Your ISA limit sets how much you can save or invest tax efficiently each tax year. Understanding how this allowance works may help you understand how your savings and investments could fit within your broader financial plans, without paying UK income tax, capital gains tax, or dividend tax on returns held within an ISA.
In this guide, we’ll explain what the ISA limit is, how the annual allowance operates, and how it can be split across different types of ISA. We also explain key rules, common misconceptions, and what to be aware of when allowances change in future tax years.
This information is for general guidance only and does not constitute personal financial advice. Whether an ISA is suitable depends on your individual circumstances. Tax treatment depends on individual circumstances and tax rules may be subject to change in the future.
What is an Individual Savings Account (ISA)?
An Individual Savings Account (ISA) is a type of savings or investment account designed to help people build tax‑free savings. Introduced by the UK Government, ISAs allow you to save or invest money without paying UK income tax, capital gains tax, or dividend tax on the returns generated within the account, up to the annual limit set by the UK Government.
There are several types of ISA, including Cash ISAs and Stocks and Shares ISAs, each designed for different saving or investing needs.
While ISAs work in a similar way to standard savings or investment accounts, their key feature is the tax efficient wrapper that applies for as long as your money remains inside the ISA.
It’s important to remember that any ISA tax benefits depend on your individual circumstances, and that tax rules may change. You must be at least 18 years old and a UK resident to open most adult ISAs, and you can typically apply for an ISA online if you meet the eligibility criteria set by the provider. Lots of providers allow you to start your ISA savings with a minimum amount set by the provider.
How do ISAs work?
ISAs work by providing a tax efficient wrapper around savings or investments. Once you set up your ISA account, from your very first payment, any interest, income, or growth earned within the ISA is currently protected from UK income tax and capital gains tax however tax treatment depends on individual circumstances and may change.
You can usually choose from selected accounts offered by different providers. Some people prefer Cash ISAs, where the money is held in cash and accrues tax-free interest, while others prefer investment‑based ISAs where growth is dependent on the performance of certain investments.
ISAs are often used for a range of purposes, including general saving or building towards specific goals, like saving to enjoy a comfortable retirement, leave an inheritance, or save for a child’s education.
Some ISAs allow you to start with minimum deposits, which can make them accessible even if you’re saving affordable regular amounts or irregular lump sums.
What is the ISA limit for the 2026 tax year?
The ISA limit is the maximum amount you can save or invest within ISAs each year tax‑free. This is also known as your tax‑free allowance. Under current rules, in a single tax year, you can pay up to £20,000 into ISAs across all of your ISAs combined.
The current tax year runs from 6 April 2026 until 5 April 2027, and your ISA allowance resets at the start of each new tax year in April. It’s not possible to carry over any unused allowance into a new tax year, so if you don’t use your full ISA allowance by the end of the current tax year, it’s lost.
Once money is already inside an ISA, it can usually remain there and continue to benefit from tax‑free treatment in future years, subject to the terms of the account.
Money withdrawn from most ISAs cannot be re-deposited in the same tax year if the £20,000 limit has been reached, unless the ISA is flexible.
How does the ISA allowance work with different types of ISA?
You can spread your allowance across different types of ISAs, as long as your total contributions stay within the overall limit. How you choose to split your allowance will depend on your individual circumstances. Each ISA type has its own features and rules, but they all share the same £20,000 annual allowance under current rules.
Stocks and shares ISA
A stocks and shares ISA allows you to invest in assets like shares, funds or bonds. They might tend to suit longer-term investment and any income or growth generated within the ISA is tax‑free under current rules.
Contributions to a stocks and shares ISA count towards your overall ISA allowance. Unlike Cash ISAs, the value of investments can go down as well as up and you could get back less than you invest.
Scottish Friendly specialises in providing Stocks & Shares ISAs.
Cash ISA
A Cash ISA is a savings account that lets you earn interest free from UK income tax (subject to current rules) because you don’t pay income tax on any interest your savings accrue.
Cash ISAs are often used for short-term saving or where people want easy access to ISA savings, depending on the account terms. Contributions to one or more Cash ISAs count towards your overall ISA allowance for the tax year.
The Cash ISA limit for individuals under 65 is currently expected to decrease to £12,000 starting April 2027, while the overall ISA limit remains at £20,000 across all ISA types.
Scottish Friendly does not provide Cash ISAs.
Lifetime ISA
A Lifetime ISA (LISA) is designed to help people aged 18 - 39 save or invest for a first home or for later life, with a government bonus of 25% on contributions, of up to a maximum of £1,000 a year.
You can only pay into one Lifetime ISA per tax year, and there is an annual contribution limit of £4,000 that you can pay into a LISA, which forms part of your overall £ 20,000 ISA allowance. You can continue contributing until you’re 50.
There are restrictions on when you can withdraw money from a Lifetime ISA, and withdrawals outside permitted circumstances will usually result in a government withdrawal charge.
Scottish Friendly does not provide Lifetime ISAs.
Innovative finance ISA
An Innovative Finance ISA or IFISA allows you to invest in alternative assets like peer‑to‑peer lending, which comes with increased risk. Instead of saving or investing in traditional assets, any potential returns will come from interest paid by individuals or businesses that borrow the money.
Any returns within the ISA are tax‑free, but these investments can be higher risk. Your capital is not guaranteed, and returns depend on borrowers repaying their loans, meaning you could get back less than you invest and there is a risk you could lose all of your capital.
IFISAs are generally considered suitable for experienced investors who are comfortable with investment risk. Contributions to an Innovative Finance ISA still count towards your total ISA allowance.
Scottish Friendly does not provide Innovative Finance ISAs.
When does the ISA limit reset?
Your ISA limit applies within the current tax year, which runs from 6 April 2026 to 5 April 2027. That means that you can’t pay more than the £20,000 limit across all your ISAs within the same tax year.
At the end of each tax year, your ISA allowance resets, giving you a new allowance to use for the next year. This reset happens automatically, so you don’t need to take any action for it to apply.
Once the new tax year begins, you can start saving and investing again using the refreshed allowance, even if you already hold ISAs from previous years. You can't carry any allowance over into the next year; it will reset to the limit again once the new tax year starts on 6 April.
How do I know whether I've reached my ISA limit?
Keeping track of how much you’ve paid into ISAs during the tax year can help you avoid accidentally exceeding your allowance, especially if you hold accounts with more than one provider. There are several different ways to check.
Check your ISA statement
Your provider might issue regular ISA statements throughout the year showing how much you’ve paid in during the current tax year.
This information might arrive by post or via email and should spell out clearly the amount and number of deposits you’ve made, as well as how much of your overall allowance you’ve already used with your provider.
Use online banking or a mobile banking app
Many ISA providers let you view your contribution history through secure online banking or a mobile banking app. These tools may show year‑to‑date contributions and, in some cases, how much of your overall allowance you have left for the tax year with that provider.
Contact your provider directly
If you’re unsure about ISA allowances or how close you are to the ISA limit, you can contact your ISA provider(s) directly and ask them for confirmation.
They should be able to check your records, tell you how much you’ve contributed to ISAs with them during the tax year, and provide support if there are any other questions you have.
What happens if I go over the ISA allowance?
Your ISA allowance sets the maximum amount you can pay into all your ISAs during a tax year. If you accidentally exceed this limit, it’s important to act quickly. While there aren’t fines for doing so, the extra amount paid in will not benefit from tax‑free status and will need to be corrected in line with HMRC guidance.
Contact from ISA provider
If your bank or financial provider becomes aware that you’ve exceeded your ISA allowance, they may contact you to explain next steps. In some cases, they might wait for instructions from HM Revenue & Customs (HMRC) before taking action.
If you do receive word from your ISA provider that you’ve gone over the limit, you shouldn’t withdraw the money yourself unless you’re advised to do so.
Potential tax implications
Any money paid into an ISA above the allowance loses its tax‑free status. This means you could lose money to tax, as interest, income or gains earned on the excess amount may be subject to UK tax. The exact tax treatment depends on the type of ISA and your individual tax position.
Reporting requirements
HMRC reviews ISA subscriptions after the end of each tax year. If an oversubscription is identified - meaning they realise that you’ve gone over the ISA limit - HMRC will issue a ‘notice of repair’ (an HMRC instruction explaining how the situation will be corrected). Your provider should then remove the excess amount and any associated returns.
Cooperating with HMRC
Correcting an ISA oversubscription usually involves cooperation between you, your provider and HMRC. Your provider can offer support by explaining the process and confirming what actions are needed to resolve the issue properly.
Does paying into a Junior ISA impact my adult ISA allowance?
Paying into a Junior ISA does not affect your own adult ISA allowance. A Junior ISA has a separate allowance, as it belongs to the child, which is currently £9,000 per tax year, and this therefore sits independently from the £20,000 adult ISA limit.
This means your ISA contributions and Junior ISA contributions for your child are not split across the same allowance. In theory, you could pay £20,000 into your adult ISA, and £9,000 into your child’s Junior ISA, for a total of £29,000 in the same tax year.
Once set up, anyone can pay into a child’s Junior ISA, including parents, grandparents, or other family members, but the money always belongs to the child and remains locked away until they turn 18. When the child reaches adulthood, the Junior ISA converts into an adult ISA, and from the next tax year they will be subject to their own adult ISA allowance, if the money remains invested.
Scottish Friendly is an award-winning Junior ISA provider. Investment Life & Pensions Moneyfacts Awards 'Best Junior ISA provider' 2019-2025.
Can I pay money into someone else's ISA?
You can’t pay directly into someone else’s ISA. ISAs can only be funded by the named account holder, meaning contributions must come from money in your own name. ISAs are held in a single name, so only that individual can use their own ISA allowance. The value of an ISA always belongs to the person whose name is on the account.
You can give money to another person, like a partner or older child, and they can pay it into their own ISA if they choose, using their own allowance. For younger children, adults can pay into a Junior ISA for them, which has its own separate rules and allowance.
How does transferring my ISA impact my ISA limit?
Transferring an ISA does not usually affect your total ISA allowance, as long as the transfer follows the official ISA transfer process. Money saved or invested into ISAs in previous tax years can normally be moved between different ISA accounts without counting towards your current year’s allowance.
For example, you can transfer funds from one Cash ISA to another without using up any of your annual allowance. You can also transfer existing ISA savings into a Stocks and Shares ISA, or another type of ISA, if the provider allows it.
Any new money you add during the current tax year still counts towards your ISA limit. To keep in line with current tax rules, ISA transfers should always be arranged through the ISA providers, not by withdrawing money yourself to pay it in again (as this loses ISA protection and may use up your allowance again).
Transfer an ISA to Scottish Friendly
What happens to my ISA allowance if I die?
When you die, your ISA allowance itself does not transfer to someone else. However, the value of your ISA(s) may still benefit certain people.
Spouses can inherit an additional ISA allowance equal to the value of the deceased partner's ISA(s), known as an Additional Permitted Subscription (APS). If you’re married or in a civil partnership, for example, your spouse or civil partner may be eligible to inherit the value of your ISA and add it to their own ISA without using their annual ISA allowance.
The APS is a one‑off allowance and usually needs to be used within specific time limits, depending on the type of ISA and the provider. ISA and tax rules change, and eligibility depends on individual circumstances, so it’s always helpful for individuals to check how the rules apply in their situation.
Where can I invest my ISA allowance?
Your ISA allowance can be invested across a range of ISA options, depending on your individual circumstances, risk appetite and how involved you want to be in managing your money.
Ready-made ISAs
Ready-made ISAs are managed for you and may be invested in a mix of assets aligned to a specific aim or risk level. These may appeal to some people who prefer the simplicity of having investment decisions handled on their behalf, rather than choosing individual investments themselves.
Self-managed ISAs
Self‑managed ISAs, sometimes called self‑selected ISAs, can give you greater control over how your ISA allowance is invested. You can choose funds, shares, or other investments yourself, including moving money between this account and other ISAs, where transfers are allowed.
This approach may appeal to some people looking for more interest or dividends over time and who are comfortable making their own investment decisions.
Some key takeaways
The ISA limit is £20,000 for the 2026/27 tax year, covering combined contributions across all the ISAs you hold.
You can split this allowance across different ISA types, but the total must stay within the yearly limit.
Junior ISAs have a separate £9,000 allowance for the 2026/27 tax year.
The allowance resets each tax year (6 April), and any unused amount cannot be carried forward.
Exceeding the limit may affect the tax-free status of the extra contributions and require correction in line with HMRC guidance.
Transfers between ISAs don’t usually count towards your current limit.
Important information
The value of stock market investments can go down as well as up, so you or your child could get back less than you’ve paid in.
The funds paid into a Junior ISA belong to the child and can only be accessed by them when they turn 18.
Tax-Free means the investment grows free from tax, with the exception of any tax your provider has already paid on your behalf (for example on dividends from UK shares). Tax treatment depends on individual circumstances and may be subject to change in the future.
This information is for general guidance only and does not constitute personal financial advice.
Scottish Friendly does not provide financial advice. If you’re unsure whether an ISA or Junior ISA is suitable for your situation, you may want to speak to an independent financial adviser.