISA allowance. There is a £20,000 ISA limit on an innovative finance ISA, but remember, if there are other ISAs in your name, they all contribute to this amount.

Returns can be higher than cash savings, but they depend on borrowers meeting repayments, and investments are not protected by the FSCS financial compensation schemes.

Even the strongest platforms involve higher risk compared with Cash or Stocks and Shares ISAs..

Stocks and shares ISA

Stocks and shares ISAs are tax-efficient accounts that act as wrappers for your investments. You can invest in companies directly or through managed funds. Managed funds are pooled arrangements run by professionals who manage money for other people. This type of investment ISA puts your money in stocks, bonds, funds, and other assets. As a result, it is one of the best ISA options as it can be used to diversify investments.

Stocks and shares ISAs are riskier than some other types of ISA accounts, but they offer higher returns. Since April 2024, you can contribute to more than one Stocks and Shares ISA in the same tax year, within the overall allowance.  Stocks and shares ISAs come with tax benefits: income tax does not apply to the interest earned on bonds and other investment products held inside an ISA. If you keep your investment in this ISA only, there’s also no need to pay tax on any dividends.

No capital gains tax applies, so you don’t need to report profits to HMRC, although keeping records can help you track performance. 

The annual allowance of £20,000 does apply to stocks and shares ISAs. In other words, each tax year, you can invest up to £20,000 into your stocks and shares ISA, or you can spread your allowance between the other types of ISA accounts if you prefer.

If savings rates are too low for your goals, you may prefer to invest in the financial markets for potential growth. 

As usual, before starting investing, you should pay off any expensive debt, have three months of outgoings saved up in case of an emergency, and have a longer time horizon in mind, but once you begin, you can begin planning for the future with a degree of confidence. Investing for your retirement, for example, is an excellent choice.

Due to the fundamental dynamics of the financial markets and the types of ISA variations available, you need to be able to take on some risk if you want to grow your money for the future. For goals within the next two years, a Cash ISA may be more suitable, as Stocks and Shares ISAs carry market risk. 

Time can be your best friend when investing – many people hunt for that elusive edge that will help them reach their goals, the ‘holy grail’, but all you need is time. A long investment horizon enables you to tolerate volatility and benefit from tax-free growth on gains. 

Junior ISA

A Junior ISA is a long-term savings or investment account for children under the age of 18. It carries the same tax advantages as other ISAs, with all interest, dividends and capital gains sheltered from tax.

From the age of 16 the young person can manage the account, although funds remain locked until they reach 18. At that point, the Junior ISA automatically converts into an adult ISA in their name.

There are two types of Junior ISA:

• Cash Junior ISA, that pays tax-free interest and offers a secure way to save;
• Stocks and Shares Junior ISA invests in funds, equities or bonds, with the potential for higher long-term growth but with investment risk.

The allowance for the 2025/26 tax year is £9,000 per child. This limit is separate from the adult ISA allowance, so it does not reduce the £20,000 that parents may contribute to their own ISAs.

Junior ISAs are intended to help families build a financial foundation for a child’s future, whether that is university, a first home or another significant milestone.

Five factors to consider for an effective ISA account comparison

To help with the best ISA account comparison, here are the five things you should look for to find the best ISA for you.

1. Get Professional Investment Advice

Stocks and shares ISAs can be DIY vehicles, which means you’ll have to manage your investments yourself. You have the flexibility to choose what goes into your portfolio. However, you are responsible for planning your investment strategy, outlining your asset allocation, and researching the investments that best reflect you to go into your portfolio.

Many people like this freedom, but for those who are too busy to manage their investments by themselves or lack the financial confidence to oversee the family finances, the best investment ISA is on that offers professional investment advice that can help you to make better decisions with your money.

Making the right decisions for your financial situation means you’re more likely to reach your financial goals, whatever they may be, and could help you attain a better quality of life.

Innovation in the financial services sector means that people can now access investment advice on the best ISA options and other investment opportunities at the touch of a button and at a fraction of the price offered by traditional industry leaders. It can also be delivered anywhere and anytime, whether on your daily commute, over a glass of wine once the kids are in bed, or over brunch on the weekend.

