Time is running out to make the most of this year’s ISA allowance: Use it or lose it!
There is just a month to go before the end of the tax year on April 5, so if you’re considering using some or all this year’s £20,000 individual savings account (ISA) allowance, you may want to get your skates on.
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This is a ‘use it or lose it’ allowance, so if you don’t make the most of it this tax year, you can’t carry it forward to the following 2026/27 tax year.
ISAs are essentially a tax-free wrapper and mean that you don’t have to pay any income tax, dividend tax, or capital gains tax on any interest or growth on savings and investments held in them. Under current rules, you can save up to £20,000 across various ISA types such as cash ISAs, stocks and shares ISAs or innovative finance ISAs, which invest in peer-to-peer lending.
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However, from April 2027, as announced by Rachel Reeves in the 2025 Autumn Budget, anyone aged under 65 will only be able to pay a maximum of £12,000 into cash ISAs each tax year. They can put the remaining £8,000 into other types of ISA, or put the full £20,000 into a stocks and shares or innovative finance ISA.
Savers are rushing to make the most of this year’s allowance ahead of these changes. Lloyds Bank estimates that UK savers will put a record total £115 billion into ISAs this tax year, with over £85 billion going into tax-free cash savings alone.
Ian Futcher, financial planner at Quilter said: “Households are continuing to plough money into savings where they can, and the combination of the end of the tax year nearing, as well as changes to the cash ISA allowance which will see cash ISA savings limited to £12,000 per year for under 65s from April 2027, appear to have driven a renewed interest in ISAs.”
Bear in mind that the end of the tax year on April 5 falls on Easter Sunday this year, so some providers may set earlier cut off dates.
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Do plenty of research
If you want to put your money into a cash ISA, always do plenty of research to ensure your money will earn as much interest as possible. According to analysis from Investec Save, fixed rate cash ISA savers risk missing out on up to 1% a year in tax-free interest if they do not shop around.
Its analysis shows the average rate paid by the top 10 highest paying one-year fixed rate cash ISAs is 4.11% compared with 3.15% from the lowest paying account on the market. Investec Save analysed all 77 of the one-year fixed rate accounts available for savers ahead of the end of the current tax year.
Savers depositing the maximum £20,000 allowed in a one-year fixed rate cash ISA this tax year risk giving up £200 of tax-free interest if they pick the lowest paying account available. David Hunt, Head of Deposits, Investec, said: “The difference between the highest and lowest paying accounts is significant and savers will see the difference if they shop around for the best home for their money.”
Current best buy one-year fixed rate ISAs include Virgin Money’s Cash ISA and Tandem Bank’s Cash ISA which pay 4.15% and 4.07% respectively and can each be opened with £1.
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Don’t forget children’s tax-free savings
If you have children, remember that they have a Junior ISA allowance which is in addition to your own ISA allowance. Again, this must be used by April 5 or this year’s allowance will be gone for good.
Simon Caddick, Savings Director at Lloyds, said: “The Junior ISA is specifically designed for children and a great way to help them get into a savings habit. There’s an annual savings limit of £9,000 that is distinct from parents’ own individual £20,000 savings limits. This means parents don’t have to worry about maxing out their personal annual allowance, they can still save into a junior account for their child on top.”