If you’re looking for a tax-efficient way to save or invest, your ISA allowance is one of the best opportunities available.
ISAs (Individual Savings Accounts) allow you to save or invest money without paying tax on the interest, income or capital gains you earn. For many UK individuals and business owners, they’re an important part of long-term financial planning.
But with changes on the horizon for cash ISAs, now could be the right time to review how you’re using your allowance.
What Is an ISA?
An ISA is a tax-free savings or investment account available to UK residents aged 18 and over.
There are currently four main types of ISA:
- Cash ISA
- Stocks and Shares ISA
- Innovative Finance ISA
- Lifetime ISA
Each option works slightly differently, so it’s important to understand which one suits your goals.
Cash ISAs
Cash ISAs work similarly to regular savings accounts but with one major advantage — the interest earned is tax-free.
These are usually offered by:
- Banks
- Building societies
- National Savings & Investments (NS&I)
If you prefer lower-risk saving and easy access to your money, a cash ISA may appeal to you.
Stocks and Shares ISAs
Stocks and Shares ISAs allow you to invest in assets such as:
- Company shares
- Investment funds
- Government bonds
- Corporate bonds
- Long-term asset funds
Any income or capital growth generated within the ISA is free from UK tax.
While investments can go down as well as up, these ISAs are often used for longer-term wealth building.
Lifetime ISAs
Lifetime ISAs can be held as cash or investments and are designed to help people:
- Buy their first home
- Save for retirement
There’s currently a maximum annual contribution limit of £4,000 into a Lifetime ISA.
Innovative Finance ISAs
These are designed for alternative investments and can include:
- Peer-to-peer lending
- Crowdfunding investments
- Certain investment products that don’t qualify for Stocks and Shares ISAs
- Some crypto-related exchange traded notes
These products can carry higher risk, so it’s important to understand what you’re investing in.
Don’t Forget Junior ISAs
Parents and guardians can also save for children through a Junior ISA.
For 2026/27, the Junior ISA allowance is £9,000 per child.
This can be a great way to build savings for a child’s future while benefiting from tax-free growth.
What Is the ISA Allowance for 2026/27?
The overall ISA allowance for adults remains at £20,000 for the 2026/27 tax year.
You can split this allowance across different types of ISA depending on your financial goals.
Example
Richard wants to use his full ISA allowance in 2026/27.
He decides to:
- Invest £4,000 into a Lifetime ISA
- Place £10,000 into a Cash ISA
- Invest £6,000 into a Stocks and Shares ISA
This means he has fully used his £20,000 annual allowance while spreading his savings across different products.
Important Changes Coming in 2027/28
Although the overall ISA allowance will remain at £20,000, changes are planned for people under 65.
From 2027/28:
- Individuals under 65 will only be able to invest up to £12,000 into a Cash ISA
- To use the full £20,000 allowance, at least £8,000 will need to go into non-cash ISAs such as Stocks and Shares ISAs, Lifetime ISAs or Innovative Finance ISAs
However, individuals aged 65 and over will still be able to place the full £20,000 into a Cash ISA if they choose.
Should You Use More of Your Cash ISA Allowance Now?
If you’re under 65 and prefer the security of cash savings, this could be an important planning opportunity.
Many people may wish to maximise their Cash ISA contributions in 2026/27 while the current rules still apply.
As always, the right approach depends on your personal circumstances, savings goals and attitude to risk.
Need Help Planning Your Savings Tax-Efficiently?
Understanding ISAs and upcoming rule changes can feel overwhelming, especially when you’re balancing business finances and personal wealth planning.
At Jon Davies Accountants, we help business owners and individuals across Liverpool and the UK make informed financial decisions that support their long-term goals.
If you’d like help understanding your ISA options or planning tax-efficient savings for the future, get in touch with Jon and the team today.
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Any questions?
If you’d like a meeting or a video call to discuss this, please get in touch with your favourite Liverpool accountant
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