ISA Calculator UK: How to Grow Your Money Tax-Free in 2026
9 min read
In 2026, the Individual Savings Account (ISA) is more valuable than ever — and most UK savers don't realise how much tax they are paying on investments held outside one. Capital gains tax rates rose in October 2024. The dividend allowance fell to £500. Dividend tax rates rose again from April 2026. The annual CGT exemption is just £3,000. Every one of these changes makes sheltering money inside an ISA more worthwhile.
The 2026-27 ISA Allowance: £20,000
The annual ISA allowance for 2026-27 is £20,000 — unchanged since 2017-18 and confirmed frozen until 2030-31. This limit covers all ISA types combined (Cash, Stocks & Shares, Lifetime, Innovative Finance). Unused allowance cannot be carried forward — it expires at midnight on 5 April 2027.
Important: The April 2027 Cash ISA Change
The Autumn 2025 Budget announced that from 6 April 2027, savers under 65 will be limited to £12,000/year in Cash ISAs (the overall £20,000 limit stays the same across all types). Those aged 65 and over retain the full £20,000 Cash ISA limit.
2026-27 is the last tax year in which under-65s can put the full £20,000 into a Cash ISA. If you hold significant cash savings, act before 5 April 2027.
What the Outside-ISA Tax Environment Looks Like in 2026
Capital Gains Tax (October 2024 Budget Changes)
Following the October 2024 Budget, CGT rates on shares and other assets were aligned with residential property rates:
| Taxpayer Band | CGT Rate on Shares & Investments |
|---|---|
| Basic rate (income ≤£50,270) | 18% |
| Higher rate (income >£50,270) | 24% |
The annual exempt amount is £3,000 per person — down from £12,300 in 2022-23. Most investors with growing portfolios now regularly exceed this.
Dividend Tax (2026-27 Rates — Increased from April 2026)
| Band | 2025-26 Rate | 2026-27 Rate |
|---|---|---|
| Dividend allowance (first £500) | 0% | 0% |
| Basic rate | 8.75% | 10.75% |
| Higher rate | 33.75% | 35.75% |
| Additional rate | 39.35% | 39.35% |
On a £50,000 portfolio with a 3% dividend yield (£1,500 dividends), a higher-rate taxpayer pays: (£1,500 − £500) × 35.75% = £357.50 per year in dividend tax. Inside an ISA: £0.
Cash Savings Interest Tax
Interest above the Personal Savings Allowance is taxed at your marginal income tax rate:
| Band | PSA (tax-free) | Tax on excess |
|---|---|---|
| Basic rate | £1,000 | 20% |
| Higher rate | £500 | 40% |
| Additional rate | £0 | 45% |
A higher-rate taxpayer with £50,000 at 4.5% earns £2,250 in interest. After the £500 PSA, £1,750 is taxed at 40% = £700/year in tax. In a Cash ISA: £0.
Cash ISA vs Stocks & Shares ISA
| Factor | Cash ISA | Stocks & Shares ISA |
|---|---|---|
| Risk | None (FSCS protected to £85,000) | Market risk — can fall in value |
| Typical return | 4–5% (current best-buy rates) | 6–9% long-term historical average |
| Best time horizon | Under 5 years | 5+ years |
| Tax saving | Interest tax at marginal rate | CGT + dividend tax saved |
For money needed within five years, a Cash ISA's stability makes sense. For long-term wealth building, a Stocks & Shares ISA offers substantially higher expected returns — and the tax-free wrapper makes every percentage point of return worth keeping.
Types of ISA
| Type | Annual Limit | Best For |
|---|---|---|
| Cash ISA | £20,000 (shared) | Short-term savings, emergency fund |
| Stocks & Shares ISA | £20,000 (shared) | Long-term investing |
| Lifetime ISA (LISA) | £4,000 (within £20,000) | First home or retirement (25% government bonus) |
| Junior ISA | £9,000 (separate) | Saving for a child |
Since April 2024 you can open multiple ISAs of the same type in the same tax year — previously restricted to one per type.
The Lifetime ISA Bonus: 25% Free Money
The LISA pays a 25% government bonus on contributions — up to £1,000 free per year. Rules:
- Open between ages 18 and 39
- Contribute up to £4,000/year (counts within the £20,000 limit)
- Use for first home purchase (up to £450,000 property price) or from age 60
- Any other withdrawal: 25% penalty (claws back the bonus and a slice of your own money)
6 ISA Strategies for 2026-27
- Use the allowance on 6 April — Money in for the full tax year has one extra year of tax-free compounding vs last-minute April contributions.
- Max your Cash ISA before April 2027 — The last chance for under-65s to put £20,000 into a Cash ISA. Act in 2026-27.
- Bed and ISA — Sell investments in a general account and repurchase inside a Stocks & Shares ISA using your £3,000 CGT exemption. Future gains are permanently sheltered.
- Use both partners' allowances — A couple has £40,000/year combined to shelter — a powerful household strategy.
- Prioritise the LISA if you are 18–39 — The 25% government bonus is the highest guaranteed return available in the UK.
- Junior ISA for children — £9,000/year separate from your own allowance; invests tax-free for up to 18 years.
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