ISAs Explained UK 2026/27: Allowance, Types & 2027 Changes

Last updated: October 2026 · General information only, not personalised financial or investment advice. Figures are for the 2026/27 tax year.

ISAs explained simply: an ISA is a savings or investment account where you don’t pay UK tax on the interest or growth. That’s it. The confusing part is everything around it, like the £20,000 allowance, the four different types, the deadline every April, and the big Cash ISA change coming in April 2027.

In this guide I’ll walk you through how ISAs work in the UK, in plain English. You’ll learn what each type is for, whether you even need a Cash ISA, what changes in 2027, and how to open or move one without losing your tax-free allowance. No jargon, and no “pick this provider” lists, because the right ISA depends on what your money is for.

What is an ISA? (the simple version)

ISA stands for Individual Savings Account. Think of it as a tax-free wrapper. You choose what goes inside it (cash, investments or a mix, depending on the type), and anything that money earns inside the wrapper is free of UK Income Tax and Capital Gains Tax.

A few basics from GOV.UK:

• You must be 18 or over to open an adult ISA, and a UK resident (with a few exceptions, such as Crown servants abroad).
• ISAs are always in one person’s name. You can’t have a joint ISA.
• Money stays tax-free year after year. The yearly limit is about how much new money you can pay in, not how much you can hold.

That last point surprises a lot of people. If you paid £20,000 in last year and it’s grown, all of it stays tax-free, and you get a fresh allowance this year as well.

ISA allowance 2026/27: how much can you save?

The ISA allowance for 2026/27 is £20,000. The tax year runs from 6 April 2026 to 5 April 2027.

• You can split it. Put it all in one ISA, or spread it across several. Since April 2024 you can even pay into more than one ISA of the same type in a year, for example two Cash ISAs.
• Lifetime ISA money counts. You can put up to £4,000 a year in a Lifetime ISA, and that comes out of your £20,000.
• It doesn’t roll over. If you only use £5,000 this year, the other £15,000 is gone on 5 April. You can’t carry it forward.
• Junior ISAs are separate. You can pay up to £9,000 a year into a Junior ISA for a child, on top of your own £20,000.

Here’s what splitting could look like for someone saving £300 a month:

• £100 a month into a Cash ISA for a holiday pot
• £200 a month into a Lifetime ISA for a first home
• Total for the year: £3,600, well within the £20,000

Most of us won’t get anywhere near £20,000, and that’s completely fine. The allowance is a limit, not a target.

The 4 types of adult ISA (and what each one is for)

Cash ISA

A Cash ISA works like a normal savings account, but the interest is tax-free. You can find easy-access accounts, notice accounts (you give, say, 30 or 90 days’ notice) and fixed-rate accounts that lock your money away for a year or more.

Stocks and Shares ISA

Here your money is invested, often in funds that hold lots of companies. Any growth and income is tax-free. The trade-off is risk: the value can fall, sometimes a lot, and you could get back less than you put in. That’s why it’s usually for money you won’t need for at least five years.

Lifetime ISA (LISA)

You can open one from 18 until the day before you turn 40, and pay in up to £4,000 a year until you’re 50. The government adds a 25% bonus, up to £1,000 a year. You can use it for your first home (costing £450,000 or less) or take it out from age 60. If you take money out for any other reason, there’s a 25% withdrawal charge, which can leave you with less than you paid in. I’ve written a full guide to the Lifetime ISA for first-time buyers, and you can test the numbers with the Lifetime ISA calculator.

Innovative Finance ISA

This one holds peer-to-peer lending and similar investments. It’s higher risk and the money usually isn’t covered by the FSCS, so it’s not a place for savings you can’t afford to lose.

Cash ISA vs Stocks and Shares ISA: which fits your goal?

This is the question I see most, and the honest answer is that it depends on when you’ll need the money. The tax wrapper is the same. What changes is what happens to your money inside it.

Lots of people use both. For example, a Cash ISA for the next couple of years and a Stocks and Shares ISA for money they won’t touch for ten. Before investing anything, it makes sense to have an emergency fund in place first. A common rule of thumb is three to six months of essential costs. My emergency fund calculator works out your number.

If you’re thinking about investing, please read MoneyHelper’s free guide to investing before you start, and look carefully at fees. A small yearly charge adds up over a long time.

Do you even need a Cash ISA? ISA vs savings account

Here’s the bit many people don’t realise: most savers already get some interest tax-free, even outside an ISA. That’s thanks to the Personal Savings Allowance.

