What Are The New Annual ISA Allowances?

When preparing for the new tax year, it’s important to understand how to save effectively.

In the UK, ISAs are a tax-efficient way of saving or investing money. This helps UK residents to engage in regular savings or start building up a nest egg without having to pay tax on any gains.

However, there are a range of different types of ISA and a variety of rules that stipulate how much money savers can put away each year. In this article, we will be explaining the most common types of ISA and what their relevant allowances will be in the 2026/27 tax year.

What Is My ISA Allowance?

In general, every UK adult has an annual ISA allowance of £20,000. This means that the average UK adult can save up to £20,000 per tax year, which runs from 6 April to 5 April.

However, some types of ISA have an additional limit on how much money can be saved, and these rules were recently updated during the Autumn 2025 budget.

Stocks and Shares ISAs

Stocks and shares ISAs are a popular choice for investing in the UK. Rather than being held exclusively in cash, money invested in a stocks and shares ISA can be invested in a range of assets, including individual stocks and shares, funds, trusts, bonds and cash.

Because stocks and shares ISAs hold a range of investments instead of just cash, there is a greater risk of the value going up or down. However, there are strategies that can be used to reduce the risk of loss; with Sheffield Mutual, we engage in a process called ‘smoothing’, where money is held back during profitable periods to be redistributed during harder times. However, smoothing only takes place in our ISAs that are invested in our with-profits fund, which means that it does not apply to our Sustainable ISA offerings.

Currently, there are no restrictions on how much of a UK resident’s £20,000 ISA allowance can be invested in a stocks and shares ISA, which means UK savers are free to save up to £20,000 in their stocks and shares ISA without penalty.

Cash ISAs

The primary difference between cash ISAs and stocks and shares ISAs is how the money is held. As the name would suggest, cash ISAs hold money as cash, which earns interest from the financial institution that holds the ISA.

In the Autumn Budget 2025, it was announced that the contribution limit for cash ISAs will be reduced from April 2027. This means that, after the next tax year, a person looking to save £20,000 in their ISAs would be able to contribute a maximum of £12,000 to their cash ISA and would need to save their remaining £8,000 allowance in a different type of ISA, like a stocks and shares ISA. However, this limit does not apply to UK residents over the age of 65.

Lifetime ISA (LISA)

LISA allowances are handled slightly differently from other ISA products.

Lifetime ISAs are a slightly different type of product, which can be used to work toward two specific long-term goals: building a deposit for a home or acting as a supplement or alternative to a pension.

The value of a LISA can only be used to make a qualifying first-home purchase, or can be withdrawn completely after the age of 60. Withdrawals for any other reason incur an automatic penalty of 25%, which prevents savers from opening an account, receiving the 25% bonus, and then transferring the funds away.

LISA contributions are currently limited to £4,000 a year for UK residents. Any contributions up to this £4,000 limit will be topped up by 25% by the government, meaning that a maximum contribution of £4,000 will result in a LISA balance of £5,000 after this top-up.

Although no changes have been made to LISA rules in the 2025 Autumn Budget, the government has indicated that it will enter a ‘consultancy period’ around the LISA in 2026.

Junior ISA (JISA)

A JISA, is a type of ISA designed to encourage families to save for their children’s future. In order to encourage saving, JISAs provide the same tax relief as adult ISAs. While a JISA has to be opened by the child’s parent or legal guardian, any adult can make contributions to the JISA after it has been opened, like grandparents, aunts, uncles, godparents, and family friends.

Like other types of ISA, the JISA also has an annual contribution limit. A maximum of £9,000 per tax year can be saved in a JISA.

It is important to note that a child can have one of each type of JISA; if a cash JISA has already been opened on behalf of a child, a stocks and shares JISA can still be opened with Sheffield Mutual. Alternatively, the value of an existing cash JISA can be transferred to a stocks and shares JISA.

Find A Range Of ISA Products At Sheffield Mutual

At Sheffield Mutual, our ISA products, including our Sustainable ISAs like our Regular Premium Sustainable ISA, Single Premium Sustainable ISA, and Sustainable Junior ISA, are all stocks and shares ISAs, allowing our members to take advantage of their full ISA allowance for the year.

Browse our Regular Premium Investment ISA and Single Premium Investment ISA to find the right savings product to meet your needs.

If you are interested in saving, but aren’t sure which product is right for you, consider trying our helpful product selector. If you’d prefer to speak to someone over the phone, contact us, and a friendly, helpful member of the team will be happy to answer any questions you might have.

This article provides generic information and the writer's opinions and should not be relied upon for investment decisions. Sheffield Mutual has provided no advice. If you doubt whether a savings or investment plan suits you, consider contacting a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk or www.vouchedfor.co.uk. Advisers may charge for providing such advice and should confirm any costs beforehand.

The information in this article is based on our understanding of current tax rules and may vary depending on your individual circumstances.