Tax year: 2026/27 | Last reviewed: 2 October 2026
An Individual Savings Account (ISA) lets you save and invest without paying tax on interest, dividends or capital gains. With the dividend allowance at just £500, the capital gains allowance at £3,000 and income tax thresholds frozen, ISAs are more valuable than they have ever been.
The ISA allowance for 2026/27
You can pay up to £20,000 into ISAs between 6 April 2026 and 5 April 2027. Unused allowance does not roll over, so if you have spare cash, use it before 5 April.
Types of ISA
- Cash ISA: tax-free interest.
- Stocks and shares ISA: tax-free dividends and gains on investments.
- Lifetime ISA: for ages 18 to 39 at opening. Pay in up to £4,000 a year and the government adds 25%, up to £1,000 a year, for a first home up to £450,000 or retirement from 60. Withdrawals for other reasons carry a 25% charge.
- Innovative Finance ISA: peer-to-peer lending, higher risk.
- Junior ISA: up to £9,000 a year for children, theirs at 18.
The cash ISA change from April 2027
From 6 April 2027 the overall limit stays at £20,000, but people under 65 will only be able to put £12,000 of it into cash ISAs. The rest has to go into stocks and shares or other ISAs. Over-65s keep the full £20,000 cash limit. If you are a cash saver, 2026/27 is the last year you can put £20,000 into cash.
Why ISAs matter for higher earners
- Higher rate taxpayers only get £500 of tax-free savings interest. On £50,000 of savings earning 4%, that is £2,000 of interest and £600 of tax outside an ISA.
- Dividends over £500 outside an ISA are taxed at up to 39.35%.
- Gains over £3,000 are taxed at 18% or 24%.
ISAs or pensions?
Pensions give tax relief on the way in, which ISAs do not, so for higher rate taxpayers saving for retirement, pensions usually come first. ISAs win on flexibility: you can withdraw at any time with no tax. Many clients use both. See pension tax relief for higher earners.
Company owners
If your money is in a limited company, you first have to extract it, usually as a dividend, before you can put it in an ISA. Timing those dividends to stay within the basic rate band and filling an ISA each year is a simple, effective long-term plan. Read our director dividend strategy guide.
Using allowances as a couple
Each adult has their own £20,000 allowance, so a couple can shelter £40,000 a year. Additional Permitted Subscriptions allow a surviving spouse to inherit the ISA tax wrapper on their partner’s ISA savings.
FAQs
Do I need to declare ISA income on my tax return?
No. ISA interest, dividends and gains are completely tax-free and do not go on your return.
Can I have more than one ISA?
Yes, you can pay into several ISAs in the same tax year as long as the total stays within £20,000.
Are ISAs free of inheritance tax?
No. ISAs form part of your estate for inheritance tax.
Talk it through with Digivolve
We look at ISAs, pensions and company profits together, so your savings sit in the most tax-efficient place for your plans.
This article is general information based on the rules for the 2026/27 tax year as at October 2026. It is not personal tax advice. Rates and thresholds can change, so please speak to us before acting.