What Is the ISA Allowance? (UK 2025/26)

An Individual Savings Account (ISA) is a tax-free wrapper for savings and investments. For 2025/26, you can put up to £20,000 across your ISAs each tax year. All interest, dividends, and capital gains within an ISA are completely tax-free, and withdrawals are tax-free too.

ISA Types

You can spread your £20,000 allowance across several types: Cash ISA, Stocks and Shares ISA, Innovative Finance ISA, and Lifetime ISA (which has its own £4,000 sub-limit within the overall £20,000). From 2024/25 onwards, you can open and pay into multiple ISAs of the same type in the same tax year — previously you were limited to one of each.

Why ISAs Matter More Now

With the dividend allowance cut to £500, the CGT annual exempt amount reduced to £3,000, and the personal savings allowance at £500 for higher-rate taxpayers, ISAs have become more valuable than ever as a shelter from tax on investment returns.

Lifetime ISA

The Lifetime ISA lets you save up to £4,000 per year towards your first home or retirement. The government adds a 25% bonus (up to £1,000/year). You must be aged 18–39 to open one. Withdrawals for purposes other than buying a first home or retirement after age 60 incur a 25% penalty, which means you get back less than you put in.