Is an ISA Halal? (2026): Cash, Stocks and Shares, Lifetime and Junior ISAs

An ISA is halal or haram depending on what you put inside it, because the ISA itself is only a tax status granted by HMRC, not a financial contract. A cash ISA at a conventional bank pays interest, which is riba. A cash ISA at Gatehouse Bank pays an expected profit rate instead (2.60% AER on its Easy Access Cash ISA on 2 October 2026) and is permissible. A stocks and shares ISA is permissible when it holds screened funds, which is what Wahed and Simply Ethical provide. Lifetime and Junior ISAs follow the same rule. The one thing to get right is the transfer: move an old ISA through the new provider's transfer form, never by withdrawing.

Why the ISA wrapper itself is neutral

gov.uk describes an ISA as a way to save or invest without paying tax on interest, income or capital gains, with four types: cash, stocks and shares, innovative finance and Lifetime. The 2026 to 2027 allowance is £20,000 across all of them, and HMRC does not care which bank or fund manager holds the money as long as the account is registered as an ISA. Nothing in the ISA rules requires interest. The rules simply exempt whatever return the account produces from tax.

That is why scholars treat the wrapper as neutral. The same tax exemption that shelters interest at a high-street bank shelters the expected profit paid by an Islamic bank, or the dividends and growth from a screened equity fund. The contract that matters is the one between you and the provider: a loan at interest, a Shariah-compliant deposit, or ownership of shares in permissible companies. Rule on that contract and you have ruled on the ISA. The halal investing hub and the halal savings accounts hub list the providers whose contracts pass that test.

The four ISA types ruled on

Two cautions on the table. First, the Gatehouse figures are the expected profit rates published on gatehousebank.com on 2 October 2026, and Gatehouse states it can change them with 30 days' notice of any reduction. Second, Simply Ethical's online service is an advised service with a minimum of £1,000, while Wahed is a discretionary manager with a £50 minimum; both hold your assets with a custodian under FCA client asset rules rather than on their own balance sheets.

Why conventional cash ISA interest is riba and expected profit is not

A conventional cash ISA is a loan from you to the bank. The bank promises to return your capital plus a fixed or variable percentage, whatever it does with the money. That promised increase on a loan is the textbook definition of riba al-nasi'ah, and the tax-free wrapper does not change the nature of the promise. It makes no difference whether the rate is called AER, gross or tax-free; the return is contractually owed on a debt.

An Islamic bank's cash ISA is not a loan. Gatehouse describes its Easy Access Cash ISA as operated under Shariah principles, meaning interest cannot be earned and the bank generates profit instead, paid as an expected profit rate that it monitors and can adjust. The capital is placed into Shariah-compliant trading or investment, and the bank shares the profit it expects to make; UK Islamic banks' savings terms provide that if the expected rate looks unlikely to be achieved the customer is told and may withdraw. In practice the shortfall has not happened: Al Rayan Bank says it monitors its investments daily to ensure they deliver the quoted rate and has always paid it since the bank was founded in 2004. Whether that reliability makes expected profit interest in disguise is a fair question, and our explainer on whether expected profit is just interest with extra steps deals with it properly. The short version is that the legal and contractual structure, not the predictability of the outcome, is what separates the two.

One change to note: Al Rayan's Instant Access Cash ISA (Issues 1, 2 and 3) now sits in the "savings accounts you can no longer open" list on alrayanbank.co.uk. Existing holders keep their accounts and can still transfer in or out using the bank's ISA Transfer Authority Form, but a new customer looking for an Islamic cash ISA in October 2026 is choosing Gatehouse.

What has to be inside a stocks and shares ISA for it to be halal

A stocks and shares ISA is a shell. Open one at a mainstream platform and leave the default fund in place and you will usually own a global tracker that holds banks, insurers, brewers, defence contractors and a bond sleeve. None of that is permissible. The ISA becomes halal when every holding passes a Shariah screen: no prohibited business activity, and debt and interest-bearing cash below the ratio limits set by the screening body the fund follows.

There are two ways to get there. The managed route is Wahed or Simply Ethical. Wahed's UK ISA page describes portfolios screened to avoid riba and non-permissible sectors, overseen by a Shariah committee, with an annual purification report; its FAQ sets the wrap fee at 1% a year on the first £250,000, falling to 0.75% between £250,000 and £1 million. Simply Ethical's ISA page lists seven risk-rated portfolios built from the HSBC Islamic Global Equity Index Fund, the Schroder Islamic Global Equity Fund, HSBC's Islamic ESG ETFs, the Franklin Global Sukuk Fund and physical gold and silver, with a tiered fee starting at 0.75% a year on the first £50,999. The self-directed route is to open an ISA at any broker and buy only screened funds yourself, which our guide to stocks and shares ISAs the halal way walks through fund by fund.

The 2026/27 allowance and the transfer rules that protect it

gov.uk sets the 2026 to 2027 ISA allowance at £20,000, which you can put into one account or split across types, with the Lifetime ISA capped at £4,000 inside that total and the Junior ISA carrying its own £9,000 limit. The tax year runs from 6 April to 5 April. You can only pay new money into one stocks and shares ISA in a tax year, though you can open a fresh one with a different provider each year.

