8 ISA mistakes to avoid before the 2025/26 tax year end

What ISA changes are coming?

Cash ISA contributions for adults aged under 65 are set to be capped at £12,000 a year from April 2027, along with new measures planned to discourage people from holding cash balances inside Stocks & Shares ISAs - though the final details on the latter are yet to be confirmed.

These proposals follow the changes introduced by former Chancellor Jeremy Hunt, such as allowing savers to subscribe to multiple ISAs of the same type in a single tax year and enabling partial transfers between accounts. His British ISA proposal, however - an additional £5,000 allowance earmarked for UK equities - never saw the light of day after being shelved by the current Labour administration.
 
With so many reforms landing in quick succession, it’s understandable that some savers may feel confused. But the key point as this tax year ends is that none of the future reforms affect the current tax year. 

What does matter now is the rising tax burden. Since the onset of the Covid-19 pandemic, rapidly shifting tax policy has left Britons grappling with frozen or shrinking personal allowances. With personal tax burdens heading towards a record high, savers would be wise to make the most of their tax-free £20,000 allowance for 2025/26 while they can, ensuring their money remains as tax efficient as possible. 

Remember, the ISA operates on a use-it-or-lose-it basis – it does not roll over to the next tax year and resets at midnight on April 5 with any unused portion gone for good.

So, with more changes coming, but none impacting this tax year, here are eight common ISA mistakes to avoid in the final sprint towards the tax-year-end deadline: 

Remember that ISA rules and their tax treatment are subject to change in the future. Investments carry risks and you can get back less than you invested.

1. Not making use of the £20,000 ISA allowance at all

For those looking for a home for their savings and investments, particularly in the longer term, the biggest mistake anyone can make is failing to take advantage of this tax-free allowance - even if you can only use a portion of it, you should. Not everyone has spare cash available to fill their ISA to the maximum, or assets held outside a tax wrapper that they can transfer in to ring-fence from tax, but ignoring the allowance altogether is a mistake.

Saving into an ISA allows individuals to grow their wealth free of tax on both investment gains and income, while withdrawals are also completely tax-free. This can be crucial when you consider the steep cuts to the annual Capital Gains Tax exemption* and Dividend Allowance in recent years**, the hike in CGT rates that took effect in October 2024 (which rose from 10% to 18% for basic-rate taxpayers, and from 20% to 24% for higher and additional rate taxpayers) and the 2-percentage point rise in dividend income tax due to take effect from April 6 2026 for basic and higher rate taxpayers. 

Another major consideration is the dwindling real-term value of the Personal Savings Allowance (PSA), which lets savers earn a limited amount of interest before tax applies***. This has remained the same since its inception in 2016, meaning it has failed to keep pace with both inflation and the sharp rise in savings rates seen in recent years. As a result, more savers are finding themselves liable for tax charges on a much lower level of interest

ISAs are a ‘use it or lose it’ allowance that cannot be backdated, so moving money into a tax-free ISA keeps it clear of all these taxes, which is why anyone not taking advantage of the perks that come with these types of accounts could be missing out.
 

2. Not maximising the £20,000 ISA allowance in full (if you can afford to)

For those fortunate enough to have the funds available, failing to maximise the allowance in full could lead to regret further down the line. Once money is inside an ISA, the tax-free element applies year after year, so any unused allowance is a lost opportunity to shelter more of your wealth for the long term.

Whether making fresh contributions or transferring assets held outside a tax wrapper into an ISA, not using the full allowance when you are able to means that your money is not working as effectively as it could.

Making your investments as tax efficient as possible is one of the most effective ways to make the most of the returns you receive. While adding cash to an investment ISA is relatively straightforward, those holding shares and funds held outside a tax wrapper can use a Bed & ISA transfer. This entails savers selling existing investments – preferably not exceeding their annual Capital Gains Tax exemption - and then repurchasing them inside an ISA where returns will be tax-free.

3. Exceeding the £20,000 subscription limit 

Another potential error is paying too much into your ISA accounts and inadvertently exceeding the maximum subscription limit of £20,000.

The current annual adult ISA limit of £20,000 has remained unchanged since April 2017. While it can be split across different types of ISAs, the total subscribed across all accounts must not exceed this figure. Adults can contribute to a range of ISAs, such as a Cash ISA, Stocks & Shares ISA, a Lifetime ISA (LISA) - if eligible - and an Innovative Finance ISA. Those who already hold one may also continue contributing to a Help to Buy ISA, although these are now closed to new applicants.