Investment advice helps people invest in a way that’s right for them. Understanding your financial background, your appetite for risk, and your financial goals means you can build your investment portfolio in the best way to achieve these.

At Moneyfarm, our technology allows us to provide expert digital investment advice on the best ISA accounts for a fraction of the cost, with ongoing suitability tests that ensure your investments continue to put you in the best position to reach your goals for as long as you invest with us. That’s why we advocate that the best investment ISA is the one we at Moneyfarm offer.

2. ISA portfolios fully managed by specialists

Once you know what your stocks and shares ISA portfolio should look like in terms of asset allocation, how do you decide which investments to put in it?

Once you’ve got your portfolio set up, do you have the time and discipline to manage your portfolio to ensure you’re on the right track? Adults can invest up to £20,000 per tax year across their ISAs. Within this, contributions to a Lifetime ISA are capped at £4,000. Junior ISAs have a separate allowance of £9,000 per child, which does not affect the adult ISA limit.

Many people love the thrill and responsibility of managing their investments themselves, but others just don’t have the time, skill, or knowledge to do their financial future justice. That’s why many prefer the experts to do it for them, so they can focus on the important things in life, knowing that a team of professionals with a track record of performance have their best ISA investments under control.

At Moneyfarm, the strategy for our best investment ISA is built around our strategic asset allocation team, which takes a 10-year view on market trends. While we can broadly forecast where we’re going to be in a decade, we know the route there might not be smooth, so we complement our strategic strategy with a tactical overlay to take advantage of any new opportunities that arise along the way.

3. Don’t let fees eat into your returns

Traditionally, having an expert manage your money for you has come at a high cost. The more you pay in fees, the more your investments have to grow, even in the best ISA to allow you to cover these costs and break even, and the more growth you’ll need to attain to make a profit.

It doesn’t help that pricing structures have also traditionally been convoluted, with many investors unaware of how much they’re actually paying in fees. All investors should be able to access cost-effective investment advice and discretionary fund management to help them reach their financial goals.

Thanks to changes in the regulatory landscape, wealth managers now have to adopt Moneyfarm’s philosophy of transparency and simplicity, although look out for exit fees as these still aren’t clear on some platforms. When you invest with Moneyfarm, you’re charged one flat fee across all of your investments with us, a percentage that reduces the more you invest or the more your savings grow.

4. Free transfers

Whether you’ve built up a small fortune in a cash ISA or have several different stocks and shares ISAs accumulated over the years, many investors like to transfer their various ISAs into the best type of ISA to benefit from cheaper fees and to manage their investments more efficiently.

When you want to move your money from one ISA provider – whether it be a bank, an asset manager or an investment platform – to another provider, it’s important you transfer your money correctly. You don’t want to take your money out of your ISA wrappers because you will lose the tax-free benefits you’ve accrued over the years unless you transfer it to another top ISA using the right transfer process.

ISA transfers have become hassle-free and straightforward for investors looking to make their money work harder for them. However, it’s important you understand whether you’ll be charged anything to move providers, as this could impact your decision.

Whether hidden or not, costs like transfer fees can eat into an investor’s return. At Moneyfarm, we believe investors should be able to transfer in and out for free – and you can. One of our founding philosophies was to be transparent over costs, which is why we don’t have any hidden charges.

5. Invest Regularly

When you’ve got a lump sum to invest, you’ll want to get it working harder for you as soon as possible, but it’s important you supplement this with a regular investment to your best ISA, or ISAs if you have several types of ISA.

In addition to increasing the amount you have invested in your ISA, it also averages out the amount you spend on investment over time, potentially lowering it during times of volatility. Little and often is a mantra that’s as effective as it is straightforward when it comes to investing.

That means you could end up paying less for an asset, which makes it that much easier to turn a profit.

Regular investment plans are a great way to benefit from pound cost averaging, but make sure you know how much setting up and running a standard investment plan will cost you. At Moneyfarm, it doesn’t cost a thing to deposit money in your account or set up a standing order.

This means you keep more of your money invested in the market, which can help you benefit from compound interest – where your earnings are reinvested to earn their own return. Albert Einstein called this the eighth wonder of the world, and it can make a real difference over the long run.

