Key tax allowances for investors in the 2026/27 tax year

The new tax year is here and runs from 6 April 2026 until 5 April 2027. As with each tax year, most allowances have reset and can’t be carried over to the next tax year, with pensions being one of the exceptions – more on that later. While there are no major changes this tax year, the case for tax-efficient saving and investing has become more compelling in recent years after a series of tax changes have taken effect in the UK that could significantly increase personal tax burdens and reduce disposable incomes. With that in mind, savers and investors should review the valuable tax allowances available to them this tax year.

The tax treatment of the products referred to below depends on individual circumstances and is subject to change.

Tax

Personal Allowance (PA)

The Personal Allowance (PA) is the amount of income you can earn before you start paying tax. For the 2026/27 tax year, the main income tax thresholds remain frozen and are planned to remain so until at least 2031. These figures have been frozen for several years which means more people will gradually get pulled into higher tax bands as wages rise with inflation. 

• Personal Allowance: £12,570 
• Higher rate threshold: £50,270 
• Additional rate threshold: £125,140 

It’s worth noting that the Personal Allowance is gradually withdrawn once income exceeds £100,000. It is reduced by £1 for every £2 of income above this threshold, meaning it’s fully lost at £125,140. This creates an effective marginal tax rate of 60% on income within this band, as individuals pay higher-rate tax while also losing their tax-free allowance. 

Personal Savings Allowance (PSA) 

The Personal Savings Allowance (PSA) is the amount of interest you can earn on savings tax-free, above the personal allowance, and it’s based on your income tax band. For the 2026/27 tax year, the PSA remains unchanged. 

• Basic rate taxpayers (20%) - £1,000 
• Higher rate taxpayers (40%)- £500 
• Additional rate taxpayers (45%) – No allowance 

Tax rates and bands differ if you’re a Scottish taxpayer. 

Dividend Allowance

This is the amount of dividend income above the personal allowance that can be received each tax year, before dividend tax becomes payable. The dividend allowance remains at £500 for this tax year but the tax rates have changed: 

• The basic rate dividend tax increases from 8.75% to 10.75% 
• The higher rate increases from 33.75% to 35.75% 
• The additional rate remains at 39.35% 

Capital Gains Tax (CGT) Allowance 

This is a tax on the profit or gain made when selling assets that have increased in value. The CGT allowance is the amount of capital gains you can make each tax year before tax is payable. The CGT allowance remains at £3,000 for this tax year. 

Savings and investments 

ISA Allowance 

ISAs provide tax-free growth and flexible withdrawals. This tax year, savers can split their allowance across different types of ISA, whether that’s a Stocks & Shares ISA, a Cash ISA, a Lifetime ISA (up to £4,000 for those who qualify) or an Innovative Finance ISA. 

For the 2026/27 tax year the ISA allowance remains at £20,000. 

Junior ISA Allowance 

Children are eligible for their own tax-free wrapper in the form of a Junior ISA (JISA). Junior ISAs are a popular way for parents to build tax-efficient savings and investments for a child. The child can take control of the account when they turn 16 but cannot withdraw the money until they turn 18. After their 18th birthday, the money can be withdrawn to fund savings goals like paying for university fees or to go towards a house deposit. Alternatively, the JISA can be converted to an adult ISA to continue investing. 

For the 2026/27 tax year the Junior ISA allowance remains at £9,000. 

Pension Annual Allowance 

The Pension Annual Allowance is the amount that can be contributed across all pensions each tax year, while still benefiting from tax relief. For 2026/27, this is up to £60,000 or 100% of earnings (whichever amount is lower). It may also be possible to carry forward any unused allowance amounts from the previous three tax years (subject to eligibility). 

For higher earners the Tapered Annual Allowance would need to be considered. This affects individuals with adjusted income over £260,000 and threshold income over £200,000. If both apply, the annual allowance may be reduced progressively down to a minimum of £10,000. 

Additionally, for those who've already accessed a defined contribution (DC) pension, the Money Purchase Annual allowance (MPAA) may have been triggered. This restricts the amount that can be contributed to a DC pension with tax relief going forward. It’s important to check whether this applies to you. 

Keep in mind that you cannot start withdrawing from your pension until age 55, rising to 57 from April 2028. 

Summary of key tax allowances for the 2026/27 tax year

What changes are coming into effect for ISAs from 6 April 2027?

For people under age 65, the annual cash ISA subscription limit will be reduced to £12,000. If you fall within this age bracket, to fully use the £20,000 overall ISA allowance, the remaining £8,000 must go into other ISA types (for example, stocks and shares) if you want to maximise your tax-free allowance. 

For people aged 65 and over on 6 April 2027, the £20,000 cash ISA allowance stays at £20,000.