Your ISA allowance explained

ISAs are one of the most popular ways to save because any interest you earn is tax-free.

Many people use ISAs in different ways:
•    Saving towards a future goal. 
•    Building an emergency fund. 
•    Setting aside money for retirement. 
•    Making use of tax-free saving. 

Understanding how your ISA allowance works can help you make the most of your options.

Knowing how much you can save tax-free each tax year can help you plan ahead.

What is your ISA allowance?

Your ISA allowance is the maximum amount you can pay into any ISAs during a single tax year.

The allowance is set by the government and applies across all your ISA accounts combined.

For the 2026/2027 tax year, the ISA allowance is £20,000.

This means you can pay in up to £20,000 into ISA accounts during that tax year. Although from April 6 2027, the rules are changing so anyone under the age of 65 can only pay up to £12,000 of their total ISA allowance into cash ISAs.

Any interest you earn on money in a cash ISA is free from UK income tax.

The amount of interest you'll earn depends on your account's interest rate, how much you save, and how long your money remains in the account.

Do you need to use your full allowance?

No. You can save as much or as little as you like, up to the annual limit.

Your allowance works on a 'use it or lose it' basis.

So if you don't use your full allowance during the tax year, you can't carry it over into the next tax year. 

Even if you don't use the full allowance, a cash ISA can still be a valuable home for your savings.

Can you use your full allowance in cash ISA?

This depends on how old you are. From April 6 2027, a change to ISA rules means that:

If you're under 65, you can only put £12,000 of your total ISA allowance into cash ISAs. 
If you're over 65, you can use your whole £20,000 in cash ISAs if you want to.

In a nutshell this means if you're under 65, the 2026/2027 tax year is the last time you can put your full £20,000 ISA allowance into a cash ISA (until the tax year you turn 65).

To find out more about how these changes effect you, read our guide to cash ISA rule changes or stay up to date at GOV.UK.

How ISA allowances work

Your annual ISA allowance applies across all the ISAs you pay into during a single tax year.

You can pay into multiple different ISAs in a tax year. But the total amount you contribute can't exceed your annual allowance.

You could put your full allowance into one ISA. Just remember the cash ISA limits for under 65s mentioned above. Or choose to split your allowance across different types of ISA. The choice is yours. 

With Principality you can only pay into one cash ISA each tax year. 

What counts towards your allowance?

Any money you pay into your cash ISA during the tax year counts towards your annual allowance. This includes any money you transfer from a current account or non-ISA savings account, whether its through regular monthly payments or a one-off deposit. 

Money you transfer from one ISA to another doesn't count towards your annual allowance. But you must make sure you follow your provider's official ISA transfer process. 

What happens when you reach your allowance?

Once you've used your full ISA allowance for the tax year, you can't pay any more money into ISAs until the next tax year begins.

Any savings already held within your ISA can remain there and continue earning tax-free interest.

If you're approaching your allowance limit, it's worth keeping track of contributions across all your ISA accounts.

Making the most of your ISA allowance

There's no right or wrong way to use your ISA allowance.

Some people make one-off or lump-sum deposits as soon as they can each tax year.

Starting early in the tax year gives your savings longer to earn interest.

But regular contributions throughout the year might suit you better. Some people don't have their full allowance to save as a lump sum, so prefer to add to their ISA over time.

If that's you, make sure you choose an ISA that lets you keep adding money over time. 

Your savings are protected

If your ISA provider is regulated by the FCA, your savings are protected by the Financial Services Compensation Scheme (FSCS). This covers eligible savings up to £120,000 per person, per provider.

If you have more than £120,000 in savings, consider spreading it across different providers to maximise your protection.

Whether you're saving for a specific goal or simply want to make the most of tax-free interest, our range of cash ISAs could help you reach your savings goals.