Making the most of your ISA allowance before the rules change
Savers are being urged to make the most of this year’s individual savings account (ISA) allowance, ahead of changes to come on tax and savings rules.
Currently, adults can invest up to £20,000 each tax year in these tax-efficient accounts, via a cash ISA, stocks and shares ISA, or a combination of both.1 However from April 2027, while the overall annual allowance will remain the same, those under the age of 65 will only be able put up to £12,000 a year into a cash ISA.2
Starting to save or invest in an ISA early in the tax year rather than towards the end will help to maximise returns and make the most of tax-free interest or dividend payments. Failure to do so can eat into overall returns, particularly for higher-rate taxpayers.
Tax changes
Outside of ISAs, investors can earn just £500 from dividends before tax is due. From April this year dividend tax rates will increase again, to 10.75% for basic-rate taxpayers and 35.75% for higher-rate taxpayers. Additional-rate taxpayers will continue to pay 39.35%.3
From April 2027, savers will see a similar hike to tax paid on savings interest – with rates up to 22%, 42% and 47% respectively.4 Remember, while basic-rate taxpayers can earn £1,000 in interest per year tax-free (outside of ISAs), this reduces to £500 for higher-rate taxpayers and zero for additional-rate taxpayers.
There’s generally more focus on starting off a new ISA allowance, but savers should also track the performance of existing holdings – both stocks and shares and/or cash ISAs. If investment returns are poor, or interest rates have dropped, you can switch products and providers, without affecting the current year’s allowance.5
Many people also assume they can only open or fund one ISA account per tax-year. This is not the case – you can open or fund multiple ISA accounts provided the total amount invested does not exceed the £20,000 limit.
Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances
Investments do not offer the same level of capital security as deposit accounts.
The value of your investment, and the income from it, can go down as well as up and you may not get back the full amount you invested.
Past performance is not a reliable indicator of future performance.
The Financial Conduct Authority does not regulate tax advice. Tax treatment varies according to individual circumstances and is subject to change.
Sources
1 UK Government | How ISAs work
2 UK Government | Tax-free savings newsletter 19 — November 2025
3 UK Government | Tax on dividends
UK Government | Income Tax — Changes to Tax rates for Property, Savings and Dividend Income
4 UK Government | Tax-free savings newsletter 19 — November 2025
5 UK Government | Transferring your ISA
May Bulletin 2026
This insight is part of our May Bulletin 2026. Explore all the articles:
