ISA tax rules: allowances, transfers and flexible ISAs

For 2026 to 2027 you can pay up to £20,000 into adult ISAs, split however you like between cash, stocks and shares, innovative finance and Lifetime ISAs, with no more than £4,000 going into a Lifetime ISA. Interest, income and gains inside an ISA are free of income tax and capital gains tax and do not go on a tax return. Transfers between providers do not use the allowance, and a flexible ISA lets you replace cash you have withdrawn in the same tax year.

What counts towards the £20,000 allowance?

The allowance applies to new money paid in during the tax year, 6 April to 5 April. GOV.UK lists four adult ISA types: cash, stocks and shares, innovative finance and the Lifetime ISA. All of them share the single £20,000 limit. The Lifetime ISA has its own cap of £4,000 a year inside that figure, and you can pay into only one Lifetime ISA in a tax year.

These do not use the allowance:

• interest, dividends and growth earned inside the ISA;
• transfers of savings from one ISA provider to another, whichever year the money went in;
• replacing cash withdrawn from a flexible ISA, within the rules below;
• an additional permitted subscription made by a surviving spouse or civil partner;
• Junior ISA payments, which have a separate limit of £9,000 for 2026 to 2027 and belong to the child (see Junior ISAs and children’s savings).

For a non flexible ISA, HMRC’s guidance for ISA managers says the limit applies to the amount subscribed and is not reduced by a later withdrawal. Paying in £20,000, taking out £5,000 and paying it back is therefore an over subscription unless the account is flexible.

Since 6 April 2024 you must be 18 or over to subscribe to any ISA. You must also be UK resident, or a Crown servant serving overseas (or their spouse or civil partner). An ISA cannot be held jointly.

Can you pay into more than one ISA of the same type?

Yes. GOV.UK’s own example shows £10,000 in one cash ISA, £3,000 in another cash ISA and £7,000 in a stocks and shares ISA in the same year. The limit is on the total paid in, not the number of accounts. The exception is the Lifetime ISA, where only one account can receive payments in a tax year.

Each ISA manager checks only the accounts it runs. HMRC’s guidance says investors who use several managers are responsible for staying within the overall limit themselves. Where an over subscription is found in the current year, the excess and any related gains are removed; for earlier years, HMRC contacts the investor.

What can each type of ISA hold?

ISA type	What it can hold (GOV.UK)
Cash ISA	Bank and building society savings and some National Savings and Investments products
Stocks and shares ISA	Shares, unit trusts and investment funds, corporate and government bonds, long term asset funds. Cryptoasset exchange traded notes only if held there before 6 April 2026
Innovative finance ISA	Peer to peer loans, crowdfunding debentures, funds whose notice periods keep them out of stocks and shares ISAs, and cryptoasset exchange traded notes
Lifetime ISA	Cash, stocks and shares, or both; see Lifetime ISA bonus and withdrawal charge

Shares you already own outside an ISA cannot be moved in, except shares from certain employee share schemes such as Sharesave and share incentive plans. To shelter other shares you must sell them and subscribe the cash, and HMRC’s guidance confirms the sale is a disposal for capital gains tax (see capital gains tax rates).

How do flexible ISAs work?

A flexible ISA is one whose terms let you replace cash you have withdrawn without the replacement counting towards the annual limit. Providers do not have to offer it, so check the terms. The main rules in HMRC’s ISA manager guidance are:

• flexibility covers cash only: cash ISAs, and cash held in stocks and shares or innovative finance ISAs;
• Lifetime ISAs and Junior ISAs cannot be flexible;
• a withdrawal comes first out of the current year’s subscriptions, then out of earlier years’ money;
• earlier years’ money can only be replaced in the same account and in the same tax year, so the chance is lost after 5 April;
• withdrawing current year subscriptions reduces your net subscription, freeing allowance you can use in another ISA;
• money moved out by an ISA transfer, or taken by HMRC to cover a tax debt, cannot be replaced.

