ISA ISA Baby 💷

What To Do Before 5 April 2026

The UK tax year runs from 6 April to 5 April.

On 5 April 2026, this year’s £20,000 ISA allowance expires.

On 6 April, a new £20,000 allowance begins.

If you do not use it, you lose it.

Unlike pension allowances, ISA allowances cannot be carried forward.

Yet fewer than 10% of ISA holders fully use the allowance each year.

For some, that reflects income constraints.

But if you are able to invest, the real question is simple:

Are you using the structure available to you?

What Is an ISA and Why It Matters

ISA stands for Individual Savings Account.

It is a tax wrapper that allows you to:

• Grow investments free from Capital Gains Tax 📈
• Receive dividends free from Dividend Tax 💰
• Earn interest free from Income Tax 🏦

The annual allowance is currently £20,000 per tax year.

Over time, that tax protection compounds. That is where the real advantage sits.

The Different Types of ISA

You can split your £20,000 across different ISA types depending on your goals.

🏦 Cash ISA

A tax free savings account.

Interest earned is not taxed.
Suitable for short term goals or emergency savings.
No exposure to market volatility.

📈 Stocks and Shares ISA

Allows you to invest in shares, ETFs, funds and bonds.

Capital growth is tax free.
Dividends are tax free.
No Capital Gains Tax when selling investments inside the ISA.

For long term investing, this is typically the most powerful wrapper.

💡 Innovative Finance ISA

Used for peer to peer lending.

Interest earned is tax free.
Higher potential returns.
Higher risk.

🏠 Lifetime ISA

You can contribute up to £4,000 per year.
The government adds a 25 percent bonus.
It can be used for a first home up to £450,000 or accessed from age 60.

The £4,000 counts toward your overall £20,000 ISA allowance.

Withdraw outside the rules and penalties apply.

(You must open a Lifetime ISA between ages 18 and 39.)

👶 Junior ISA

Annual limit £9,000.
For children under 18.
Grows tax free.
Converts to an adult ISA at age 18.

This allowance is separate from your own £20,000.

Already Maxed Your ISA?

Consider Bed and ISA 📦

If you have already used your £20,000 Stocks and Shares ISA allowance and continue investing through a General Investment Account, a Bed and ISA strategy may be worth considering.

A Bed and ISA means selling investments held in your taxable account and repurchasing them inside your ISA using the new tax year’s allowance.

You are not changing your investments.
You are improving their tax efficiency.

Example

You have £40,000 invested in a GIA and plan to invest £20,000 into your ISA next tax year.

Before 5 April, you sell £20,000 from your GIA.

If the gain realised is £2,500, it falls within your £3,000 Capital Gains allowance and no CGT is due.

From 6 April, you use your new £20,000 ISA allowance to buy the investments back inside your ISA.

If instead the gain had been £5,000, tax would apply only to £2,000, the amount above the £3,000 allowance.

Repeat this each year and gradually more of your portfolio sits inside a tax-free wrapper.

Don’t Forget the Wider Allowance Landscape 🧠

The ISA sits within a broader tax framework.

You should also be aware of:

£3,000 Capital Gains Tax allowance
Dividend allowance of £500 per year
Personal Savings Allowance of £1,000 for basic rate and £500 for higher rate taxpayers

Tax efficiency is not about one allowance.

It is about coordinating multiple allowances intelligently.

Before 5 April

This is not about last minute action.

It is about reviewing your structure.

Have you used the allowance available to you this year?
Are your investments positioned efficiently?
Are you gradually reducing future tax exposure?

Most people think about tax after they owe it.

A more deliberate approach is to think about it before you do.

5 April is approaching.

Make sure it does not pass without a review.