The £20,000 ISA allowance for 2025/26, and what changes after it

The ISA allowance for the 2025/26 tax year is £20,000, and it stays at £20,000 for 2026/27 as well. That much has been true, at the same figure, for several years running. What has moved around it is more interesting: a proposed extra allowance for UK shares was announced, consulted on, and then dropped entirely, and a genuine change to how much of that £20,000 can sit in cash is now confirmed for April 2027. Here is the full picture, as it actually stands today rather than as it was proposed.

How the £20,000 allowance works

Every UK adult gets a single ISA allowance each tax year, running 6 April to 5 April, currently set at £20,000 per person. It resets every year and does not carry over — money you do not shelter by 5 April is gone for that year, not banked for next year. You can hold ISAs with more than one provider and split the £20,000 across different ISA types in a single tax year, but you cannot put more than £20,000 in total into ISAs across all of them combined. Everything held inside an ISA — interest, dividends, and capital gains — is free of UK income tax and capital gains tax for as long as it stays inside the wrapper, which is the entire point of using one before other, taxable accounts.

The four ISA types, and how they share the allowance

The £20,000 allowance is a shared ceiling across four different account types, each suited to a different purpose:

• Cash ISA — works like an ordinary savings account, but the interest is tax-free. No investment risk, and the natural home for money you might need at short notice.
• Stocks and Shares ISA — holds shares, funds and bonds, with growth and dividends tax-free. Values can fall as well as rise, unlike a Cash ISA.
• Innovative Finance ISA — holds peer-to-peer lending and similar investments; a smaller and higher-risk corner of the ISA family.
• Lifetime ISA (LISA) — for a first home or retirement, available from age 18 to 39 to open. It has its own £4,000 sub-limit within the overall £20,000, and the government adds a 25% bonus — up to £1,000 a year — on top of what you pay in.

Anyone saving for a child separately should note that a Junior ISA is an entirely different allowance — £9,000 for 2025/26, confirmed to stay at that level until 2030/31 — and does not use up any of the adult £20,000 figure.

The "British ISA" that was proposed, then dropped

In the March 2024 Spring Budget, the then Chancellor proposed a new "British ISA" — a further £5,000 allowance, on top of the standard £20,000, available only for investments in UK-listed companies. A consultation on how it would work ran until June 2024. Following the change of government, the Autumn Budget 2024 confirmed the idea would not go ahead, citing mixed responses to the consultation. There is no British ISA, no extra £5,000 UK-shares allowance, and none is currently planned — any page or advert describing one as available is describing a proposal that was never implemented.

What is actually changing: the cash ISA cut in 2027

At the Autumn Budget on 26 November 2025, the government confirmed a real change to how the £20,000 allowance can be used, taking effect on 6 April 2027. From that date, savers under 65 will only be able to put £12,000 of their annual allowance into a Cash ISA; the rest must go into Stocks and Shares, Innovative Finance or Lifetime ISAs to be sheltered from tax. Savers aged 65 and over keep the full £20,000 cash allowance unchanged. The overall £20,000 ceiling itself is not falling — it is the proportion of it that can sit in cash that is being capped for most savers. Alongside the cut, new anti-circumvention rules restrict holding purely cash-like assets inside a Stocks and Shares ISA and restrict transferring money from a non-cash ISA into a Cash ISA, both aimed at preventing the cash limit being sidestepped through another ISA type.

Why this is worth acting on before 2027, not after

Nothing about the 2025/26 or 2026/27 allowance has changed — the full £20,000 can still go into cash in either of those two years if that suits your circumstances. The reason to think about it now rather than in 2027 is that a Cash ISA balance built up before the cap applies is not affected retroactively; only new subscriptions from 6 April 2027 onward are limited to £12,000 in cash. Anyone under 65 who expects to want more than £12,000 a year in cash savings going forward has two tax years left to decide, ahead of the change, whether some of that saving belongs in a Stocks and Shares ISA instead — a decision that depends on your own time horizon and appetite for risk, not on the ISA rules themselves.

What the allowance is worth over time

The tax saving from an ISA only shows up once growth compounds inside it for a while. Someone who uses the full £20,000 allowance every year for ten years, growing at a steady 5% a year, would have paid in £200,000 in total and would hold roughly £264,000 — with every pound of that £64,000 of growth untouched by income tax or capital gains tax, for as long as it stays inside the wrapper. The compound interest calculator runs that same arithmetic for any rate, term and contribution amount, and the savings goal calculator works it the other way round — from a target amount back to what you would need to set aside each year to reach it within the allowance.

Sources

• GOV.UK: Individual Savings Accounts (ISAs)
• GOV.UK: Autumn Budget 2024
• GOV.UK: ISA reform 2027 — anti-circumvention rules factsheet

This is general information, not financial advice. Whether cash or investments suit your savings is a personal decision that depends on your own time horizon and risk tolerance. For a decision about your own ISA choices, speak to a regulated financial adviser.