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Tax Planning7 min read

ISA Season: Making the Most of Your 2025/26 Allowance

With the tax year end approaching, here's everything you need to know about maximising your ISA allowance before 5th April.

Altor Wealth20 December 2025 · Financial Planners

Use It or Lose It

Your annual ISA allowance of £20,000 cannot be carried forward. If you don't use it by 5th April, it's gone forever.

The tax year ends on 5th April 2026. Any unused ISA allowance from 2025/26 will be lost permanently.

This might sound like pressure, but it's actually an opportunity. Let's explore how to make the most of this valuable tax shelter.

Types of ISA

Cash ISA

Best for: Emergency funds, short-term savings (less than 5 years)

Feature Details
Current rates Up to 5% AER
Access Usually instant
Risk level None - capital protected
Tax benefit Interest is tax-free

A Cash ISA is perfect for your emergency fund. You get competitive interest rates AND tax-free growth, with instant access when you need it.

Stocks and Shares ISA

Best for: Long-term goals (5+ years)

Feature Details
Potential returns Higher than cash
Access Usually 1-3 business days
Risk level Capital at risk
Tax benefit No CGT or income tax on gains

Lifetime ISA (if under 40)

Best for: First home purchase or retirement

Feature Details
Government bonus 25% top-up
Maximum contribution £4,000 per year
Withdrawal rules First home or after age 60
Early withdrawal penalty 25% of amount withdrawn

The LISA bonus is essentially free money from the government. If you're under 40 and saving for a first home, this should be your priority.

Strategy: How to Split Your £20,000

There's no one-size-fits-all answer, but here's a framework:

If You Have No Emergency Fund

  1. Build 3-6 months' expenses in a Cash ISA first
  2. Then consider Stocks and Shares for longer-term goals

Financial security comes before wealth building. An emergency fund isn't sexy, but it's essential.

If You're Under 40 and Saving for a Home

  1. Max out your LISA (£4,000) for the 25% bonus
  2. Remaining £16,000 in Cash or S&S ISA depending on your timeline

If You're Focused on Retirement

  1. Check you're maximising pension contributions first (higher tax relief)
  2. Use remaining capacity for S&S ISA for tax-free growth

Don't Forget Last Year's ISA

Many people focus on new contributions but forget about previous years' ISAs.

Old Cash ISAs are often paying pitiful rates. You can transfer to a better provider WITHOUT losing the tax-free status or affecting your current year's allowance.

Taking Action

Here's your ISA season checklist:

  1. Review your current ISAs - Are they paying competitive rates?

  2. Calculate remaining allowance - What have you used this year?

  3. Set up regular contributions - Don't leave it until March

  4. Consider "Bed and ISA" - Transfer taxable investments into your ISA

Setting up a regular monthly contribution is better than scrambling in March. Even £500/month uses £6,000 of your allowance automatically.

Need help deciding? Book an ISA review with your Altor adviser.

Key takeaways

  • Your £20,000 ISA allowance expires on 5th April - use it or lose it
  • Cash ISAs are ideal for emergency funds; Stocks & Shares ISAs for long-term goals
  • Lifetime ISAs offer 25% free money for first-time buyers under 40
  • Old ISAs can be transferred to better rates without losing tax-free status

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