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Taxation (UK) · Property and investment income

Individual Savings Accounts (ISAs) for ACCA TX-UK

Updated 11 October 2026 · Fact-checked

An ISA is a tax-efficient investment account. For the Finance Act 2025 exams, the overall investment limit is £20,000 a tax year. Interest, dividends and gains inside an ISA are exempt from income tax and capital gains tax. So you leave them out of the tax computation and out of CGT gains.

Understand Individual Savings Accounts (ISAs)

An individual savings account (ISA) is a wrapper around savings or investments. You put money in, up to an annual limit. Whatever the money earns inside the wrapper is free of UK tax.

The ACCA tax tables give one figure you must know: the overall investment limit is £20,000. This is the most you can subscribe across all your ISAs in one tax year. Think of it as one pot of £20,000 that you can split between ISA types. You cannot get £20,000 in each.

The tax benefit has three parts. Interest from a cash ISA is not taxable income. Dividends from shares held in a stocks and shares ISA are not taxable income. Gains on disposing of investments held in the ISA are exempt from capital gains tax. The ISA does not give tax relief on the money you pay in. You invest out of income that has already been taxed.

The common types are the cash ISA, the stocks and shares ISA and the lifetime ISA. The examinable documents give only the £20,000 overall limit. Do not quote sub-limits or lifetime ISA rules from memory unless the question gives them. Focus on the main exam skill: spotting that ISA income and gains are exempt, and removing them from a computation.

ISAs also matter in tax planning. They suit investors who have used their savings nil rate band, dividend nil rate band or annual exempt amount. They are a simple, low-risk way to shelter growth.

Key rules to remember

Overall ISA investment limit
Maximum subscription per tax year = £20,000
This is the total across all ISA types. It is given in the tax tables, but know it.
Tax treatment inside an ISA
Interest, dividends and capital gains within an ISA = exempt
Exclude them from taxable income and from chargeable gains. Do not use up nil rate bands or the annual exempt amount on them.
Remaining subscription room
Unused limit = £20,000 − amounts already subscribed in the tax year
Use this when a question asks how much more can be invested.

How to solve Individual Savings Accounts (ISAs) questions

Use this method for any exam question on ISAs, whether in an objective test or a written planning answer.

  1. 1Identify the tax year and check that the question is within the Finance Act 2025 rules you were given.
  2. 2List all ISA subscriptions already made in that tax year, across every ISA type.
  3. 3Subtract the total from £20,000 to find the remaining room.
  4. 4Mark any interest, dividends or gains that arise inside an ISA as exempt.
  5. 5Remove those exempt items from the income tax computation or the CGT computation.
  6. 6Tax the income and gains that are outside ISAs as normal, using the usual rates and nil rate bands.
  7. 7If the question asks for advice, explain that an ISA shelters income and gains but gives no relief on the money paid in.

Quickest way: Two-second ISA check

When to use it: Use this in Section A and Section B objective questions where ISA income is one of several items in a list.

  1. Scan the data for the word ISA.
  2. Cross out any interest, dividends or gains from an ISA. They are exempt.
  3. Check the subscription total against £20,000.
  4. Carry on with the rest of the computation.

Common mistakes in Individual Savings Accounts (ISAs)

  • Including ISA interest or dividends in taxable income.

    The figures sit in a list of savings and dividend income and look like all the others.

    Fix: Underline the word ISA in the question. Treat anything earned within it as exempt and leave it out.

  • Thinking each ISA type has its own £20,000 limit.

    Students see several ISA types and assume separate limits.

    Fix: Remember that £20,000 is the overall limit across all ISAs in the tax year.

  • Giving tax relief on money paid into an ISA.

    Students confuse ISAs with pension contributions.

    Fix: Contributions to an ISA get no relief. The benefit is on the growth and income only.

  • Using the annual exempt amount or nil rate bands against ISA income and gains.

    Students include the item first and then try to shelter it.

    Fix: Exclude exempt items before you start. Keep the bands for income and gains outside the ISA.

  • Quoting ISA rules or sub-limits that are not in the tax tables.

    Students rely on memory of general news or old rules.

    Fix: Use the £20,000 overall limit and any figures the question gives. Do not add other detail.

Worked examples

Example 1

In the tax year, Priya subscribes £8,000 to a cash ISA and £7,500 to a stocks and shares ISA. How much more can she subscribe to ISAs in the same tax year?

Show the solution
  1. Total subscribed so far: £8,000 + £7,500 = £15,500.
  2. Overall limit: £20,000.
  3. Remaining room: £20,000 − £15,500 = £4,500.

Answer: £4,500 more can be subscribed, to any ISA type.

Example 2

Tom has employment income of £30,570 (all in the tax year, after the personal allowance is considered below). He also receives £600 interest from a building society account, £900 interest from a cash ISA and £700 dividends from shares held in a stocks and shares ISA. His personal allowance is £12,570. Calculate his taxable income and say which income is taxable.

Show the solution
  1. The ISA interest of £900 and the ISA dividends of £700 are exempt. Exclude them.
  2. Taxable non-ISA income: £30,570 employment + £600 savings interest = £31,170.
  3. Deduct the personal allowance: £31,170 − £12,570 = £18,600 taxable income.
  4. The savings income of £600 is covered by the £1,000 savings nil rate band for a basic rate taxpayer, so it is taxed at 0%.
  5. Income tax on £18,000 non-savings income (£18,600 − £600) at 20% = £3,600.

Answer: Taxable income is £18,600, of which £600 is savings income taxed at 0%. Income tax is £3,600. The ISA interest and dividends are exempt and add no tax.

Exam tips

  • In objective tests, an ISA item is often a distractor. Exclude it first.
  • Remember the £20,000 limit is one total across all ISA types, not per type.
  • In a planning answer, say that ISAs give no relief on money paid in but shelter income and gains from tax.
  • Do not use nil rate bands or the annual exempt amount on ISA items. Save them for income and gains outside the ISA.
  • Only use ISA figures that you have been given or that appear in the tax tables.

Practice questions from Property and investment income

Individual Savings Accounts (ISAs) in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Individual Savings Accounts (ISAs): frequently asked questions

What is the ISA limit in ACCA TX-UK?

The overall investment limit is £20,000 for a tax year. This is the total across all ISAs, not a limit for each type. It appears in the rates and allowances provided in the exam.

How are cash ISAs and stocks and shares ISAs taxed?

Both are tax-free on what they earn. Interest in a cash ISA is exempt from income tax. Dividends and gains in a stocks and shares ISA are exempt from income tax and capital gains tax respectively.

Do I get tax relief when I pay into an ISA?

No. You pay in from income that has already been taxed. The benefit comes from the exempt interest, dividends and gains while the money is in the ISA.

Do I need to know lifetime ISA rules for TX-UK?

The examinable tax tables give only the £20,000 overall investment limit. Be ready to explain that ISA types exist, but rely on any figures the question provides rather than adding rules from memory.