With the new tax year starting on 6th April, millions of UK savers have a final opportunity to use the full £20,000 Individual Savings Account (ISA) allowance in cash before upcoming restrictions take effect.
The 2026/2027 tax year is the last chance for individuals under 65 to contribute the entire £20,000 limit into a cash ISA. From 6th April 2027, annual contributions to cash ISAs will be capped at £12,000 for those under 65, although the overall ISA allowance will remain at £20,000. Savers wishing to use the full allowance will need to allocate the remaining portion into other ISA types, such as stocks and shares ISAs. Over-65s will retain the full £20,000 cash ISA allowance.
The reforms, announced in the Autumn 2025 Budget, aim to encourage investment in the UK economy by shifting some savings from low-yielding cash accounts into productive assets. Existing cash ISA balances built up before April 2027 will not be affected.
Derence Lee, Chief Finance Officer at mutual society Shepherds Friendly, stressed the importance of acting now. “The new tax year gives savers a fresh opportunity to make full use of their annual allowances. From 2027/2028 onwards, the cash ISA limit drops to £12,000. Those wishing to maximise their full ISA allowance may want to direct the remainder into a stocks and shares ISA,” he said.
Cash ISAs remain popular for their simplicity and protection under the Financial Services Compensation Scheme (FSCS) up to £85,000 per person per authorised firm. They are suitable for short-term savings and emergency funds, though with recent falls in interest rates, many savers are seeing modest real returns after inflation.
Stocks and shares ISAs, by contrast, allow investment in a range of funds, shares, bonds, and other assets. While capital is at risk and values can fluctuate, they historically offer stronger medium- to long-term growth potential, with all gains and dividends free from UK income tax and capital gains tax.
Despite the benefits, research by Shepherds Friendly highlights hesitation among savers. Their data shows that 48% of people lack confidence in investing, and only 1 in 10 currently hold a stocks and shares ISA.
Lee explained, “While cash ISAs are important for short-term needs, stocks and shares ISAs may be better for those seeking to grow investments over time. Education and research can help bridge the confidence gap, showing benefits beyond tax efficiency, including the potential for your money to grow more to achieve your financial goals. Reviewing allocations now and understanding stocks and shares ISAs can help make full use of your ISA allowance ahead of next year’s changes.”
Experts recommend savers consider their overall financial situation, time horizon, and risk tolerance before allocating funds. Those with long-term goals, such as retirement or saving for a house, may benefit from diversifying into investments, though professional advice is advised where appropriate.
The government has confirmed the overall £20,000 ISA allowance will remain unchanged until at least 2030. Banks and providers are expected to inform customers with large cash ISA balances about the upcoming changes.
With ISA season underway, financial organisations including Shepherds Friendly are emphasising the value of using current rules while they last. Lee added, “Taking action sooner rather than later ensures you make full use of your ISA allowance, benefit from potential tax-free growth, and stay on track for your long-term financial goals. Investments should always be considered in the context of your overall financial situation and risk tolerance.”
Savers can contribute to ISAs from 6th April 2026 for the 2026/2027 tax year. Those who have not yet used their 2025/2026 allowance have until 5th April 2026 to do so.