The ISA allowance for 2025/26 and 2026/27 is £20,000 per tax year. Going over this limit — even accidentally — creates a problem with HMRC. Here is what happens and how to fix it.
The ISA Allowance Rules
| Rule | Details |
|---|---|
| Annual ISA allowance | £20,000 per tax year (2025/26 and 2026/27) |
| Tax year | 6 April to 5 April |
| Lifetime ISA sub-limit | £4,000 (counts towards the £20,000 total) |
| Multiple ISAs of same type | Allowed since April 2024 |
| Carry forward unused allowance | Not allowed — use it or lose it |
| Transfers between ISAs | Do not count as new subscriptions (if done correctly) |
How the £20,000 Splits
| ISA type | Maximum you can pay in | Notes |
|---|---|---|
| Cash ISA | Up to £20,000 | Across one or multiple providers |
| Stocks and Shares ISA | Up to £20,000 | Across one or multiple providers |
| Innovative Finance ISA | Up to £20,000 | Peer-to-peer lending ISA |
| Lifetime ISA | Up to £4,000 | Counts towards £20,000 total |
| Total across all ISAs | £20,000 | Combined maximum |
You can split the £20,000 however you like. For example, £10,000 in a Cash ISA and £10,000 in a Stocks and Shares ISA.
What Happens If You Exceed £20,000
| Step | What happens |
|---|---|
| 1. Overpayment detected | Your ISA provider or HMRC identifies the excess |
| 2. HMRC contacts you | You receive a letter or notification |
| 3. Excess must be removed | HMRC instructs you (or your provider) to withdraw the excess |
| 4. Tax status of excess | The excess amount loses its ISA tax-free status |
| 5. Tax on gains/interest | Any interest or gains on the excess amount are taxable |
| 6. Repair charge | HMRC may apply a repair charge (essentially the tax owed on the excess) |
How the Penalty Works
The penalty is not a fixed fine. Instead:
| Scenario | Consequence |
|---|---|
| £500 over the limit in a Cash ISA earning 4% | Interest on the excess (£20) is taxable — likely no actual tax if within Personal Savings Allowance |
| £5,000 over the limit in a S&S ISA with gains | Capital gains on the excess portion are taxable |
| Large excess for multiple years | HMRC may investigate and apply penalties for each year |
In practice, for small accidental overpayments, the actual tax impact is often minimal. But HMRC still requires the excess to be corrected.
How Overpayments Happen
| Common cause | How it happens |
|---|---|
| Multiple ISAs with different providers | Each provider does not know what you have paid into other ISAs |
| Forgetting about a Lifetime ISA | £4,000 into a LISA + £18,000 into other ISAs = £22,000 (£2,000 over) |
| Transferring incorrectly | Withdrawing from one ISA and depositing into another counts as a new subscription |
| Joint finances confusion | Each person has their own £20,000 — you cannot use a partner’s allowance |
| Auto-payments set too high | Standing orders that push total over £20,000 |
| Flexible ISA withdrawals | If you withdraw and redeposit in a flexible ISA, no issue — but if it is not flexible, the redeposit counts |
Flexible vs Non-Flexible ISAs
| ISA type | Withdraw and redeposit in same tax year? |
|---|---|
| Flexible ISA | Yes — withdrawn amount can be paid back without using allowance |
| Non-flexible ISA | No — any deposit counts as a new subscription, even if replacing a withdrawal |
If you have a flexible ISA, withdrawing £5,000 and redepositing £5,000 in the same tax year does not affect your allowance. With a non-flexible ISA, the redeposit counts as a £5,000 subscription.
Always check whether your ISA is flexible before withdrawing and redepositing.
How to Fix an Overpayment
| Step | Action |
|---|---|
| 1 | Contact the ISA provider where the excess was paid |
| 2 | Ask them to remove the excess to a non-ISA account |
| 3 | If HMRC has contacted you, follow their instructions |
| 4 | The provider will report the correction to HMRC |
| 5 | Any tax owed on gains/interest on the excess must be paid (via Self Assessment if necessary) |
If you notice it yourself before HMRC contacts you, act quickly. Providers can usually fix it with a simple instruction.
How to Avoid Going Over the Limit
| Tip | Details |
|---|---|
| Track your subscriptions | Keep a simple spreadsheet of how much you have paid into each ISA |
| Check before the tax year end | Review in March to confirm total is under £20,000 |
| Remember LISA counts | £4,000 LISA + other ISAs must not exceed £20,000 total |
| Transfer correctly | Use the ISA transfer process — do not withdraw and deposit manually |
| Check if ISA is flexible | Before withdrawing and replacing funds |
| One person, one allowance | You cannot use your partner’s unused allowance |
ISA Transfers (Do Not Count as Subscriptions)
| Transfer type | Counts towards allowance? |
|---|---|
| Transfer from one Cash ISA to another (via transfer form) | No |
| Transfer from Cash ISA to S&S ISA (via transfer form) | No |
| Withdraw from ISA, deposit into different ISA manually | Yes — this is a new subscription |
| Transfer current year subscriptions | Must transfer the full amount for current tax year |
| Transfer previous years’ ISA savings | Any amount, does not affect current year allowance |
Always use the official ISA transfer process through your new provider. Never withdraw and re-deposit yourself.
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