There’s also the starting rate for savings: if your other income is under £17,570, you could get up to £5,000 more interest tax-free.

So let’s do a quick example using a made-up rate of 4%:

• Basic-rate taxpayer with £10,000 saved: £400 interest a year. That’s under the £1,000 allowance, so no tax is due even in an ordinary savings account.
• Higher-rate taxpayer with £20,000 saved: £800 interest. £500 is tax-free, and the other £300 is taxed at 40%, so £120 in tax. In a Cash ISA, that £120 stays with you.

What this means for you: if your interest fits inside your allowance, simply pick whichever account pays the best rate with the access you need, ISA or not. A Cash ISA becomes more useful as your savings grow, if you’re a higher-rate taxpayer, or if you expect interest rates or your income to rise.

One thing to know: from April 2027, tax on savings interest above your allowance goes up by 2 percentage points (to 22%, 42% and 47%). That makes ISAs a little more valuable for people who pay tax on their savings.

Comparing an ISA with Premium Bonds? Try my Cash ISA vs Premium Bonds calculator.

Cash ISA changes from April 2027: the £12,000 limit

This is the big one, so here it is in plain English.

• From 6 April 2027, if you’re under 65, you can pay up to £12,000 a year into Cash ISAs.
• The overall ISA allowance stays at £20,000. The other £8,000 can go into a Stocks and Shares ISA, a Lifetime ISA or an Innovative Finance ISA, if you want it to.
• If you’re 65 or over, you can still put the full £20,000 into Cash ISAs. The regulations measure your age at the end of the tax year, so the £12,000 limit applies if you are 64 or younger then.
• Money already in your Cash ISA stays tax-free. Nothing you’ve saved becomes taxable.

To stop people getting around the limit, HMRC is also restricting transfers from Stocks and Shares and Innovative Finance ISAs into Cash ISAs for under-65s. A separate 22% charge on interest paid on cash deposits inside those non-cash ISAs applies regardless of age; it is not a tax on investment growth or dividends.

Does this mean you have to invest? No. You don’t have to use your full allowance at all. If you want all your savings in cash, you can save up to £12,000 in a Cash ISA and keep anything extra in an ordinary savings account (remember your Personal Savings Allowance). The change only matters if you save more than £12,000 a year in cash, which most people don’t.

The current 2026/27 tax year is the last one where everyone can put up to £20,000 into Cash ISAs, so if you’re a big cash saver, it’s worth knowing that date.

ISAs if you’re 65 or over

Being over 65 doesn’t change the tax-free part, but from April 2027 you’ll keep the full £20,000 Cash ISA limit. A few things matter more than the headline rate at this stage of life:

• Access. If the money might be needed for care, home repairs or helping family, a fixed account that locks it away may not suit.
• Your Personal Savings Allowance. If you’re a basic-rate taxpayer, an ordinary savings account paying more may leave you better off.
• Protection. Keep an eye on the FSCS limit (below) if you hold a large amount with one bank.

The ISA deadline: what happens on 5 April?

Every year, your allowance resets on 6 April. So 5 April is the last day to use this year’s allowance. For 2026/27, that’s 5 April 2027.

Don’t leave it to the last day, though. Some providers need a few working days to process a new account or payment, and 5 April 2027 is a Monday. And please don’t let a deadline rush you into investing in something you don’t understand. Missing the deadline only means losing that year’s unused allowance. Your existing ISA money is still tax-free.

How to open an ISA (step by step)

1. Decide what the money is for and when you’ll need it. That tells you cash or investments.
2. Compare accounts on the day using a live comparison table. Rates change weekly, so any “best ISA” list in an old article is already out of date.
3. Check the details: the rate (AER), whether it includes a temporary bonus, access rules, the minimum deposit and whether it accepts transfers in.
4. Apply online with your National Insurance number and bank details.
5. Pay in, and set up a monthly standing order if you can. Small and regular beats big and never.
6. Keep a note of how much you’ve paid into ISAs this tax year, so you don’t go over £20,000 (or £12,000 in Cash ISAs from April 2027 if you’re under 65).

How to move (transfer) an ISA without losing the tax-free status

If your Cash ISA rate has dropped, you can move it. The golden rule: never take the money out yourself. If you withdraw it and pay it into a new ISA, it counts as new money and uses up your allowance (unless your ISA is a flexible one, and even then the rules are strict).

1. Open the new ISA and choose the “transfer in” option.
2. Fill in the new provider’s ISA transfer form. They contact your old provider for you.
3. Cash ISA to Cash ISA transfers should take no more than 15 working days. Other transfers should take no more than 30 calendar days.

