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What is an ISA allowance?
An ISA allowance is the maximum amount you can invest or save in an individual savings account (ISA) each tax year without paying capital gains or income tax on its earnings. A tax year in the UK runs from 6 April to 5 April. For the tax year 2025/2026, the ISA allowance is £20,000.1
The allowance is set by the government and can vary from year to year based on factors such as inflation, government policy, and the financial needs of investors and savers. Understanding your ISA allowance is important, as it can influence how you plan and manage your investments and savings.
How to maximise your ISA allowance benefits?
Here are some ways in which you could maximise your ISA allowance benefits:
- Starting to contribute early in the tax year. The earlier you start, the more time your investments have to grow tax free
- Making regular contributions, eg setting a monthly direct debit
- Aiming to use the full £20,000 allowance
- Reviewing your investment strategy regularly to ensure that it still aligns with your financial goals and risk tolerance
- Exploring different types of ISAs to find the one that’s most suitable for you
When does the ISA allowance reset?
The ISA allowance resets at the start of each tax year, on 6 April. For the 2025/26 tax year, the allowance is £20,000. So, you can invest or save up to this amount and pay no taxes on any returns or interest earned on it.
Any unused allowance doesn’t roll over into the next tax year. This means that you’d miss out on the ISA tax advantages if you don’t use your allowance in full. However, it’s important to keep in mind that your investments can grow or lose value.
Learn about possible loss-making investments in an ISA
Suppose you use some of your allowance to buy a stock that subsequently depreciates in value. If you sell this stock at a loss, you won’t be able to reap the ISA tax advantages on this investment, as there’d be no returns to use the tax benefit on.
But there’s no time limit on how long you can hold investments in your ISA. So, if you think that there’s potential for the price to recover, you could wait for the market to reverse to sell for a profit. If the market does move in your favour and you close your position at a favourable price, you won’t pay any taxes on the investment's returns.
ISA allowance rules and limits
The ISA allowance for the 2025/26 tax year is £20,000. You can choose to spread this amount across your preferred combination of account types, eg stocks and shares ISAs, cash ISAs and innovative finance ISAs.
If you exceed your ISA allowance, any returns on additional contributions are subject to capital gains and income tax. To avoid unnecessary tax liabilities, you must ensure that your contributions stay within the annual limit.
You can transfer funds between different types of ISAs. If you’d like to do this, it’s important to follow the ISA transfer process. Withdrawing and reinvesting the money outside of this process would count against your allowance.
Transferring your ISA to us
To transfer your ISA to us, you’ll fill in our online transfer request form; then we’ll take care of the rest. The process usually takes about 14 days, but this depends on your transferring broker. You can also make a partial transfer to our stocks and shares ISA from another broker, provided they enable this. With us, you can use your ISA to invest via the IG Invest app or through a web-based share dealing account.
Investing your ISA allowance
Investing your ISA allowance can be a strategic way to grow your returns tax free. You can use your ISA allowance to invest or save through your preferred financial products. Remember, each has its potential risks and benefits, and you should always tailor your investments to suit your financial goals.
It's important to do thorough research before choosing an ISA account provider for investing. Some important factors to consider include the range of available markets, the selection of asset types and customer service aspects. It’s vital to have a financial strategy in place that aligns with your goals before you start making any investment decisions. You can review your strategy when needed.
How to open a stocks and shares ISA
You can invest using a share dealing ISA via the IG Invest app or a web-based share dealing account in these steps:
- Create a share dealing account
- Add an ISA wrapper to your account
- Download the IG Invest app (if you want the mobile option)
- Start investing in over 11,000 global stocks and exchange-traded funds (ETFs)
ISA allowance summed up
- An ISA allowance is the maximum amount you can invest or save each tax year without paying tax on any of its gains in an ISA account
- The ISA allowance for the tax year 2025/26 is £20,000
- There are ways in which you can try make the most of your allowance benefits, eg aiming to use the allowance in full
- The ISA allowance resets at the start of each tax year, on 6 April – any unused portion of the allowance cannot be carried over into the next tax year
- If you invest more than your ISA allowance, any earnings from the excess amount will be taxable under capital gains and income tax rules
- Before selecting a provider for your ISA investments or savings, it's essential to conduct comprehensive research to find the one that's best for you
1 Invest up to £20,000 in an ISA in 2025/26 without incurring capital gains or income tax on any returns earned. Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.
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