The UK Individual Savings Account (ISA) annual allowance for the 2026/27 tax year is 20,000 pounds. This period, running from 6 April 2026 to 5 April 2027, represents the final full tax year in which savers aged under 65 can choose to allocate the entire 20,000 pounds into a Cash ISA. From 6 April 2027, significant changes announced in the Autumn Budget on 26 November 2025 will alter how individuals under 65 can distribute their ISA contributions, primarily by capping the Cash ISA component.

Money held within an ISA wrapper is exempt from UK income tax and capital gains tax on interest, dividends, or investment gains. This tax-free status applies across various ISA types. Understanding the current rules and the impending changes is crucial for effective tax-efficient saving.

What is the UK ISA Allowance for 2026/27?

The annual Individual Savings Account allowance for the 2026/27 tax year is 20,000 pounds. Savers can split this allowance across different ISA types. These include Cash ISAs, Stocks and Shares ISAs, Innovative Finance ISAs, and Lifetime ISAs. The combined total contributed across these account types cannot exceed 20,000 pounds within a single tax year.

A saver can open and pay into one ISA of each type per tax year. However, transfers between providers within the same ISA type are permitted at any time without affecting the annual allowance. The ISA tax year runs from 6 April to 5 April the following year. Any unused ISA allowance does not roll over into the next tax year.

What is the Junior ISA allowance?

Separate from the adult 20,000 pound allowance, the Junior ISA (JISA) has its own annual allowance. For children under 18, this allowance is 9,000 pounds. Money saved in a JISA grows tax-free until the child turns 18.

What Changes to UK ISAs from April 2027?

The Autumn Budget, delivered on 26 November 2025, introduced material changes to ISA rules, taking effect from 6 April 2027. These changes primarily impact savers aged under 65 and their ability to utilise Cash ISAs.

From 6 April 2027, the Cash ISA component of the annual allowance will be limited to 12,000 pounds for savers aged under 65. The remaining 8,000 pounds of the total 20,000 pound allowance must be invested in a Stocks and Shares ISA, an Innovative Finance ISA, or a Lifetime ISA. This 12,000 pound Cash ISA limit applies only to new contributions made on or after 6 April 2027; cash balances accumulated in Cash ISAs in earlier tax years are not affected and continue to grow tax-free.

Savers aged 65 and over will retain the full 20,000 pound annual Cash ISA allowance from 6 April 2027. They will not be subject to the 12,000 pound cap.

Further changes include a new 20 per cent tax charge on interest earned from cash held within a Stocks and Shares ISA above a permitted allowance, effective from 6 April 2027. Also, transfers from Stocks and Shares ISAs or Innovative Finance ISAs into Cash ISAs will be banned for savers aged under 65 from the same date.

Beyond ISA rules, income tax rates on savings interest are also rising. From April 2027, the basic rate increases from 20 to 22 per cent, the higher rate from 40 to 42 per cent, and the additional rate from 45 to 47 per cent. This further highlights the tax advantages of the ISA wrapper.

How Do Different ISA Types Work?

The 20,000 pound annual ISA allowance offers flexibility across several account types. Each type serves different saving or investment goals while providing tax-free growth.

• Cash ISA: This ISA holds cash savings, typically offering a variable or fixed interest rate. The interest earned is free from income tax. Currently, a saver can put their entire 20,000 pound allowance into a Cash ISA.
• Stocks and Shares ISA: This account allows investments in various assets like company shares, bonds, and investment funds. Any capital gains or dividends generated within this ISA are tax-free. Platforms such as Vanguard, Hargreaves Lansdown, AJ Bell, and Fidelity offer Stocks and Shares ISAs.
• Lifetime ISA (LISA): The LISA is designed for first-home buyers or retirement savers. UK residents aged 18 to 39 can open one, contributing up to 4,000 pounds per year, which counts towards the overall 20,000 pound ISA limit. The government adds a 25 per cent bonus on contributions, up to 1,000 pounds per year. Contributions can be made until the day before the saver's 50th birthday. Funds can be withdrawn without penalty for a first-home purchase up to 450,000 pounds, after reaching age 60, or in cases of terminal illness. Other withdrawals incur a 25 per cent penalty charge on the amount withdrawn.
• Innovative Finance ISA (IFISA): The IFISA permits investments in peer-to-peer loans and crowd-funded bonds. Interest and gains generated through these investments are tax-free within the ISA wrapper.

The Personal Savings Allowance (PSA) operates separately, allowing basic-rate taxpayers to earn up to 1,000 pounds of interest tax-free outside an ISA. Higher-rate taxpayers can earn up to 500 pounds, while additional-rate taxpayers receive no PSA. These PSA limits remain unchanged for 2026/27.

What Should You Consider for Your £20,000 Allowance Now?

The 2026/27 tax year is a critical period for savers under 65, representing the last opportunity to utilise the full 20,000 pound allowance exclusively for a Cash ISA. With the Cash ISA component capped at 12,000 pounds from April 2027 for this age group, strategic planning for the current tax year is important.

For savers under 65 who prioritise accessible cash savings, fully funding a Cash ISA with 20,000 pounds before 6 April 2027 could lock in the ability to hold a larger tax-free cash sum in this wrapper. After this date, any new Cash ISA contributions for under-65s will be limited to 12,000 pounds, requiring the remaining 8,000 pounds of the annual allowance to be allocated to investment-based ISAs like Stocks and Shares ISAs, Innovative Finance ISAs, or Lifetime ISAs.

The rising income tax rates on savings interest from April 2027 further underscore the value of ISAs. Basic-rate taxpayers will face a 22 per cent rate, higher-rate taxpayers 42 per cent, and additional-rate taxpayers 47 per cent on interest earned outside an ISA. Utilising the full ISA allowance can mitigate this increased tax burden.

What should over-65s know?

Savers aged 65 and over face different considerations. They are exempt from the new 12,000 pound Cash ISA limit from April 2027. This means individuals in this age bracket will continue to retain the full 20,000 pound annual Cash ISA allowance. They are also not subject to the ban on transfers from Stocks and Shares or Innovative Finance ISAs into Cash ISAs. This distinction offers greater flexibility for older savers to manage their cash within an ISA.

What should you do next?

Review your personal financial objectives and how the upcoming ISA changes align with them. For savers aged under 65, the 2026/27 tax year offers a final window to contribute up to 20,000 pounds into a Cash ISA. Consider your preference for cash versus investment and how the 12,000 pound Cash ISA limit from April 2027 will influence your future contributions. Explore the various ISA types like Stocks and Shares ISAs, Innovative Finance ISAs, and Lifetime ISAs to determine the best allocation for your remaining allowance. Over-65s should note their continued full Cash ISA allowance and plan accordingly.