Check for exit penalties first, especially on fixed-rate ISAs, and remember the 2027 limits on moving money from a Stocks and Shares ISA into cash if you’re under 65.

How to compare ISA providers (without a “best” list)

I don’t do “best ISA provider” lists, and here’s why: the best account for an easy-access saver is completely different from the best one for a long-term investor, and rates move every week. Instead, here’s what to look at.

For a Cash ISA

• The AER, and whether part of it is a bonus that ends after 12 months
• Access: easy access, notice, or fixed
• Whether it’s flexible (you can take money out and put it back in the same tax year)
• Transfers in: does it accept your old ISA?
• FSCS protection: eligible deposits are protected up to £120,000 per person, per bank (since 1 December 2025). Some brands share a banking licence, so they count as one bank.

For a Stocks and Shares ISA

• Platform fee (a percentage or a flat fee), plus fund fees and dealing charges
• Minimum monthly amount
• What you can hold: ready-made funds, or a wide choice
• Remember: FSCS protection covers the provider failing, not your investments falling in value

What about gold, silver or “safe haven” ISAs?

You might see posts about holding gold or silver in a Stocks and Shares ISA. Not every product with “gold” in its name can go in an ISA, and precious metal prices can rise and fall sharply. I don’t recommend any particular investment. If you’re interested, check the product’s ISA eligibility with the provider and read MoneyHelper’s guidance on investment risk first.

7 common ISA mistakes to avoid

1. Withdrawing to switch instead of using a transfer form.
2. Leaving money in an old Cash ISA on a rate that’s dropped once the bonus ended.
3. Investing your emergency fund. Money you might need soon belongs in cash.
4. Paying into a Lifetime ISA for something it can’t be used for, and then facing the 25% charge.
5. Going over the allowance. Keep a running total across all your ISAs.
6. Assuming an ISA always wins. A normal savings account at a better rate can beat it if your interest is under your allowance.
7. Panic-investing before 5 April. A deadline is never a reason to buy something you don’t understand.

ISAs explained: FAQs (UK)

What is the ISA allowance for 2026/27?

£20,000, for the tax year 6 April 2026 to 5 April 2027. Up to £4,000 of it can go in a Lifetime ISA. Junior ISAs have their own £9,000 limit.

Can I have more than one ISA?

Yes. You can hold as many ISAs as you like from past years, and pay into several in the same year, as long as your total stays within £20,000. The exception is the Lifetime ISA: you can only pay into one a year.

Is the Cash ISA limit going down to £12,000?

Yes, from 6 April 2027, for people under 65. The overall allowance stays at £20,000, and people 65 and over keep a £20,000 Cash ISA limit.

Do I pay tax on ISA interest?

No. Interest, dividends and gains inside an ISA are free of UK Income Tax and Capital Gains Tax, and you don’t need to declare them on a tax return.

Is my ISA protected if the bank goes bust?

Eligible cash with a UK-authorised bank or building society is protected by the FSCS up to £120,000 per person, per banking licence. That limit covers all your accounts with that bank, ISA or not.

What happens to my ISA if I move abroad?

You can keep it and it stays tax-free in the UK, but you usually can’t pay new money in while you’re not UK resident. Check the tax rules in your new country, too.

ISAs explained UK: summary

• An ISA is a tax-free wrapper for cash or investments.
• The ISA allowance for 2026/27 is £20,000, and it doesn’t roll over.
• Cash for money you need within about 5 years; investments for longer.
• If your interest fits in your Personal Savings Allowance, choose on rate, not on the ISA label.
• From April 2027, under-65s can pay up to £12,000 a year into Cash ISAs.
• Always use a transfer form to move an ISA.

Which type of ISA are you using this year, or are you still deciding? Tell me in the comments.

Sources

• GOV.UK: Individual Savings Accounts (allowance, types, transfers; checked 9 October 2026)
• GOV.UK: Reduction in the Cash ISA limit (from 6 April 2027)
• GOV.UK: Lifetime ISA and Junior ISAs
• GOV.UK: Tax on savings interest and savings tax rates from April 2027
• FSCS: deposit limit rise to £120,000
• MoneyHelper: savings and investing guides (free and impartial)

I’m not a financial adviser, and this is general information, not advice on what you should do with your money. Investments can fall as well as rise. If you’re unsure, MoneyHelper offers free, impartial guidance. See my financial disclaimer.