How the 2026/27 ISA allowance works
The overall ISA allowance for 2026/27 is £20,000 per adult, unchanged from recent tax years, according to HMRC's ISA guidance. This is a total allowance across all your ISAs in a single tax year, not a per-account limit, so you could put £20,000 into one Cash ISA, or split it between a Cash ISA, a Stocks & Shares ISA and an Innovative Finance ISA, as long as the combined total does not exceed £20,000.
The Lifetime ISA (LISA) sits within this overall allowance but has its own annual cap of £4,000, and only those aged 18 to 39 can open one. Contributions to a LISA attract a 25% government bonus, so paying in the full £4,000 adds a further £1,000 from the government, subject to the scheme's rules on withdrawals for a first home or after age 60. Junior ISAs are separate again, with their own £9,000 annual limit for under-18s, and do not count against the adult £20,000 allowance.
Splitting your allowance: a worked example
Consider someone with £20,000 to invest across the tax year who wants some accessible cash savings alongside longer-term investment growth. They could put £6,000 into a Cash ISA for an emergency fund, £4,000 into a Lifetime ISA to work towards a house deposit (triggering a £1,000 bonus), and the remaining £10,000 into a Stocks & Shares ISA for long-term growth. The combined contributions equal exactly £20,000, so the full allowance is used without breaching any single product's own sub-limits.
It's worth noting that transfers between ISA providers, if done correctly using the official ISA transfer process rather than withdrawing and redepositing cash, do not count against your annual allowance. This means you can move a previous year's ISA savings to a better-paying provider at any time without eating into your current year's £20,000 limit, which is a common point of confusion for savers comparing rates.
ISA versus pension: which comes first?
A frequent question is whether to prioritise ISA contributions or pension contributions when funds are limited. Pension contributions attract tax relief at your marginal rate and, for employees, may also benefit from employer contributions and National Insurance savings through salary sacrifice, which can make pensions more efficient for higher and additional rate taxpayers. ISAs, by contrast, offer no upfront tax relief but allow completely tax-free withdrawals at any age, which suits savers who may need access to their money before retirement age.
In practice, many people use both: enough pension contributions to capture any employer match, then ISA savings for medium-term goals and flexibility, before topping pension contributions back up if higher-rate tax relief is available. Comparing your salary sacrifice pension savings against straightforward ISA saving can help clarify which route suits your personal circumstances and tax band.
What happens if you over-contribute
If you accidentally pay more than £20,000 across your ISAs in a single tax year, HMRC will typically identify the breach through data reported by ISA providers and may write to you, sometimes requiring the excess (and any tax advantage gained) to be withdrawn. This most often happens when people open a new ISA with a different provider partway through the year and forget how much they've already contributed elsewhere.
Keeping a simple running total of contributions across all your ISA accounts, especially if you hold accounts with more than one provider, is the most reliable way to avoid this. Providers are required to report annual subscriptions to HMRC, so discrepancies are usually caught, but resolving them can take time and may involve unwinding transactions, so prevention is far simpler than correction.
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FAQ
Frequently asked questions
Short answers first. Open the question if you want the detail behind the result.
Does the £20,000 ISA allowance reset every tax year?
Yes. The allowance runs from 6 April to 5 April and does not carry over. Any unused allowance is lost once the tax year ends, so unused headroom cannot be added to a future year's limit.
Can I have more than one ISA at the same time?
You can hold multiple ISAs, including from different providers, as long as your total new contributions across all of them in a tax year do not exceed £20,000. Older ISAs from previous years can also be held alongside new ones without affecting this year's allowance.
Do I pay tax on ISA withdrawals?
No. Withdrawals from a Cash ISA or Stocks & Shares ISA are free of income tax and capital gains tax. A Lifetime ISA has different rules, and withdrawing funds before age 60 for reasons other than a first home purchase can trigger a government withdrawal charge.
Is the Lifetime ISA bonus paid every year?
Yes, provided you contribute. The government adds a 25% bonus on contributions up to the £4,000 annual LISA limit, meaning a maximum bonus of £1,000 per tax year if you use the full allowance.
Sources
External links open the official source used to review this guide.