Pillar Guide · Updated June 2026
UK ISA Allowance 2026/27
The ISA is the simplest tax shelter in the UK: pay in, and everything that grows inside is free of income tax and capital gains tax forever. For 2026/27 the allowance is £20,000, which you can split however you like across Cash, Stocks and Shares, Lifetime and Innovative Finance ISAs. This guide explains each ISA type, the £4,000 Lifetime ISA limit that sits inside the £20,000, the flexible ISA rules that let you replace withdrawals in the same year, how transfers preserve your tax-free status without touching your allowance, and the bed-and-ISA technique for moving existing investments into the wrapper — with a worked example.
The £20,000 Allowance
In 2026/27 you can pay up to £20,000 into ISAs across the tax year. That total is shared across every ISA you hold and every type — there is no separate limit per ISA. Everything inside grows free of income tax, dividend tax and capital gains tax, and nothing is ever reported to HMRC.
The allowance resets on 6 April and is strictly use-it-or-lose-it — unused allowance cannot be carried forward. A separate Junior ISA allowance of £9,000 applies to children and does not count towards the adult £20,000.
The Four ISA Types
| ISA type | Best for |
|---|---|
| Cash ISA | Tax-free savings, short-term goals, emergency funds |
| Stocks & Shares ISA | Long-term, tax-free investing in funds and shares |
| Lifetime ISA | First home or retirement, with a 25% bonus (£4,000 cap) |
| Innovative Finance ISA | Peer-to-peer lending — higher risk, higher return |
You can hold and pay into several types at once — and since April 2024, even more than one of the same type — as long as total contributions stay within £20,000. Compare options in the cash vs stocks & shares ISA comparison.
Lifetime ISA & the £4,000 Cap
The Lifetime ISA lets under-40s save up to £4,000 a year — counted within the £20,000, not on top — and the government adds a 25% bonus, up to £1,000 annually.
It is designed for two goals: buying a first home worth up to £450,000, or retirement from age 60. Withdraw for any other reason and a 25% charge applies, which can leave you with less than you contributed. For first-time buyers it is one of the most generous accounts available; weigh it against alternatives in the ISA vs LISA comparison.
Flexible ISA Rules
A flexible ISA lets you withdraw money and pay it back within the same tax year without the replacement counting against your allowance. So if you have paid in the full £20,000, take out £5,000, then repay it before 5 April, you have not breached the limit.
Without flexibility, that £5,000 repayment would be treated as a brand-new contribution and push you over. Flexibility depends on the provider, so check before you rely on it — and note that Lifetime ISAs are never flexible. This feature is handy if you need temporary access to cash without permanently sacrificing your tax-free wrapper.
Transfers
You can move money between ISAs — to a better rate, or from cash to stocks and shares — without using any of your annual allowance, provided you use the provider’s official transfer process. Never withdraw the money yourself, as that strips the tax-free status.
Current-year contributions must be transferred in full; money from previous tax years can be moved in whole or in part. Always ask the new provider to arrange the transfer — they pull the funds across directly, keeping everything inside the wrapper. See the ISA transfer rules guide for the detail.
Bed-and-ISA
If you hold investments outside an ISA, bed-and-ISA moves them into the wrapper. You sell the holdings in your taxable account and immediately repurchase them inside your stocks and shares ISA, using your £20,000 allowance.
The sale can trigger capital gains tax if your gain exceeds the £3,000 annual exempt amount, so it is often spread across several tax years to stay within the exemption. Once inside the ISA, all future growth, dividends and gains are tax-free — valuable now that the CGT exemption and dividend allowance are so low. Model the gain with the capital gains tax calculator.
Worked Example: Splitting the £20,000
Imagine a 35-year-old first-time buyer who also wants to invest. They split the 2026/27 allowance like this. Figures are illustrative.
- Lifetime ISA: £4,000 (the cap) → £1,000 government bonus added = £5,000 working towards a deposit.
- Stocks & Shares ISA: £12,000 invested for the long term, tax-free.
- Cash ISA: £4,000 as an accessible, tax-free emergency buffer.
- Total contributed: £4,000 + £12,000 + £4,000 = £20,000 — the full allowance.
All contributions stay within the single £20,000 limit, the LISA bonus is free money towards a home, and every penny of future interest, dividends and gains is sheltered from tax. Plan your own split with the ISA calculator and the Lifetime ISA calculator.