ISA Allowance & Savings Tax Calculator UK 2026/27
ISAs shelter savings from income tax on interest and capital gains. The annual ISA allowance is £20,000 per person in 2026/27. Outside an ISA, basic rate taxpayers get a £1,000 Personal Savings Allowance (PSA); higher rate taxpayers get £500; additional rate taxpayers get nothing. This calculator works out how much tax you could save by using your ISA allowance.
ISA allowance 2026/27: £20,000/person. Lifetime ISA: max £4,000/year, 25% bonus (max £1,000/year), age 18–39 to open, use for first home (up to £450,000) or age 60+. PSA: £1,000 basic rate, £500 higher rate, £0 additional rate. Since April 2024: can pay into multiple ISAs of same type in one year. ISA allowance cannot be carried forward.
ISA Types — Which Is Right for You?
| ISA type | Annual limit | Best for | Notes |
|---|---|---|---|
| Cash ISA | £20,000 | Short-term savings, emergency fund | Instant access or fixed terms; no tax on interest |
| Stocks & Shares ISA | £20,000 | Long-term growth (5+ years) | No CGT or income tax on returns; investment risk |
| Lifetime ISA | £4,000 (within £20,000) | First home or retirement top-up | 25% bonus; age 18–39 to open; penalties for non-qualifying withdrawals |
| Innovative Finance ISA | £20,000 | Higher-risk lending/crowdfunding | Higher potential returns; significant default risk |
| Junior ISA (JISA) | £9,000 per child | Saving for children | Separate allowance; child cannot access until 18 |
The Case for Using Your ISA First
With savings rates at 4–5% in 2025, the £1,000 PSA for basic rate taxpayers covers £20,000 in savings before tax kicks in. But higher rate taxpayers only get £500 tax-free interest, meaning they pay tax on interest above that from just £10,000 of savings at 5%. Additional rate taxpayers pay tax on all savings interest outside an ISA. If you are a higher or additional rate taxpayer with significant savings, maximising your ISA allowance every year should be a priority.
For stocks and shares ISAs, the benefit compounds over time — no capital gains tax, no dividend tax, and no reporting required. Over a 20–30 year investment period, the tax shelter can be worth tens of thousands of pounds compared to holding the same investments outside an ISA.
Lifetime ISA — Bonus and Penalties
The LISA bonus of 25% (up to £1,000/year) is one of the best risk-free returns available. If you are aged 18–39 and saving for your first home or retirement, contributing to a LISA is almost always worth doing. But the withdrawal penalty is severe: if you withdraw for any reason other than first home purchase, terminal illness, or after age 60, you pay a 25% penalty on the entire withdrawal — which effectively takes back the bonus plus 6.25% of your own money. Only put money in a LISA that you are confident you will not need for other purposes.
What Happens If You Don't Use Your Full ISA Allowance
Unlike your pension Annual Allowance, unused ISA allowance does not carry forward to future tax years — if you don't use some or all of your £20,000 allowance by 5 April, that unused portion is simply lost, and you start fresh with a new £20,000 allowance on 6 April. This makes ISA allowance genuinely a "use it or lose it" entitlement, which is why many people who can afford to make a lump-sum contribution do so towards the end of the tax year if they haven't used their allowance earlier, rather than letting it expire unused. If you're regularly falling short of using your full allowance, it's worth checking whether setting up a smaller, regular monthly contribution (rather than trying to find one large lump sum) makes it easier to consistently use more of your allowance across the year.
Splitting Your Allowance Across Different ISA Types
Your £20,000 annual ISA allowance can be split across different types of ISA in the same tax year — for example, contributing to both a Cash ISA and a Stocks & Shares ISA, or adding to an Innovative Finance ISA alongside a Lifetime ISA — provided the combined total across all of them doesn't exceed £20,000, and no more than £4,000 of that total goes into a Lifetime ISA specifically. This flexibility means you don't have to commit your entire allowance to a single type of ISA or a single provider; you might keep an emergency fund in a Cash ISA for accessibility while investing a separate portion in a Stocks & Shares ISA for longer-term growth, all within the same year's allowance. Since the 2024/25 tax year, you're also able to pay into multiple ISAs of the same type within a single tax year (previously restricted to one of each type per year), giving even more flexibility to split contributions between different providers if you want to.
Frequently Asked Questions
Yes. You can transfer your ISA to a different provider at any time without losing your ISA status. The transfer must be done through the ISA transfer process (not by withdrawing and re-depositing). Current year subscriptions can be transferred in full; previous years’ ISAs can be transferred in full or in part. Always use the official transfer process — withdrawing and redepositing uses up your current year allowance unnecessarily.
ISA interest and returns are completely tax-free and do not need to be declared on a tax return. However, ISA savings and their value are counted as capital for the purpose of means-tested benefits such as Universal Credit (£6,000 disregard applies; over £16,000 bars entitlement entirely) and Pension Credit. The fact that returns are tax-free does not mean the capital itself is invisible to the benefits system.
Generally, you need to be resident in the UK for tax purposes to open a new ISA, though a small number of exceptions exist (such as Crown employees serving overseas and their spouses or civil partners). If you already hold an ISA and later move abroad, you can usually keep the existing ISA and its tax-free status, but you typically cannot add new contributions to it while you remain a non-UK resident, and you should notify your ISA provider of your change in residency status.
Your ISA forms part of your estate and passes according to your will (or intestacy rules if you don't have one), but it also carries a special benefit for a surviving spouse or civil partner — they can inherit an additional ISA allowance equal to the value of your ISA at the date of death (an "Additional Permitted Subscription"), on top of their own normal annual allowance. This means the tax-free wrapper effectively transfers to the surviving spouse, rather than the tax efficiency being lost when the ISA holder dies.