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Tax year 2026/27 Last reviewed: 23 October 2026
Smart savings 2026/27: how ISAs, savings tax and FSCS protection work
In 2026/27 you can put up to £20,000 into ISAs and pay no tax on the interest, income or gains. Outside an ISA, a basic rate taxpayer can earn £1,000 of interest tax-free, a higher rate taxpayer £500 and an additional rate taxpayer nothing. The FSCS protects deposits up to £120,000 per person, per authorised firm.
The tax year 2026/27 runs from 6 April 2026 to 5 April 2027. This page explains the rules and does not list savings rates, providers or rankings. Check the current rate with the provider before you open an account.
What changes for cash ISAs on 6 April 2027?
From 6 April 2027, if you are 64 or under at the end of the tax year, you can pay up to £12,000 of your £20,000 ISA allowance into cash ISAs. If you are 65 or over at the end of the tax year, the cash ISA limit stays at £20,000.
Until 5 April 2027 the whole £20,000 can go into cash ISAs. The Individual Savings Account (Amendment) (No. 2) Regulations 2026 (SI 2026/1018) were made on 10 September 2026 and come into force on 6 April 2027.
The £12,000 sits inside the £20,000, not on top of it. The other £8,000 can go into a stocks and shares ISA, an innovative finance ISA or a Lifetime ISA, up to each type's own limit, or stay unused. Nothing in the regulations requires you to invest it.
Other changes from 6 April 2027
- Interest paid on cash held in a stocks and shares ISA or an innovative finance ISA is charged at the savings basic rate, which is 22% for 2027/28. Your ISA provider pays it to HMRC. It applies at any age, and a cash ISA is not affected.
- You cannot transfer money from a stocks and shares ISA or an innovative finance ISA into a cash ISA unless you are 65 or over at the end of the year. You can still transfer from a cash ISA to a stocks and shares ISA.
- The investments in a stocks and shares ISA, apart from cash, cannot be 100% money market funds.
Sources: SI 2026/1018 and the HMRC factsheet on ISA reform. See also our ISAs explained guide.
How does Income Tax affect your savings interest?
Savings interest counts as income, so tax is due at your usual Income Tax rate once it goes above your allowances. The Personal Allowance is £12,570. In England, Wales and Northern Ireland the rates are 20% up to £50,270, 40% up to £125,140 and 45% above that. Interest inside an ISA is not taxed.
| Band | Income | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
Source: Income Tax rates and allowances. Scotland sets its own rates and bands for most income. The allowance falls by £1 for every £2 of adjusted net income above £100,000 and is zero at £125,140.
The Personal Allowance and the basic rate limit of £37,700 are fixed in law for every tax year up to and including 2030/31 (Finance Act 2021 section 5 and Finance Act 2026 section 10). If your income rises while the figures stay the same, more of it can fall above £50,270.
To find out which allowance you get on savings interest, see How much savings interest can you earn tax-free? below. For the full band rules, see our Income Tax guide.
How do ISAs work, and which types are there?
An ISA lets you save or invest without paying tax on the interest, income or gains. In 2026/27 you can save up to £20,000 across all your ISAs, in one account or split between several. The tax year runs from 6 April to 5 April. The four adult types are cash, stocks and shares, innovative finance and Lifetime ISAs.
You can pay into more than one ISA of the same type in a tax year, as long as the total stays within £20,000. GOV.UK gives the example of £10,000 in one cash ISA, £3,000 in another cash ISA and £7,000 in a stocks and shares ISA. You can pay into only one Lifetime ISA in a tax year.
ISAs do not close when the tax year ends. You keep the savings tax-free for as long as the money stays in your ISA accounts. If you complete a tax return, you do not need to declare ISA interest, income or gains on it.
Taking money out and moving it
You can take money out of an ISA at any time without losing tax benefits, but check your terms for rules or charges. If your ISA is flexible, you can put cash back in during the same tax year without using up more allowance. With a £20,000 allowance, £10,000 paid in and £3,000 taken out, you could pay in £13,000 if your ISA is flexible and £10,000 if it is not.
You can transfer all or part of an ISA to another provider at any time, to the same type or a different type. Use the new provider's transfer form: if you withdraw the money yourself, you cannot put that part back in tax-free. Transfers between cash ISAs should take no longer than 15 working days, and other transfers no longer than 30 calendar days.
The ISA types
Cash ISAs
Interest is not taxed. Cash ISAs can include savings in bank and building society accounts and some National Savings and Investments products.
Lifetime ISAs
Up to £4,000 a year with a 25% government bonus of up to £1,000 a year. You must be 18 or over but under 40 to open one.
Junior ISAs
Up to £9,000 a year in total across a child's Junior ISAs, from anyone. The child must be under 18.
ISA allowances and rules
How the £20,000 allowance is shared between ISA types, and the rules for transfers.
Over-60s ISAs and retirement savings
How the cash ISA limit works if you are 65 or over at the end of the tax year.
