Savers in the UK must stick to an important £20,000 rule. An Individual Savings Account (ISA) allows people to save money and earn interest that is tax-free. However, there is a yearly limit on how much you can have in an ISA.

It further explains: “Every tax year you can save up to £20,000 in one account or split the allowance across multiple accounts. The tax year runs from 6 April to 5 April.”

GOV.UK adds: “Your ISAs will not close when the tax year finishes. You’ll keep your savings on a tax-free basis for as long as you keep the money in your ISA accounts.”

However, it is important to note that in April 2027, the Cash ISA limit is set to reduce to £12,000 for those under the age of 65, which will be explained below.

Types of ISA

There are four types of ISA:

• Cash ISA: Similar to a savings account but tax-free
• Stocks and Shares ISA: Allows investing in stocks, funds, and bonds
• Lifetime ISA (LISA): For buying a first home or retirement, with a 25% Government bonus on contributions
• Innovative Finance ISA: Allows peer-to-peer lending

The £20,000 limit applies to the collective groups of ISAs. But there are limits on how much you can pay into one Lifetime ISA in a tax year. The maximum you can pay into this is £4,000.

GOV.UK shares the following examples of how the savings could be split:

Changes for 2027

From April 6, 2027, the annual Cash ISA limit for people under 65 will be reduced to £12,000 as part of a new two-tier system designed to encourage investing. Although the total ISA allowance is set to remain at £20,000, the remaining £8,000 must be placed in Stocks and Shares or Innovative Finance ISAs.

• You’ll be able to put up to £12,000 in a cash ISA each tax year
• The rest – up to £8,000 – could go into a stocks and shares ISA
• Or, you can choose any combination that suits you, as long as you don’t exceed £12,000 in a cash ISA and your total across both types of ISAs doesn’t go over the £20,000 total ISA allowance
• The annual limit for stocks and shares ISAs remains at £20,000
• For those aged 65 or over, these changes don’t apply. The full £20,000 annual ISA allowance will remain, which can be used across all ISAs

What to do if you go over the £20,000 limit

HMRC will likely contact you after the tax year ends to resolve the issue. You may be asked to remove the excess funds and any interest/gains earned on that specific excess.

The interest or income generated by the money exceeding the limit may become taxable. You can contact your ISA provider to identify the over-subscription and rectify it.

For more information, visit the Government website here.

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