• Open the new halal ISA first, whether that is a Gatehouse cash ISA or a Wahed or Simply Ethical stocks and shares ISA, and tell the new provider you want to transfer in.
• Complete the new provider's ISA transfer form; gov.uk is explicit that the new provider arranges the transfer, and Al Rayan's own page says the same about moving money out of its ISAs.
• Do not withdraw the money yourself. gov.uk warns that if you withdraw without using the transfer process you cannot reinvest that part of your allowance, and Al Rayan notes that withdrawn funds also lose their tax-free status.
• Expect the transfer to take up to 15 working days between cash ISAs and up to 30 calendar days for other types; if it runs longer, complain to the provider and then to the Financial Ombudsman Service.
• Transfers from previous tax years do not use any of this year's £20,000, so a large old balance can move in full and you still have the current allowance to add to.

Gatehouse confirms on its cash ISA page that transfers in from existing ISAs are permitted and that funds must otherwise come from your nominated account. Check whether an old fixed-rate cash ISA carries an exit charge before you move it; gov.uk notes providers may charge for transfers, and a conventional bank's penalty is a cost you can weigh against the religious need to leave.

What to do with interest already earned inside an old cash ISA

If you have held a conventional cash ISA for years, the balance now contains two things: your contributions, which are yours, and the accumulated interest, which the majority scholarly position says you may not keep or benefit from. The remedy is purification. Work out the total interest from your statements (most banks show it as a separate line each year), and give that amount away to a charitable or public cause without intending reward, because it was never yours to earn merit with. Scholars differ on where it may go; the common position is to general public benefit or the poor rather than to mosque construction, and your local scholar's guidance should settle the detail.

There is no tax consequence to giving it away, because ISA interest was never taxable in the first place. There is also no need to wait: you can transfer the whole balance into a halal ISA now and give the interest portion away from other funds, or withdraw just the interest amount (losing that slice of allowance) and transfer the rest. The second approach is cleaner if the interest is a large share of the balance. Either way, stop the interest accruing first, then purify.

The Lifetime ISA bonus, in one paragraph

gov.uk describes the Lifetime ISA as an account for a first home or later life, open to people under 40, accepting up to £4,000 a year until you are 50, with a 25% government bonus worth up to £1,000 a year. The bonus is a grant from the Treasury, not a return on a loan, so the bonus itself is not riba; the contents still have to be halal, and most Lifetime ISA providers are either conventional cash accounts or unscreened funds. Our full ruling on whether a Lifetime ISA is halal covers which providers currently work and how a Lifetime ISA interacts with a Home Purchase Plan.

Who should choose what

If you want cash you can reach, open the Gatehouse Easy Access Cash ISA and move any conventional cash ISA into it through the transfer form; the rate is modest but the contract is clean and the deposit is FSCS-protected up to £120,000. If you can lock money away, Gatehouse's fixed term Woodland Cash ISAs pay more, with the 1 Year at 3.75% AER on 2 October 2026. If you are investing for five years or longer, a stocks and shares ISA at Wahed (small sums, fully managed) or Simply Ethical (£1,000 upwards, advised, strongest governance) is the better home for the £20,000 allowance than cash.

If you are a parent, do the same exercise for the £9,000 Junior ISA allowance using our halal Junior ISA guide. If you already hold a conventional ISA with years of interest inside it, purify the interest and transfer the rest this month rather than waiting for the new tax year, because the accrual does not pause while you decide. Facts checked against gov.uk, gatehousebank.com, alrayanbank.co.uk, wahed.com, simplyethical.com on 2 October 2026.

Frequently asked questions

Is a stocks and shares ISA halal?

Yes, provided every holding inside it is Shariah-compliant. The ISA is only a tax wrapper; what you own inside it decides the ruling. A stocks and shares ISA run by Wahed or Simply Ethical holds only screened funds and is permissible. The same wrapper at a mainstream platform holding a standard global tracker is not, because that tracker owns banks, bonds and other prohibited businesses.

Are cash ISAs haram?

A cash ISA at a conventional bank is haram because it pays interest on a loan to the bank. A cash ISA at an Islamic bank is halal because it pays an expected profit rate from Shariah-compliant investment rather than interest. In October 2026 Gatehouse Bank is the provider offering new Islamic cash ISAs to UK residents; Al Rayan's instant access cash ISA is closed to new customers.

Do I lose my ISA allowance if I move to a halal provider?

No, as long as you transfer rather than withdraw. gov.uk states that you contact the new provider and complete its ISA transfer form, and the money keeps its tax-free status. Transfers of previous years' savings do not count against the current £20,000 allowance. If you withdraw the cash and pay it in yourself, that part of the allowance is used up.

What should I do with interest earned in an old cash ISA?

Give it away. Add up the interest shown on your statements, donate that sum to a charitable or public cause without expecting reward, and transfer the remaining capital to a halal ISA. ISA interest was never taxed, so there is no HMRC consequence. Stop the account earning further interest as soon as possible by starting the transfer now rather than at the next tax year.

Is the Lifetime ISA 25% bonus halal?

The bonus itself is a government grant, not interest, so it is not riba. The account still has to hold permissible assets: an Islamic cash balance or screened funds rather than a conventional interest-bearing cash Lifetime ISA. gov.uk sets the bonus at 25% of contributions up to £4,000 a year, a maximum of £1,000 a year, for people who open the account before 40.

How much can I put into ISAs in 2026/27?

£20,000 in total across cash, stocks and shares, innovative finance and Lifetime ISAs, according to gov.uk. The Lifetime ISA takes at most £4,000 of that total. A child's Junior ISA has a separate £9,000 limit. The tax year runs from 6 April 2026 to 5 April 2027, and unused allowance does not carry forward.