UK Tax-Free Savings & Investment Allowances 2026/27

Every UK tax-free savings and investment allowance 2026/27 - ISA £20,000, pension £60,000, dividend £500, CGT £3,000, savings interest £500/£1,000, gift aid.

The UK tax system gives every individual several separate tax-free allowances covering income, savings, dividends, investments and pension contributions. Most people use only the ISA; high earners and investors can shelter materially more. This guide covers every allowance for 2026/27 with the exact cap, who it applies to, and how they interact.

1. Personal Allowance — £12,570

What it is: the amount of income you can earn before Income Tax applies.

2026/27 rate: £12,570 (frozen from 2021/22 through at least 2028/29 per current government policy).

Who loses it: anyone with “adjusted net income” above £100,000 — the PA tapers by £1 for every £2 of income above £100k, reaching zero at £125,140. This creates the notorious 60% effective marginal rate for higher earners between £100k and £125,140.

How to maximise: pension contributions and charity Gift Aid reduce ANI. See pension section below.

Regions: same across UK (Scottish bands attach to the PA, not replace it).

2. ISA allowance — £20,000

What it is: annual contribution cap into Individual Savings Accounts. Any gains, interest, and dividends inside an ISA are completely tax-free, forever.

2026/27 rate: £20,000/year (unchanged since 2017/18).

Subtypes:

Cash ISA — savings-account returns, protected by FSCS up to £85,000.
Stocks and Shares ISA — investment account, can hold funds/ETFs/shares/bonds.
Innovative Finance ISA — P2P lending returns.
Lifetime ISA (LISA) — up to £4,000/year of your £20k, +25% government bonus, for first home or age 60.
Help to Buy ISA — closed to new applicants since 2019.

You can split the £20,000 across any combination (e.g. £10k cash + £10k stocks). The LISA £4,000 counts within the £20k; it doesn’t add.

Junior ISA (JISA) — separate £9,000/year allowance for under-18s (2024/25 rate, frozen 2026/27).

Claim by: 5 April each year. Unused allowance is lost — no carry-forward.

3. Pension Annual Allowance — £60,000

What it is: the amount you can contribute (employer + employee + self-employed) to all UK pensions per year with full tax relief.

2026/27 rate: £60,000 (raised from £40,000 in April 2023, unchanged since).

Taper for high earners: if your “threshold income” exceeds £200,000 and “adjusted income” exceeds £260,000, the allowance tapers £1 for every £2 above £260,000, down to a minimum of £10,000 at £360,000+ adjusted income.

Carry-forward: you can use unused allowance from the previous 3 tax years. Must have been a pension scheme member in each year. A full carry-forward can shelter £240,000 (£60k × 4 years) in a single year.

Tax relief:

Basic-rate (20%) claimed automatically by provider under relief-at-source.
Higher-rate (40%) additional relief claimed via Self Assessment or Personal Tax Account.
Salary sacrifice arrangements give full NI + IT relief without separate claim.

See our pension calculator to model real net cost.

4. Dividend Allowance — £500

What it is: the amount of dividend income taxed at 0% before normal dividend rates apply.

2026/27 rate: £500 (reduced from £2,000 in 2022/23 to £1,000 in 2023/24 and £500 from 2024/25).

Rates above the allowance:

Basic rate: 8.75%
Higher rate: 33.75%
Additional rate: 39.35%

Who benefits: small-portfolio investors (typically under £25k in dividend-paying shares), Ltd company directors paying themselves via dividends.

Interaction with ISA: dividends inside an ISA are entirely tax-free and don’t count toward the £500 allowance — so there’s almost never a reason to hold dividend-paying shares outside an ISA if you have ISA headroom.

See our dividend tax calculator for exact modelling.

5. Personal Savings Allowance (PSA) — £1,000 / £500 / £0

What it is: tax-free interest on savings held outside an ISA.

2026/27 rates:

Basic-rate taxpayer: £1,000/year tax-free interest.
Higher-rate taxpayer: £500/year tax-free interest.
Additional-rate taxpayer (income > £125,140): £0 — all interest taxed at marginal rate.

How it works: banks/building societies pay gross (no tax deducted) and HMRC collects tax on interest above your PSA via PAYE adjustment to your tax code (next year).

Interaction with Starting Rate for Savings (£5,000): separately, the first £5,000 of savings interest is taxed at 0% if your non-savings income is below £17,570. This is a genuinely underused allowance for people with low earned income but savings — typically retirees.

Interaction with ISAs: ISA interest is tax-free and separate. Move savings into a Cash ISA first to use the £20k ISA allowance before relying on the PSA.

