ISA Allowance 2026/27: Everything You Need to Know

The total ISA allowance for the 2026/27 tax year (6 April 2026 to 5 April 2027) remains at £20,000. This is the combined limit across all ISA types — you can split it however you like, but the total across all your ISAs cannot exceed £20,000 in a single tax year. The allowance is per person, so a couple can shelter up to £40,000 between them. And it's use-it-or-lose-it: you can't carry unused allowance into the next year. If you only use £5,000 this year, the remaining £15,000 is gone — your next year's allowance is still just £20,000.

There are four types of ISA available to UK residents: Cash ISAs work like regular savings accounts but interest is tax-free. Stocks and Shares ISAs let you invest in funds, shares, and bonds with tax-free growth. Lifetime ISAs (LISAs) give you a 25% government bonus on up to £4,000 per year, for first-time house purchases or retirement. Innovative Finance ISAs let you hold peer-to-peer loans tax-free, though these are higher risk. You can now pay into multiple ISAs of the same type in a single tax year — a rule change from 2024 that gives you more flexibility.

If you're saving for something in the next 1-3 years, a Cash ISA is your best bet. Your money is protected by the FSCS (up to £85,000 per provider), you earn tax-free interest, and you can access your money when you need it. In 2026, the best easy-access Cash ISA rates are around 4-5% — significantly better than a few years ago. Fixed-rate Cash ISAs offer even higher rates if you can lock your money away for 1-2 years. Cash ISAs are especially valuable if you're a higher or additional rate taxpayer, as your Personal Savings Allowance is reduced to £500 or £0 respectively.

If you're investing for 5+ years, a Stocks and Shares ISA shelters your investments from capital gains tax and dividend tax. This matters more than you might think — outside an ISA, you'd pay up to 20% on capital gains and up to 39.35% on dividends above your (very small) annual allowances. Most people invest in diversified index funds within their S&S ISA, which offers broad market exposure with low fees. Popular choices include global tracker funds that invest across thousands of companies worldwide. The key is time in the market — the longer your ISA investments are left to grow, the more powerful the tax-free compounding becomes.

The Lifetime ISA is unique because the government adds 25% to your contributions — put in £4,000 and the government adds £1,000. That's a guaranteed 25% return before any interest or investment growth. But there are strict rules: you must be aged 18-39 to open one, you can contribute until age 50, and withdrawals are only penalty-free for buying your first home (up to £450,000) or after age 60. Withdrawing for any other reason incurs a 25% penalty on the total amount — which actually means you lose money, not just the bonus. If you're a first-time buyer saving for a deposit, the LISA is almost certainly the best place for your money.

There's no single right way to split your £20,000 allowance — it depends on your goals. A common approach: fill your LISA first if you're eligible (£4,000 for the 25% bonus), then put short-term savings into a Cash ISA, and allocate the rest to a Stocks and Shares ISA for long-term growth. If you're a basic rate taxpayer with less than £1,000 in annual interest, the Personal Savings Allowance means your regular savings accounts are already tax-free — so prioritise your S&S ISA over a Cash ISA. Higher and additional rate taxpayers should prioritise Cash ISAs more, as their PSA is much lower.

Don't let your allowance expire unused — even putting in a small amount is better than nothing. Don't hold cash long-term in a Stocks and Shares ISA (it won't grow). Don't withdraw from a LISA for non-qualifying purposes (the penalty is brutal). Don't assume all ISAs are equal — compare rates and fees regularly, as the difference between providers can be significant. And don't forget: ISAs are per person. If you have a partner, make sure both of you are using your allowances.