ISAs explained — for people on a film set, not in the City
An ISA is one of the simplest, most powerful financial tools you have as a UK freelancer. Here's how it works, which type to use, and why it should be the first place your savings go.
What is an ISA?
ISA stands for Individual Savings Account. The key thing to know: any money inside an ISA grows completely tax-free. No income tax on interest. No capital gains tax when your investments go up in value.
Outside an ISA, if you earn interest on savings or profit from investments, HMRC wants a cut. Inside an ISA, they don't. That's the whole deal.
The annual allowance
You can put up to £20,000 per tax year into ISAs. The tax year runs from 6 April to 5 April.
Unused allowance doesn't roll over — if you don't use it this year, it's gone. You can split the £20,000 across different types of ISA, as long as the total doesn't exceed the limit.
The two types that matter for freelancers
Cash ISA
Best for: Emergency fundWorks exactly like a regular savings account, but the interest you earn is completely tax-free. Easy access versions let you withdraw at any time.
- +Your money is safe — covered by FSCS up to £85,000
- +Can access the money whenever you need it
- –Returns are limited to the interest rate — won't grow much in real terms over the long run
Stocks & Shares ISA
Best for: Long-term wealthYou invest your money in funds or shares. If they grow in value, you pay no capital gains tax. Any dividends or interest are tax-free too.
- +Historically much better returns than cash over 10+ years
- +Zero tax on growth — all the upside stays with you
- –Value can go down as well as up — not ideal for money you might need soon
Why this matters more for freelancers
When you're employed, your employer pays into your pension alongside you. As a freelancer, there's no one topping up your savings but you. That means you need to be smarter about where you put your money.
The ISA is one of the few tax-efficient tools you have complete control over. No rules about when you can access it (unlike a pension). No employer to ask permission from. You open it, you fund it, you benefit from it.
The rule of thumb: your ISA should be the first place your savings go — before any taxable account. Fill this before anything else.
How to get started
Build your emergency fund first
Open a Cash ISA and put 3–6 months of essential spending in it. This is your financial cushion between jobs — keep it separate and don't touch it.
Open a Stocks & Shares ISA
Once your emergency fund is sorted, any extra savings should go here. Pick a low-cost global index fund and let it sit. You don't need to be an expert — simple and consistent beats clever.
Make it automatic
Set up a standing order the day after you pay yourself. Pay your ISA before you can think about spending the money on anything else.
Thinking about the long term?
ISAs are great, but pensions have their own advantages — especially for higher earners. Use our pension calculator to see what you need to save.
Pension Calculator