GOV.UK’s illustration: you pay £10,000 into an ISA in 2026 to 2027 and then take out £3,000. If the ISA is flexible you can still pay in £13,000 that year; if it is not, only £10,000.

How do ISA transfers work?

You can transfer all or part of an ISA to another provider at any time, to the same or a different type, including money from earlier years. Ask the new provider to arrange it using its transfer form. If you withdraw the money yourself instead, GOV.UK warns that you cannot reinvest that part of your allowance. Transfers between cash ISAs should take no more than 15 working days and other transfers no more than 30 calendar days. Lifetime ISAs and Junior ISAs have their own restrictions, and Junior ISA money cannot be transferred into an adult ISA.

If you become non resident you must tell your provider and cannot pay in more (Crown employees overseas excepted), but you can keep the ISA, its tax relief continues and you can still transfer it.

What changes from 6 April 2027?

The Individual Savings Account (Amendment) (No. 2) Regulations 2026 were laid before Parliament on 14 September 2026 and come into force on 6 April 2027. They change the rules as follows:

• the overall limit stays at £20,000, but investors under 65 can put no more than £12,000 of it into cash ISAs; those aged 65 and over keep a £20,000 cash limit from the start of the tax year in which they turn 65;
• investors under 65 will not be able to transfer from a stocks and shares or innovative finance ISA into a cash ISA, although transfers from cash to those ISAs remain possible;
• interest on cash held inside stocks and shares and innovative finance ISAs will bear a flat rate charge set at the savings basic rate, 22%;
• a stocks and shares ISA will not be allowed to consist entirely of money market funds, a rule that will not apply to Junior ISAs.

None of this applies in 2026 to 2027. Savers under 65 who regularly put more than £12,000 a year into cash ISAs should plan their 2027 to 2028 subscriptions now.

What happens to an ISA when the holder dies?

For deaths on or after 6 April 2018, the ISA becomes a continuing account of a deceased investor. No new payments can be made, but income and gains stay free of income tax and capital gains tax until the executor closes it, the administration of the estate is completed, or the provider closes it three years and one day after the death. The ISA still forms part of the estate for inheritance tax.

A surviving spouse or civil partner who was living with the deceased at the date of death gets an additional permitted subscription on top of their own allowance. It equals the higher of the ISAs’ value at death and their value when they ceased to be continuing accounts, and is available whether or not the survivor inherits the ISA itself. HMRC’s guidance sets the time limits: cash subscriptions within three years of the death or, if later, within 180 days of the administration being completed; transfers of inherited ISA investments within 180 days of ownership passing to the survivor. Once part of it is used with one manager, the rest must be used with the same manager.

What mistakes catch people out?

• Withdrawing money to switch providers instead of using a transfer.
• Assuming every ISA is flexible, then replacing a withdrawal and over subscribing.
• Spreading subscriptions across several providers and losing track of the £20,000 total.
• Declaring ISA interest on a tax return. GOV.UK says you do not need to; interest outside ISAs falls under the Personal Savings Allowance instead.
• Missing the additional permitted subscription after a spouse’s death.

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Related Accountapedia entries

• Keeping ISAs and UK accounts after moving abroad
• Saving for a child: bare trust or Junior ISA
• Tax on peer to peer lending interest and losses
• Pension or ISA: which is more tax efficient
• Savings income tax rates rising from April 2027

Sources

• GOV.UK: Individual savings accounts
• GOV.UK: Manage isa subscriptions for your investors
• GOV.UK: Who can invest in an isa if youre an isa manager
• GOV.UK: Junior individual savings accounts
• GOV.UK: Tax free savings newsletter 23 september 2026
• GOV.UK: Tax free savings newsletter 22 june 2026
• GOV.UK: Cash individual savings account isa limit reduction
• GOV.UK: Manage additional permitted subscriptions into an isa

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.