ISAs: 20 Days Left to Use Your £20,000 Allowance
The tax year ends on 5 April. Any ISA allowance you haven't used by midnight disappears permanently — it does not carry forward. Here is what you need to know, and what to do before the deadline.
What is an ISA — and why does it matter?
An Individual Savings Account (ISA) is a government-backed wrapper that allows your money to grow completely free of UK Income Tax and Capital Gains Tax. You pay no tax on interest, dividends, or investment gains — ever — as long as the money stays inside the ISA.
For context: a basic-rate taxpayer has a £1,000 Personal Savings Allowance and a £500 dividend allowance outside an ISA. A higher-rate taxpayer gets just £500 of savings allowance. Beyond those limits, interest is taxed at your marginal rate. ISAs remove this constraint entirely.
The annual allowance is £20,000 per person. You can split this however you like across the different ISA types — but the total across all ISAs cannot exceed £20,000 in a single tax year.
The four main ISA types
Works like a standard savings account but all interest is tax-free. Top easy-access Cash ISAs are currently paying up to 4.68% AER. If you pay tax on savings interest outside an ISA, a Cash ISA is an immediate, risk-free win.
No minimum term required. Instant access options available.
Invest in funds, shares, bonds or ETFs with no Capital Gains Tax or dividend tax on returns. Historically, a globally diversified index fund has returned around 7–9% per year over the long run. The compounding effect inside a tax-free wrapper is significant over decades.
Value can fall as well as rise. Best suited to money you won't need for at least 5 years.
Save up to £4,000/year and receive a 25% government bonus — up to £1,000 free money per year. Can only be used for a first home purchase (up to £450,000) or from age 60. Early withdrawal triggers a 25% penalty which claws back more than just the bonus.
Counts toward your £20,000 annual ISA allowance.
Separate to your own £20,000 allowance — children get their own £9,000 annual JISA allowance. The child cannot access the money until they turn 18. Invested over 18 years, even modest monthly contributions can grow into a meaningful lump sum.
Available as Cash JISA or Stocks & Shares JISA.
Why unused allowance matters more than most people think
Most people think of unused ISA allowance as a missed admin task. The reality is more significant.
Every £1,000 of unused ISA allowance, invested at a modest 5% per year, grows to approximately £2,653 over 20 years. Inside an ISA, that growth is completely tax-free. Outside an ISA, a higher-rate taxpayer would owe CGT on the gains and income tax on dividends each year.
The ISA wrapper does not change the investment return — it removes the tax drag on that return. For long-term investors, this is material.
Common ISA rules worth knowing
- One of each type per year: You can only open one Cash ISA, one Stocks & Shares ISA, one LISA, and one Innovative Finance ISA in a single tax year — but you can hold ISAs from previous years with different providers.
- Flexible ISAs: Some ISA providers offer "flexible" ISAs, where money you withdraw can be replaced in the same tax year without using extra allowance. Not all providers offer this — worth checking.
- ISA transfers: You can transfer ISAs between providers without losing tax-free status or using up allowance. Always use the official transfer process — withdrawing and redepositing counts as new contributions.
- Married couples: Each spouse has their own £20,000 allowance. A household can shelter up to £40,000 per year in ISAs.
- Death and inheritance: On death, ISA assets can be passed to a spouse via an "Additional Permitted Subscription" (APS) without losing ISA status. They do not automatically leave the ISA wrapper.
What to do in the next 20 days
- Check how much you've used this year. Log into your ISA provider(s) and check your current year subscriptions. Many providers show this clearly in the app.
- Decide where to put any remaining allowance. If you need the money within 1–2 years, a Cash ISA or fixed-rate Cash ISA is appropriate. If you can leave it for 5+ years, a Stocks & Shares ISA gives more long-term growth potential.
- Don't wait for the perfect moment. For long-term investing, time in the market matters more than timing the market. Investing on 16 March versus 5 April makes very little difference over 20 years. Not investing at all is the only move that permanently reduces your tax-free wealth.
- If you're opening a new ISA: Most major platforms allow same-day account opening online. You do not need to fund it immediately — just open and fund before midnight on 5 April.