Which ISA to choose?

Which is the best ISA is subjective. At Moneyfarm, we’ve built our investment strategy around the stocks and shares ISA and we have recently begun to offer a cash ISA. Of all the types of ISA options, including the cash ISA, lifetime ISA and Junior ISA, when it comes to asking, “Which ISA is best for me?” – we suggest it’s the investment ISA for people who are not risk averse and a cash ISA for those who need a shorter term savings option.

The minimum age at which you can open a cash or a stocks-and-shares ISA is now the same. In most cases you must be 18 or over to open either type of adult ISA. The only exception is a transitional rule: anyone who was already 16 or 17 on 5 April 2024 may open (or keep contributing to) one cash ISA until they reach 18.

A short while ago, we performed a 10-year study comparing the performance of a hypothetical investment ISA vs that of a cash ISA. Against the backdrop of a low-interest environment, it’s clear to us that a well-diversified and actively managed stocks and shares ISA is the best ISA to use to help customers beat inflation and protect and grow their wealth for the long term.

You don’t need to be an expert to invest in stock markets and stocks and shares, and you certainly don’t need hundreds of thousands of pounds to do it. Digital technology has democratised the industry to such a degree that almost anyone can consider supplementing their futures with a well-thought-out investment plan. So, you’ll want to choose an ISA provider and a wealth manager that utilises technology to make the process as frictionless and transparent as possible.

Please refer to our comprehensive ISA guide to gain a more thorough understanding of different types of ISAs and how to invest in the best ISA account. 

Comparison Table for the best ISAs

How to switch ISA provider

As we have discussed, people switch ISA providers for several reasons. Whether their current provider isn’t giving them the returns they need or they want to have all their investments in one, easy-to-manage place, choosing the best ISA for you may involve transferring—indeed, transferring an ISA is more common than you might think.

If you’re unsure whether it’s time to move your ISA, here’s a simple checklist.

• Is the return on your ISA lower than inflation? The purchasing power of your savings could be shrinking over time. Which ISA is best You might want to think about switching to our best investment ISA – our stocks and shares ISA
• Not finding the time to manage your money? You could be missing out on the important things in life because it’s taking you hours to manage your savings or investments. A provider like Moneyfarm does it all for you.
• Are fees eating into your returns? Your ISA could be costing you a small fortune, or you might not even be sure what you’re paying. Fees should be simple and low-cost.

You can transfer your new or existing ISA to Moneyfarm’s stocks and shares ISA or cash ISA for a tailored investment experience. We offer some of the best variable rate ISA accounts. Under the rules that took effect on 6 April 2024, you may now transfer all or part of the money you have subscribed in the current tax year, as well as any funds from previous years; you no longer have to move the full balance unless you choose to. (Some providers still set their own limits, so always check their transfer policy.) Any amount already paid in this tax year continues to count toward your overall £20,000 annual ISA allowance.

It can take up to 30 days to transfer your stocks and shares ISA from your existing provider to Moneyfarm. We won’t charge you anything to transfer to or from Moneyfarm, but your current provider might.

To initiate a transfer with any of the different types of ISA accounts into the best ISA for you, all you have to do is get in touch with a member of our investment advisory team. They’ll be happy to guide you through the entire process from start to finish, and they’ll take care of the admin for you. Get peace of mind that your ISA is in the right hands when you switch to Moneyfarm. The ISA types we offer are all protected by the Financial Services Compensation Scheme (FSCS).

Key Takeaways

• The best ISA depends on your goals, risk tolerance, and investment timeframe.
• The annual ISA allowance for 2025/26 is £20,000, which can be split across multiple ISAs (except Lifetime and Junior ISAs, which have separate limits).
• Cash ISAs are low-risk and suitable for short-term savings.
• Stocks and Shares ISAs are higher risk but offer greater long-term growth potential and full tax efficiency on gains and dividends.
• Lifetime ISAs provide a 25% government bonus for first-time home buyers and retirement savings, with strict withdrawal rules.
• You can switch providers to seek better rates or features, but transfers must be made formally to preserve tax benefits.

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