New tax year, new ISA allowance: what you need to know

For many, this is a simple but important moment to review savings and make the most of the tax-free benefits available.

What is an ISA?

An Individual Savings Account allows you to earn interest or investment returns without paying tax on them.

Each tax year, you can contribute up to £20,000 across a range of ISA types, including:

• Cash ISAs
• Stocks and Shares ISAs
• Lifetime ISAs
• Innovative Finance ISAs

Cash ISAs are often the most straightforward option, offering a secure place to save with tax-free interest, while other ISA types provide different opportunities for longer-term growth.

Why ISAs matter

As savings grow, so does the potential tax on interest earned outside of an ISA.

While the Personal Savings Allowance provides some protection, it has limits. ISAs remove this concern by ensuring all returns within the account remain tax free.

Over time, this can have a meaningful impact, particularly for those building larger balances or saving consistently each year.

Using ISAs at different life stages

ISAs are flexible and can support a range of financial goals.

Starting out

An ISA helps build strong saving habits from the beginning, with even smaller contributions benefiting from tax-free growth.

Building savings

As balances increase, ISAs allow you to continue saving without needing to consider tax, while keeping funds accessible if required.

Planning ahead

Later in life, ISAs can provide a tax-free source of funds to support income planning alongside pensions and other assets.

A change to be aware of

From 6 April 2027, the annual Cash ISA allowance for individuals under 65 will reduce from £20,000 to £12,000.

The overall ISA allowance will remain at £20,000. This means those looking to maximise their allowance will need to split contributions between cash and investment-based ISAs.

This change, introduced by HM Treasury, reduces the amount that can be held in cash each year, but ISAs themselves remain a valuable tax-efficient tool.

What this means for savers

For those who prefer cash savings, this change reinforces the importance of making good use of current allowances.

Before April 2027, you still have full flexibility to allocate up to £20,000 into Cash ISAs each year. Making use of this while it remains available may help you build a larger tax-free cash savings balance over time.

Saving with Kingdom Bank

When you save with Kingdom Bank, your money does more than earn interest.

Your savings help fund mortgages for churches and Christian charities across the UK, supporting projects that enable ministry and strengthen communities.

Find out more about how you can make an impact for the gospel by saving with Kingdom Bank.

Kingdom Bank does not provide financial advice. Please seek independent financial advice when structuring your finances.