ISA allowance for 2026/27
The annual ISA allowance for the 2026/27 tax year is £20,000 — unchanged since 2017 and frozen through at least the current parliament. You can split the £20,000 across any combination of ISA types:
- Cash ISA — interest on savings, tax-free
- Stocks & shares ISA — investments (funds, ETFs, shares), dividends and capital gains tax-free
- Lifetime ISA (LISA) — first home or retirement, maximum £4,000 a year with a 25% government bonus
- Innovative finance ISA — peer-to-peer lending
Subscriptions reset on 6 April every year. Unused allowance does not carry forward — it's a "use it or lose it" deal. Since April 2024, you can subscribe to multiple ISAs of the same type within the same tax year, which was previously restricted to one per type.
Types of ISA
The right ISA depends on your timeframe and risk tolerance:
| ISA type | Best for | Risk |
|---|---|---|
| Cash ISA | Short-term savings, emergency fund, near-term goals | Low (FSCS-protected to £85k per provider) |
| Stocks & shares ISA | 5+ year horizon, long-term wealth building | Medium–high (market volatility) |
| Lifetime ISA | First home purchase, or retirement at 60+ | Varies (cash or investments) |
| Innovative finance ISA | P2P lending, higher-yield experienced savers | High (no FSCS protection) |
When an ISA makes the most difference
The tax saving from an ISA grows with three variables: your tax rate, the size of your balance, and the time you hold it.
- Additional-rate taxpayers (over £125,140) have no Personal Savings Allowance, so every pound of interest outside an ISA is taxed at 45%. The ISA tax saving is largest here.
- Higher-rate taxpayers (£50,271 – £125,140) have a £500 PSA and pay 40% on the rest. Once you hold ~£10,000 in savings at 5%, you're already hitting the PSA and benefiting meaningfully from an ISA.
- Basic-rate taxpayers have a £1,000 PSA. An ISA starts to pay off noticeably once your savings balance generates over £1,000 of interest per year — typically around £20,000+ at 5%.
- Long time horizons magnify the benefit: shielded compounding is worth more the longer you leave it, because the tax you would have paid each year itself would have compounded.
- Stocks & shares are particularly ISA-friendly because dividends and capital gains are also sheltered — worth far more at the higher income tax and CGT rates.