6. Capital Gains Tax (CGT) annual exempt amount — £3,000

What it is: the amount of capital gains you can realise tax-free per year from selling assets outside an ISA or pension.

2026/27 rate: £3,000 (cut from £12,300 in 2022/23 to £6,000 (2023/24), then £3,000 from 2024/25).

Rates above the exemption (2026/27):

Residential property gains (not primary residence): 18% basic rate, 24% higher rate.
All other gains (shares, crypto, BADR): 18% basic, 24% higher. (Harmonised to these rates from Oct 2024 Autumn Budget — previously 10%/20%.)

Business Asset Disposal Relief (BADR): sell a qualifying business and pay 14% CGT (2025/26) rising to 18% (2026/27) on up to £1m lifetime.

Interaction with ISA: gains inside an ISA are entirely CGT-free and don’t count toward the £3,000.

Bed and ISA strategy: sell shares held outside ISA (realising gains up to £3k/year tax-free), then immediately buy them back inside your ISA. Over 5-10 years you can migrate a sizeable non-ISA portfolio into the tax-free wrapper without paying CGT.

7. Marriage Allowance — £1,260

What it is: transfer of £1,260 of unused PA from lower-earning spouse to basic-rate-taxpaying spouse.

2026/27 rate: £1,260 transferable, 20% benefit = £252/year for qualifying couples.

See our dedicated Marriage Allowance guide and calculator.

8. Gift Aid — unlimited

What it is: when you donate to a UK registered charity, the charity claims 25% from HMRC on top of your donation, and you can claim the difference between your marginal rate and the basic rate on your Self Assessment return.

Benefit for higher-rate taxpayer: donate £800 → charity receives £1,000 (basic rate claim), you claim back a further £200 via Self Assessment (40% – 20% on £1,000).

Adjusted Net Income effect: Gift Aid reduces ANI for the PA taper (>£100k) and HICBC (>£60k) calculations. A £10,000 Gift Aid donation can restore £5,000 of PA lost to taper or eliminate a £2,000 HICBC.

9. Rent-a-Room relief — £7,500

What it is: rent out furnished room(s) in your main home and earn up to £7,500/year tax-free.

Rules: must be your main home (not a buy-to-let), must be furnished accommodation, max 7 lodgers (any more and it becomes a business, not rent-a-room).

Above £7,500 — you can choose to either pay tax on the full amount under normal property rules, or just on the excess above £7,500 (election on Self Assessment).

10. Property allowance — £1,000

What it is: first £1,000 of annual property income (rent from garages, parking spaces, temporary lettings) is tax-free, no declaration needed.

2026/27 rate: £1,000 (unchanged since 2017/18).

Above £1,000 — either claim £1,000 as a standard deduction or deduct actual expenses.

11. Trading allowance — £1,000

What it is: first £1,000 of self-employed/side-hustle income is tax-free and doesn’t require Self Assessment registration.

Examples covered: eBay reselling, occasional freelance, dog-walking, tutoring, Etsy sales up to £1,000/year.

Above £1,000 — must register for Self Assessment and declare all trading income (can still deduct the £1,000 as standard).

Summary table — 2026/27 at a glance

Allowance	Amount	Notes
Personal Allowance	£12,570	Tapers >£100k
ISA	£20,000	All subtypes
Pension Annual Allowance	£60,000	Tapers at very high incomes
Dividend Allowance	£500	Outside ISA
PSA (basic rate)	£1,000	On savings interest
PSA (higher rate)	£500	On savings interest
CGT exemption	£3,000	Outside ISA/pension
Marriage Allowance	£1,260 transferred	£252 benefit
Rent-a-Room	£7,500	Main home only
Property Allowance	£1,000
Trading Allowance	£1,000	Side hustles

Maximising your allowances — order of priority

Pension to employer match — essentially free money; never leave on the table.
ISA contributions — £20k covers most people’s excess savings, tax-free forever.
Additional pension if higher-rate taxpayer or HICBC band — 40%/60% effective relief.
Bed and ISA for existing non-ISA investments — migrate to tax-free wrapper using CGT exemption.
Marriage Allowance — £252 if eligible, takes 5 minutes.
Voluntary NI if State Pension gaps — outsized long-term return.

Most employees should focus on 1 + 2 as default. Higher earners should add 3. Investors with significant non-ISA holdings should use 4 annually.

Bottom line: the UK tax system rewards allowance awareness. A basic-rate taxpayer using just PA + ISA is paying the minimum expected. A higher-rate taxpayer ignoring pension top-ups, Bed-and-ISA, or Gift Aid is probably paying 20-30% more tax than necessary.