ISA Guide UK 2026/27: Allowance, Types and Rules Explained

Use our ISA calculator to project tax free growth, the savings calculator for Cash ISA interest, or the compound interest calculator for long-term Stocks and Shares ISA projections. For how ISA tax treatment compares with taxable savings, see inflation and real returns on UK savings.

What is an ISA and the 2026/27 allowance

An Individual Savings Account (ISA) shelters your savings or investments from UK tax. Your ISA allowance is £20,000 for 2026/27. It resets each tax year on 6 April 2026 and does not carry over: unused allowance is lost.

Inside an ISA you pay no tax on interest, dividends, or capital gains. That makes ISAs especially useful once you have used your Personal Savings Allowance on taxable accounts, or if you are a higher or additional rate taxpayer.

The four types of ISA

Cash ISA

A Cash ISA works like a tax free savings account. Interest is paid without income tax, however high the balance grows. Best for emergency funds, short-term goals, and money you may need within five years. See our Cash ISA vs Stocks and Shares ISA comparison.

Stocks and Shares ISA

A Stocks and Shares ISA holds investments such as funds, shares, and bonds. Growth and dividends are tax free. Returns are not guaranteed and the value can fall, so this suits longer time horizons of five years or more. Compare with a Cash ISA in our Cash vs Stocks and Shares guide.

Innovative Finance ISA

An Innovative Finance ISA holds peer to peer loans and similar lending. Returns can be higher than Cash ISAs, but your capital is at risk if borrowers default. Treat it as a higher-risk option, not a substitute for instant-access savings.

Lifetime ISA

A Lifetime ISA is designed for a first home or later life. The rules are covered in the section below. It can hold cash or investments depending on your provider.

Can you pay into more than one ISA

Since 6 April 2024, you can pay into more than one ISA of the same type in the same tax year, as long as your combined payments stay within the £20,000 annual limit.

The Lifetime ISA still has its own cap of £4,000 a year, which counts toward your £20,000 total. You cannot pay into two Lifetime ISAs in the same year, but you could pay into a Cash ISA and a Stocks and Shares ISA alongside a Lifetime ISA within the rules.

The Lifetime ISA

You can pay in up to £4,000 a year into a Lifetime ISA. That counts toward your £20,000 allowance. The government adds a 25% bonus, worth up to £1,000 a year.

You must open a Lifetime ISA between age 18 and 39, and you can keep paying in until age 50. Withdrawals are penalty-free for a first home worth up to £450,000, or from age 60 for any purpose. See our first time buyer guide for how the bonus fits into buying your first home.

Taking money out for any other reason triggers a 25% withdrawal charge, which recovers the government bonus and a slice of your own savings.

ISA transfers

You can transfer ISAs between providers without losing the tax free status. Always use your provider's official ISA transfer process. If you withdraw cash and pay it back in yourself, it counts as new subscription and can use allowance incorrectly or lose the tax free wrapper on that portion.

Junior ISA

A Junior ISA (JISA) is a separate tax free account for children under 18. It has its own annual allowance, which does not count toward an adult's £20,000 limit. Money belongs to the child and they take control at 18.