The Lifetime ISA withdrawal charge
You can take money out of a Lifetime ISA without a charge if you are buying your first home, are aged 60 or over, or are terminally ill with less than 12 months to live. For any other reason GOV.UK calls it an unauthorised withdrawal and applies a 25% withdrawal charge. The charge applies to the total in the account, including the government bonus.
GOV.UK example: £800 saved plus a £200 bonus makes £1,000. Withdrawing all of it costs £250 and leaves £750. To buy a first home the property must cost £450,000 or less, and you must buy at least 12 months after your first payment. Sources: Lifetime ISA and Individual Savings Accounts.
How much savings interest can you earn tax-free?
Outside an ISA, your Personal Savings Allowance depends on your Income Tax band: £1,000 for a basic rate taxpayer, £500 for a higher rate taxpayer and £0 for an additional rate taxpayer. If your other income is low you may also get a starting rate for savings of up to £5,000, as well as the allowance.
| Income Tax band | Personal Savings Allowance |
|---|---|
| Basic rate, 20% | £1,000 |
| Higher rate, 40% | £500 |
| Additional rate, 45% | £0 |
Source: Tax on savings interest. To work out your band, add all the interest you earned to your other income.
You pay tax on interest above your allowance at your usual Income Tax rate. GOV.UK example: a basic rate taxpayer earns £1,300 of interest. The first £1,000 is not taxed and the remaining £300 is taxed at 20%, so the tax due is £60.
The starting rate for savings
If your other taxable income, not counting savings interest or dividends, is under £17,570, you can earn up to £5,000 of interest tax-free. Each £1 of other income above the £12,570 Personal Allowance reduces the starting rate by £1. GOV.UK example: £16,000 of wages leaves £3,430 above the allowance, so £1,570 of starting rate remains and £200 of interest is not taxed.
If your wages, pension or other income do not use all of your Personal Allowance, HMRC applies the unused part to your savings interest.
How the tax is collected
After 5 April your bank or building society tells HMRC how much interest it paid you. If you file a Self Assessment tax return, report the interest there. If you are employed or get a pension and owe tax on interest, HMRC usually collects it through your tax code and may send a Simple Assessment letter if it cannot. If your interest is more than £10,000, you must tell HMRC on a Self Assessment tax return.
HMRC splits the interest on a joint account equally between the holders unless you ask it to split it differently. It adds up the interest from all of your accounts.
From 6 April 2027
The savings rates for 2027/28 are 22% (basic), 42% (higher) and 47% (additional) under Finance Act 2026 section 5. The starting rate and the Personal Savings Allowance are not part of that change. For the different kinds of account, see our Savings accounts guide.
What is Bank Rate, and what are Premium Bonds?
As at 23 October 2026, the Bank of England's Bank Rate is 3.75%. The Bank held it there in September 2026 and its next decision is due on 5 November 2026. When Bank Rate rises, banks usually raise what they pay on savings, and the reverse when it falls. This page does not list provider rates.
| Item | Figure | Detail |
|---|---|---|
| Bank Rate | 3.75% | Held at 3.75% on 17 September 2026 |
| Next Bank Rate decision | 5 November 2026 | The Monetary Policy Committee meets eight times a year |
| CPI inflation | 3.1% | The Bank of England target is 2% |
| Premium Bonds prize fund rate | 4.35% | Variable. You can hold from £25 to £50,000 |
Sources: Bank of England: Bank Rate and NS&I Premium Bonds, both read on 23 October 2026.
Bank Rate is the rate the Bank of England pays to banks, building societies and other institutions that hold money with it, and the rate it charges on loans to them.
Premium Bonds
Premium Bonds do not earn interest. NS&I enters each Bond in a monthly prize draw, funded by a prize fund rate that is 4.35% as at 23 October 2026. The rate is variable and can change at any time. Prizes range from £25 to £1 million and are free from UK Income Tax and Capital Gains Tax.
What can reduce the tax on your savings?
Some rules lower the tax on savings. Interest in an ISA is not taxed. The Personal Savings Allowance and the starting rate come before any tax is due. Joint account interest is split equally by default. Pension contributions can lower the adjusted net income that sets your Personal Allowance. Premium Bonds prizes are free of tax.
Shares held outside an ISA
Capital Gains Tax is due on shares that are not in an ISA. The annual exempt amount is £3,000 for 2026/27, and gains above it are taxed at 18% within the basic rate band and 24% above it. You cannot transfer shares you already own into an ISA unless they come from an employee share scheme. If you sell them and pay the money into an ISA, the sale may create a gain, and the payment uses part of your £20,000 allowance.
Dividends outside an ISA have a £500 allowance in 2026/27. The rates are 10.75% (basic), 35.75% (higher) and 39.35% (additional).
Joint accounts and partners
HMRC splits joint account interest equally between the holders. You usually do not pay Capital Gains Tax on assets you give or sell to your spouse or civil partner.
Pension contributions and income over £100,000
Your Personal Allowance falls by £1 for every £2 of adjusted net income above £100,000. Adjusted net income includes savings interest, and pension contributions paid gross reduce it. For a contribution where your provider has already given basic rate tax relief, you take off the grossed-up amount: £1.25 for every £1 you paid. Source: adjusted net income.
