Key facts
- Interest earned within a cash Isa does not count towards the annual £20,000 Isa allowance.
- The £20,000 Isa allowance applies only to new money paid into an Isa in the tax year.
- Transfers between Isas do not affect the allowance if providers handle them and no withdrawals are made.
Individual savings accounts (Isas) in the UK offer tax-free interest and growth, making them a popular savings vehicle. Understanding how the annual allowance works is crucial for maximizing tax benefits. This query addresses a common point of confusion regarding whether earned interest impacts the amount that can be contributed each tax year.