As the end of the UK tax year approaches, financial expert Martin Lewis has issued an urgent reminder to savers: do not miss the £20,000 ISA allowance before it expires.
According to Lewis, failing to use the allowance before April 5 means losing the opportunity permanently for that tax year. With interest rates on some ISAs reaching attractive levels, the warning is particularly relevant for anyone looking to grow their savings tax-free.
ISA
An Individual Savings Account, commonly known as an ISA, is one of the most popular tax-free saving options available in the UK. It allows people to earn interest or investment returns without paying tax on those gains.
Each adult in the UK receives an annual ISA allowance. For the 2025/26 tax year, that allowance is £20,000. Savers can deposit money into different types of ISAs while staying within that limit.
Many people use ISAs as a long-term savings strategy because once money enters the account, it remains tax-free year after year.
Limit
The key point Martin Lewis highlighted is that the ISA allowance cannot be carried forward. This means unused allowance disappears once the tax year ends.
For the current tax year:
| Tax Year | ISA Allowance | Deadline |
|---|---|---|
| 2025/26 | £20,000 | April 5, 2026 |
If someone contributes only £5,000 before the deadline, the remaining £15,000 allowance is lost forever. When the new tax year begins on April 6, a fresh £20,000 allowance starts.
This is why Lewis emphasizes acting early rather than waiting until the last minute.
Types
There are two main ISA types most people use: Cash ISAs and Stocks and Shares ISAs. Savers can choose either option or split their allowance between both.
| ISA Type | Description |
|---|---|
| Cash ISA | Works like a savings account with tax-free interest |
| Stocks & Shares ISA | Allows investment in stocks, funds, and bonds |
Martin Lewis pointed out that the top cash ISAs currently offer rates around 4.68 percent, which can beat many standard savings accounts.
However, he also noted that long-term investors may benefit more from stocks and shares ISAs due to potential market growth over time.
Example
To explain how ISAs work, Martin Lewis used a simple cake analogy.
Imagine your savings are like a cake sitting on a table. Normally, the tax authority can take a bite of that cake in the form of taxes on interest or investment gains.
An ISA works like wrapping the cake in protective clingfilm. The cake itself does not change. Your savings remain savings, and your investments remain investments. The only difference is that the tax collector cannot take a bite anymore.
This simple explanation highlights why ISAs are so valuable for long-term financial planning.
Timing
Timing is crucial when using your ISA allowance. According to Lewis, savers should avoid leaving deposits until the final day because some providers close applications earlier than expected.
Here is how timing can work:
| Action | Example |
|---|---|
| Deposit before April 5 | Use current tax year allowance |
| Deposit on April 6 | Use next tax year allowance |
Someone with enough savings could potentially deposit £20,000 before April 5 and another £20,000 on April 6, placing £40,000 into ISAs within two days using two separate tax year allowances.
Growth
One advantage of ISAs is that there is no overall cap on the total balance someone can build over time.
The £20,000 limit only applies to how much new money can be added each tax year. Over the years, consistent contributions can build substantial savings.
Many savers now hold hundreds of thousands of pounds in ISAs after gradually building their accounts. Some investors using stocks and shares ISAs have even reached millionaire status thanks to long-term market growth.
Changes
Future changes to ISA rules are also expected. From April 6, 2027, the UK government plans to introduce a new two-tier system designed to encourage more investment.
Under the proposed rules:
| Year | Cash ISA Limit | Total ISA Limit |
|---|---|---|
| Until 2027 | £20,000 | £20,000 |
| From 2027 | £12,000 cash | £20,000 total |
This means that from 2027 onward, only £12,000 can be placed in a Cash ISA for people under 65. The remaining £8,000 of the annual allowance would need to be invested in Stocks and Shares ISAs or Innovative Finance ISAs.
The change aims to push more savers toward investment options rather than holding all their money in cash savings.
Opportunity
Martin Lewis believes the current deadline presents an important opportunity for savers. Even if someone cannot reach the full £20,000 allowance, depositing whatever they can still protects their money from taxes.
The key message is simple: once the April 5 deadline passes, the unused allowance disappears forever. Acting early allows savers to take advantage of tax-free interest rates and potentially grow their wealth more efficiently over time.
FAQs
What is the ISA allowance for 2026?
The ISA allowance is £20,000 for the 2025/26 tax year.
When does the ISA tax year end?
The ISA tax year ends on April 5 each year.
Can ISA allowance be carried forward?
No, unused ISA allowance expires each tax year.
What interest do top cash ISAs pay?
Some top cash ISAs currently pay about 4.68%.
