Understanding the new ISA rules for 2025/26

Here’s what you need to know about the latest ISA rules, how they may affect your savings, and how to make the most of your tax-free allowance this year.

A number of updates were introduced in 2024 to modernise ISAs and make them more accessible. The main changes included:

• fractional shares may be held within a stocks and shares ISA

• you can open more than one ISA of the same type in the same tax year

• partial transfers between providers are now allowed

• the minimum age for adult ISAs increased to 18.

From April 2027, ISA rules will change. The key updates are:

• the overall £20,000 annual ISA allowance stays the same

• for people under 65, the cash allowance will be capped at £12,000

• people aged 65 and over will still be able to hold up to £20,000 in cash if they prefer

• The cash cap only applies to the cash ISA. You can still put your full £20,000 annual allowance into a stocks and shares ISA or innovative finance ISA if you prefer.

As part of the 2027 ISA reform, the annual ISA allowance will be frozen at £20,000 until 2030.

It’s possible to invest in specific companies by buying whole shares, but you can also buy smaller portions of a share. For some large companies a single share can cost £100s or even £1000s, so if you want to invest in them but spend smaller amounts, you have the option to buy a portion of a single share. This is called a “fractional share”. 

It’s worth knowing that if you want to switch ISA provider, you’ll need to sell your fractional shares and rebuy them when you switch to a provider that offers a similar service. Because this sale and repurchase happens inside the ISA wrapper, any profit you made remains tax-free.

You can find out more about how to invest in stocks and shares ISAs in our guide. 

You can now open and pay into more than one ISA of the same type in the same tax year,  as long as your total ISA contributions stay within the £20,000 annual limit.

There are different types of ISA, including:

• cash ISAs

• stocks and shares ISAs

• innovative finance ISAs

This change gives you greater flexibility, whether that’s shopping around for better rates on cash ISAs or spreading your investments and savings across different providers.

All interest, income and capital gains within an ISA are tax-free, and you don’t need to include them on a tax return.

Learn more about the different types of ISAs in our guide to ISAs and other tax-efficient ways to save or invest.

The rules now allow partial transfers between ISA providers, regardless of when the money was paid in. Previously, you had to transfer all contributions made in the current tax year, or none at all.

You can now move only the amount you want while keeping the rest with your existing provider. If you’re considering switching, our guide to Cash ISA transfers explains how it works.

The minimum age to open an adult cash ISA is now 18, bringing it in line with other adult ISA types. 

If you're 16 or 17, you can still open and save into a junior ISA. The downside is that the annual tax-free allowance is £9,000 – less than half the adult ISA allowance of £20,000.  

There is no minimum age limit to open a junior ISA and when you turn 18 it will automatically roll over into an adult ISA. Find out more in our Junior ISA guide. 

There are four main types of ISAs:

• cash ISA – a savings account that pays interest tax-free.

• stocks and shares ISA – an investment account where returns are free from income tax and capital gains tax.

• innovative finance ISAOpens in a new window - includes peer-to-peer loans and alternative finance arrangements.

• Lifetime ISA (LISA) – designed for first-time home buyers or retirement savings, with a 25% government bonus.

You can open and pay into as many ISAs of the same type as you like, provided you don’t exceed the overall £20,000 annual ISA limit.

This can be helpful if you want to secure competitive interest rates or spread your money across providers.

If you fill in a tax return, you don’t need to declare any ISA interest, income or capital gains.

A Lifetime ISA offers a 25% government bonus (up to £1,000 a year). While you can save up to £20,000 in ISAs overall each year, you can only pay into one LISA per tax year, and the maximum LISA contribution is £4,000.

You can use a LISA to:

• buy your first home worth up to £450,000, or

• save for later life, with withdrawals allowed from age 60. 

Withdrawals for other reasons may incur penalties. See our Lifetime ISA guidance for more details.

You can save up to £20,000 every year into adult ISAs without it being subject to income or capital gains tax. This is called a “tax-free allowance”. The annual tax-free allowance for an adult ISA is £20,000. This limit has been confirmed to be frozen until 2030.

If you’re looking for a longer-term investment, a stocks and shares ISA might be something worth considering. We take you through the key points in our Stocks and Shares ISAs guide, but the key point to remember is that there is no guaranteed return on any funds invested.

If you’re new to investing and want to know more about what it means, see our guide Thinking about investing? Make sure you understand the risks.

Paying into your ISA earlier in the tax year gives your money more time to earn interest or investment returns, helping you maximise your tax-free growth.

When you switch to a new ISA provider it’s important to use the ISA transfer service to make sure you don’t exceed your yearly ISA allowance. 

You can add a maximum of £20,000 into ISAs each tax year (between 6 April and 5 April). Transferring your ISA means you keep your allowance from previous years. 

When switching providers:

• always use the ISA transfer service

• avoid withdrawing money manually

• check whether your new provider accepts partial transfers

• review fees or market-exit charges before transferring investments.

Understanding ISA transfer rules and timing is essential to ensure your savings move smoothly between providers without losing tax benefits or missing out on interest or investment growth.

We have tools, calculators and guides to help you make confident decisions about saving and investing. See our investing guides.