Account types: ISAs, LISAs, JISAs and SIPPs explained

We explain individual savings accounts, lifetime ISAs, junior ISAs and self-invested personal pensions

When you open an investment platform, you’ll have options to choose between lots of different account types, all with their own acronyms and no obvious differentiation between them. Mostly, you’ll be able to access all of the same investments with all of the account types you’re offered, but there are some key differences that you’ll want to know before choosing which one you want to open.

What's the difference between these account types?

The main difference between them is tax — your choice of account determines whether you’re taxed, any allowances you’ll have, whether you’ll get a top up from the government, how much that top up could be and when you’ll be able to see your money again. We’ve explained the key information for each account type below.

Investment tax and allowances

Everyone has investing and savings allowances that reduces or diminishes the amount of tax you’ll need to pay on either your deposits or your profits. Here are some of the key ones.
You don’t have to have specific account types to receive the following allowances:

  • Capital gains tax allowance. This is the amount of profit you can earn in a tax year without having to pay tax on it. The allowance is £12,300, so any profits you earn over £12,300 will be taxable.
  • Dividend allowance. This is the amount that you can receive in dividends in each year without paying any tax. You get £2,000 in each tax year.

The following allowances are related to specific account types, which we explain below.

  • ISA allowance. This is the total amount that you can pay into your combined ISAs in each tax year. You get £20,000 in each tax year. If you stay within your allowance, this would mean you wouldn’t need to pay capital gains tax or dividend tax. LISA allowance. This is the amount you can pay into a lifetime ISA in each tax year to receive a government top-up on. You can pay £4,000 into your LISA each year.
  • Pension annual allowance. This is the amount that you can contribute to your pension in each tax year. This is 100% of your annual income up to £40,000 each year. You’ll receive a top up into your account from tax relief.
  • Pension lifetime allowance. This is the amount that you can pay into your pension in your lifetime without having to pay tax. The lifetime allowance is £1,073,100.

All of these allowances are correct in the 2022/2023 tax year.


An individual savings account (ISA) lets you save or invest up to £20,000 without having to pay any tax on your profits. There are a few different types of ISA, including stocks and shares, cash and lifetime.

The stocks and shares ISA lets you invest your savings. When comparing investment accounts with a provider, you’ll likely have a choice between a general investment account and an ISA. The difference between them is that the ISA has a tax-free allowance and the general investment account does not. This means that if you’re opening your first investment account, it could be wise to choose an ISA.

A cash ISA is a type of savings account, usually with a fixed interest rate. You’ll be able to pay in up to your ISA allowance (£20,000) in each tax year but instead of investing in stocks and shares, you’ll receive interest on your savings.

A lifetime ISA (LISA) is a type of ISA that gives you a government top up to go towards your first home or retirement. We explain this in more detail below.

We have a whole guide on ISAs if you’d like to learn more about the different types.


You can have a lifetime stocks and shares ISA or a lifetime cash ISA. As with ISAs, a stocks and shares LISA lets you invest your savings, while a cash LISA is simply a type of savings account.

With a lifetime ISA, you can save for either your first home or retirement. Every tax year, you can deposit up to £4,000 and receive up to £1,000 (25%) from the government. You can open a LISA if you’re between 18 and 40 and you can pay into a LISA and earn the bonus until you are 50.

You can’t withdraw your funds without incurring a fee unless you are using it to purchase a house or you’ve turned 60. You’re also allowed to withdraw if you are terminally ill with less than 12 months to live.

We have a whole guide on lifetime ISAs if you want more information.


A junior ISA is an ISA for the little ones. Like with LISAs, you can get both a stocks and shares JISA and a cash JISA.

The child’s parent can open their child a JISA and anyone can pay into it. The money that’s paid in will be locked away until the child turns 18, when they’ll be able to withdraw from it.

Your child has a JISA allowance of 9k, so any money paid into their ISA in each year cannot exceed this amount.

If you think you’d like to know more about JISAs and see what’s on offer, we have a dedicated guide.


The innovative finance ISA is slightly different to its cousins as it’s defined by the types of investments it holds. You can use your ISA allowance to invest in an innovative finance ISA, so you can put up to £20,000 into it in each tax year without paying any tax on your profits, although this allowance is inclusive of anything you hold in a cash or stocks and shares ISA as well.

Innovative finance ISAs invest in peer-to-peer loans, which is where investors are matched up with borrowers. As the investor, you’d be lending money to those who want to borrow and you’d receive interest for doing so.

Peer-to-peer platforms aren’t protected by the Financial Services Compensation Scheme (FSCS) and returns are not guaranteed.

Private pensions and SIPPs

Private pensions and self-invested private pensions are accounts that you can use to save up for your retirement. These let you save up to 100% of your annual income (up to £40,000) in each tax year. There’s also a lifetime allowance of £1,073,100.

You’ll get tax relief on your payments into a private pension, which means you’ll get back tax paid on the income — if you’re a standard rate taxpayer your pension provider claims the tax back automatically and adds it to your pot, known as relief at source. Higher rate taxpayers need to claim the tax relief.
You can’t start withdrawing from your private pension until you turn 55.

We have a detailed guide on pensions if you’d like to learn more.


Allowance£20,000 per tax year100% of earnings up to £40,000 / tax year.£4,000 per tax year
Tax reliefFree from capital gains taxTax relief at source25% top up from the government
Withdrawal rulesWithdraw whenever you likeWithdraw from 55 years.Withdraw at purchase of first home or age 60.
Tax on withdrawalsNoYesNo
What it holdsInvestments or cashInvestments or cashInvestments or cash

Bottom line: Which account type should I choose?

The account you’ll need to choose will depend on what you’re saving for. Typically, if you’ve not saved or invested much before, you’d probably want an ISA — check that you’ve definitely not paid into any ISAs in the current tax year before you get started. If you’re buying a house, you might want to consider the LISA, but ensure that you’ll be buying a home within its guidelines first. For retirement, a LISA or a pension would work.

All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.

More guides on Finder

  • How to buy EnSilica (ENSI) shares

    Learn more about EnSilica’s recent performance and where you can invest in EnSilica shares. We also run through some helpful rules of thumb for any investor

  • Ways to invest in Chelsea Football Club

    Chelsea FC isn’t publicly listed, so you can’t invest directly in the club – however, there are ways that you can invest indirectly.

  • How to buy Ithaca Energy (ITH) shares

    Everything we know about the Ithaca Energy IPO, plus information on how to buy shares.

  • How to open a stocks and shares ISA

    Looking to invest in an ISA and not sure how to open an account? Read our guide as we look what types are available and how to invest.

  • Do I have to pay tax on overseas investments?

    Thinking of expanding your investment portfolio overseas? Make sure you understand the tax rules for overseas investments.

  • Investing in overseas shares

    Investing in overseas markets can diversify your investment portfolio, and potentially reduce your overall investment risk.

  • Stock splits explained

    Find out exactly what a stock split and a reverse stock split means, why they happen and what impact it has on the price of shares.

  • Tax on investments

    We explain the different types of tax you may need to pay on investments, and the allowances that can help you keep investment tax to a minimum.

  • Investing in emerging markets

    Find out how to invest in emerging markets and learn about the best ETFs, funds and investment trusts available to UK investors.

  • How to buy RumbleON (RMBL) shares in the UK

    Ever wondered how to buy shares in RumbleON? We explain how and compare a range of providers that can give you access to many brands, including RumbleON.

Ask an Expert

You are about to post a question on

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and Terms of Use.

Questions and responses on are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
Go to site