For a higher rate taxpayer in this band, each extra £2 of income loses £1 of allowance. The tax on the £2 at 40% is £0.80, and the tax on the £1 of allowance lost at 40% is £0.40. That is £1.20 on £2, or 60%.
Premium Bonds and gilts
Premium Bonds prizes are free from UK Income Tax and Capital Gains Tax. GOV.UK also lists UK government gilts and Premium Bonds as tax-free assets for Capital Gains Tax. That list is about Capital Gains Tax only.
Frequently asked questions about smart savings
Can I pay into more than one cash ISA in the same tax year?
Yes. You can pay into more than one ISA of the same type in a tax year, as long as your total payments across all ISAs stay within the £20,000 allowance. For example, £10,000 in one cash ISA, £3,000 in another and £7,000 in a stocks and shares ISA is allowed. You can pay into only one Lifetime ISA.
Will my existing cash ISA be affected on 6 April 2027?
Your ISA does not close at the end of a tax year, and you keep the savings tax-free for as long as the money stays in your ISA accounts. The £12,000 cash ISA limit applies to what you pay in during a tax year, from 6 April 2027, if you are 64 or under at the end of that year.
Can I take money out of an ISA and put it back?
You can take money out of an ISA at any time without losing tax benefits,, though your provider may set charges. You can put cash back in the same tax year without using up more allowance only if your ISA is flexible. If you move money yourself instead of using a transfer form, you cannot put it back tax-free.
Are my savings safe if the bank goes bust?
The FSCS protects deposits up to £120,000 per eligible person, per authorised bank, building society or credit union. The limit rose from £85,000 on 1 December 2025. Banks that share a banking licence count as one bank. Joint accounts are covered up to £120,000 per eligible person. Compensation is paid automatically.
How much savings interest is tax-free outside an ISA?
A basic rate taxpayer can earn £1,000 of interest tax-free, a higher rate taxpayer £500 and an additional rate taxpayer nothing. If your other taxable income is under £17,570, you may also get a starting rate for savings of up to £5,000. Interest above your allowance is taxed at your usual Income Tax rate.
What is the Lifetime ISA withdrawal charge?
GOV.UK calls it a withdrawal charge. You pay 25% if you take money out for any reason other than buying your first home, being 60 or over or being terminally ill. It applies to the whole amount, including the bonus. With £800 saved and a £200 bonus, taking out £1,000 costs £250 and leaves £750.
Does the 22% charge on ISA interest apply to cash ISAs?
No. From 6 April 2027 the charge applies to interest on cash held in a stocks and shares ISA or an innovative finance ISA, not to a cash ISA. It is set at the savings basic rate, which is 22% for 2027/28. Your ISA provider pays it to HMRC, so you do not declare it.
What is Bank Rate?
Bank Rate is the interest rate the Bank of England pays to commercial banks that hold money with it. As at 23 October 2026 it is 3.75%, and the next decision is due on 5 November 2026. When it rises, banks usually raise what they pay on savings, and the reverse when it falls.
How much of your savings does the FSCS protect?
The Financial Services Compensation Scheme (FSCS) protects deposits up to £120,000 per eligible person, per authorised bank, building society or credit union. The limit rose from £85,000 on 1 December 2025. Banks that share a banking licence count as one bank, so the limit applies to your total across them.
| What | FSCS limit | Notes |
|---|---|---|
| Deposits and savings | £120,000 per eligible person, per firm | From 1 December 2025. It was £85,000 from 1 January 2017 to 30 November 2025 |
| Joint accounts | £120,000 per eligible person | An individual account and a joint account at the same banking licence share one limit per person |
| Temporary high balances | Up to £1.4 million | For up to six months, after events such as selling a home or receiving an inheritance |
| Investments | £85,000 per eligible person, per firm | For firms that failed after 1 April 2019. It does not cover poor investment performance |
Sources: FSCS deposit limit, FSCS banks, building societies and credit unions and FSCS investments.
The firm must be authorised by the Prudential Regulation Authority. FSCS pays compensation automatically, and says it will pay within seven working days of a bank, building society or credit union failing. More complex cases take longer.
If you hold accounts under more than one brand, you can check on the Financial Services Register whether they share a banking licence.
What should you check before 5 April 2027?
The 2026/27 ISA allowance of £20,000 covers payments up to 5 April 2027. From 6 April 2027 the cash ISA limit is £12,000 if you are 64 or under at the end of the tax year. Check what you have paid in, which allowance applies to your interest and how your savings are protected.
Add up what you have paid into every ISA this tax year, including any Lifetime ISA, so that the total stays within £20,000.
Work out your Income Tax band by adding your interest to your other income, then check which Personal Savings Allowance applies.
Check whether the banks you use share a banking licence if you hold more than £120,000 with them.
Read the terms of an ISA before you move money, because providers can set rules or charges for withdrawals and transfers.
This page is for informational purposes only and does not constitute regulated financial advice. Always consult a qualified financial adviser before making investment decisions. Capital is at risk in Stocks & Shares ISAs. FSCS protection of £120,000 per person, per authorised firm applies to eligible deposits.