Each ISA type comes with its own subscription rules. The LISA, for example, has a £4,000 annual cap, while the Help to Buy ISA only allows £200 per month. In the future, the Cash ISA will have its own cap of £12,000 for people under age 65 under changes scheduled for April 2027 

To add to the complexity, since April 6, 2024, savers have also been able to subscribe to multiple ISAs of the same type, with the exception of the Junior ISA and LISA, within the same tax year.

Given the different allowance caps, the overarching £20,000 limit across all ISAs, and the likelihood that savers will use different providers for different ISAs, it’s easy to see how the rules can be breached unintentionally. This can be a problem for those that have a monthly direct debit into one account and then make a lump sum contribution elsewhere.

I think I’ve breached the allowance limit – what should I do?

If you suspect you have breached the allowance, call HMRC on 0300 200 3300, who can help you rectify the situation. This could involve ensuring any interest earned on the money wrongly contributed is taxed or that the ISA manager refunds the overpayment. If you realise the mistake immediately, then withdraw the excess contribution and keep a record of the transaction - a smart move in case HMRC gets in touch in the future.

4. Choosing the wrong type of ISA for your savings

Selecting the wrong ISA for your financial goals can be a common mistake. ISAs each come with their own set of rules, limits and advantages. Cash ISAs, for example, can work well for savers planning short-term goals - typically those within the next five years. They are far less effective for those wanting to potentially achieve higher returns over the long term, perhaps to pay for a child’s education or retirement. This is where a Stocks & Shares ISA may be more appropriate. 

Meanwhile, a LISA is a specialist option designed for two specific purposes – helping younger people buy their first home or boosting retirement savings. With a Government bonus of up to £1,000 a year on the maximum £4,000 contribution, it can be very valuable - but only if used correctly. Withdrawing money early for anything other than these two purposes incurs a sizeable penalty. LISAs can work well for younger savers looking to purchase their first home, but the value of the property they can use the LISA towards is capped at £450,000, which can be problematic in parts of London and the Southeast. 

Although LISAs are due to be replaced by a new, simpler ISA for first-time buyers in future reforms that have yet to be confirmed, savers aged between 18 to 39 can still open and contribute to a LISA in its current form for now. 

Alongside the potentially problematic property price cap, the withdrawal penalty is punitive: this 25% charge applies to the whole pot, not just your contributions. For example, someone contributing £4,000 would receive a £1,000 government bonus, creating a total of £5,000. If they later withdraw the money for a non qualifying reason, they face a 25% charge on the full amount - £1,250 - meaning they lose more than the bonus received. As a result, LISAs may be unsuitable for anyone who could need access to their cash in the short term, except for buying their first home under the rules.

5. Cashing in an ISA rather than transferring it

Savers sometimes move their ISA to another provider to benefit from lower fees, better investment options or added extras built into the service charges. But when switching providers, one of the biggest mistakes a saver can make is to cash in the ISA rather than transfer it.

If you close an ISA, withdraw the funds and then pay the money into a new ISA, the transfer is treated as a new contribution. This means the amount you pay into the new account counts towards the annual allowance. Crucially, the tax-free status of the original ISA pot is lost the moment you withdraw it. 

By contrast, initiating a straight ISA-to-ISA transfer preserves the tax-free wrapper, regardless of the amount involved, and does not count towards your current year annual subscription limit. 

This is less of an issue for those with smaller ISA pots, as they are unlikely to use their allowance in full anyhow. But for savers with larger pots, the consequences can be significant. A simple mistake could see tens or even hundreds of thousands of pounds suddenly exposed to tax, wiping out years of careful tax-efficient investing.

The golden rule is simple: never withdraw money from an ISA if your intention is simply to move it elsewhere to another provider. Always use the official transfer process offered by your new provider.

6. Worrying that money added to a Stocks & Shares ISA must be invested immediately

Savers maximising their allowance in an investment ISA sometimes mistakenly believe they must invest the money the moment the funds enter their account. While there may be limits on how long cash be held in a Stocks & Shares ISA in the future, this is not the case yet.

If someone opens or tops up an ISA in the final moments of the tax year, it will undoubtedly be the wrong time to develop a considered investment strategy aligned to their financial goals. Provided the cash is loaded into the ISA before tax year end, it is considered part of the current tax year’s allowance. They can then take their time to make their investment selection – even well into the next tax year. 

7. Not taking advantage of your spouse’s or child’s ISA allowance

It’s not just your own £20,000 ISA allowance that needs to be used before the end of the tax year. Your spouse or civil partner also benefits from a separate £20,000 tax-free ISA allowance, and each child has a Junior ISA (JISA) allowance of £9,000. For a family of four, that means up to £58,000 can potentially be sheltered from tax on income and capital gains each year — a significant opportunity for those who can afford to make full use of it. 

Married couples and civil partners have an additional advantage unavailable to unmarried partners: the ability to transfer assets (cash or investments) between them without triggering tax. Keep in mind that you can’t make the transfer from one ISA to another. You need sell the asset, withdraw the cash from the sale to your bank account and transfer it to your spouse so they can add it to their own ISA. This means if one partner has already fully used their ISA allowance, they can transfer assets to the other so the ISA funding can continue. It’s important to remember, however, that ownership of those assets also transfers along with the money - a step only suitable for couples in a strong, trusting financial partnership.

FAQ: How to transfer cash or investments to my spouse’s Bestinvest account

Children also benefit from generous tax-free savings opportunities. A JISA is an excellent way to begin building a long-term financial foundation for your child, whether to support them through university, help them onto the property ladder or simply equip them with a meaningful financial cushion as they enter adulthood. Given the financial headwinds facing today’s young people - from rising education costs to high housing prices - making early use of a JISA can be invaluable.

However, parents must be aware that other than in exceptional circumstances JISA funds are locked away until the child turns 18. If money is needed for other child-related expenses before then, it cannot be withdrawn, so parents should only commit funds they will not require in the meantime. 

8. Missing the ISA contribution deadline

One of the most important aspects of an ISA allowance is it is provided on a strict ‘use it or lose it’ basis. You cannot roll over any unused portion of your allowance into the next tax year, so anyone aiming to maximise their £20,000 allowance must ensure all contributions and transactions are fully completed by midnight on 5 April. 

Many savers leave it to the last moment, with one Bestinvest client even making their final ISA contribution at 11:44pm on 5 April 2025, just over 15 minutes before the deadline. But relying on a lastminute dash is risky and increases the chance of mistakes that could result in missing out on valuable tax-free allowances altogether. 

While online investing platforms have made it easier to contribute at the eleventh hour, things can still go wrong. A power cut, patchy Wi-Fi, a technical glitch, high website traffic or a provider requiring time to process your payment or verify your identity could all cause delays. Crucially, your contribution or application must be completed, not just started, before midnight for it to count towards the outgoing tax year’s allowance. 

Those planning a Bed & ISA transaction to move investments held outside a tax wrapper into an ISA need even more time. Because Bed & ISA transactions involve selling and then rebuying investments, they can take several days to complete – or even weeks for those migrating paper share certificates into an ISA. Many providers stop accepting new Bed & ISA requests a week or more before the tax-year deadline to allow for trade settlement. If it’s too late to take advantage of Bed & ISA this tax year, it could be something to consider next tax year.

Ultimately, to ensure your ISA contributions and transfers make it in time, action them well before the April 5 deadline to avoid unnecessary stress and the risk of losing out. 

Bestinvest’s ISA deadlines:

• ISA/Junior ISA deadlines: To open an ISA or complete subscriptions into ISAs this tax year: 11.59 pm on Sunday, April 5, 2026.
• Debit card payment deadline for ISAs: Sunday, April 5, 2026, at 11.59pm
• Bank transfer: The deadline for ISA contributions is the same as above but beware of unforeseen delays. This tax year end falls on Easter weekend with a Bank holiday on Friday, April 3, so it is advisable to initiate the transfer earlier in the week to ensure the transaction goes through.
• Bed & ISA: Friday, March 27 at 5pm. You must sell any investments you wish to move from the Investment Account to your ISA by that date. This is to allow enough time to process the sale and transfer the cash to your Investment Account. Once the cash is available, you can then transfer it into your ISA. If you are looking to Bed & ISA shares that you hold as certificates and are not currently in your online account, then the process will take longer.
• For support: Clients can get support by phone, email or speaking to us on webchat. Those who want extra guidance from a Bestinvest coach can book a free investment coaching session with a financial coach.

See all tax year end deadlines

*The annual CGT exemption is currently just £3,000 - less than a quarter of the £12,300 available in the 2022/23 tax year.
**The annual tax-free dividend now sits at £500 - just a quarter of the £2,000 allowance investors could tap into in 2022-23 and a brutal 90% reduction from the £5,000 allowance available in 2017-18.
***The Personal Savings Allowance enables basic rate taxpayers to earn the first £1,000 in cash interest free of tax. Those paying the higher 40% income tax rate receive a £500 allowance while additional rate taxpayers subject to 45% income tax receive no concession at all.