If you pay money into an ISA, you’ll know that it is a highly tax-efficient way to grow your wealth.
However, in the recent UK Budget, changes were announced that will limit the amounts you can pay into different types of ISA.
Read about what these changes are and discover some steps you may want to take to ensure you are making the most of your tax-efficient ISA annual allowance.
Also, find out what will happen to your ISAs if you return to Australia, and how you should plan accordingly.
ISAs are a tax-efficient way to save and invest
The tax efficiency of ISAs derives from the fact that you do not pay Capital Gains Tax (CGT), Dividend Tax or Income Tax on wealth held within them, unlike many other savings and investment options.
You can currently (Jan 2026) contribute £20,000 across different types of ISAs in each tax year, including the two most popular options – Cash ISAs and Stocks and Shares ISAs.
You can use all your allowance in one ISA, or spread it across multiple ISAs.
Remember that the £20,000 a year allowance applies to each individual. This means that you and your partner can save and invest £40,000 in ISAs combined.
An important change to Cash ISAs was announced in the 2025 Budget
From April 2027, if you are under 65, the maximum amount you will be able to contribute to a Cash ISA each year will reduce from £20,000 to £12,000.
You will still be able to contribute up to your maximum £20,000 allowance, but at least £8,000 will have to be invested in a Stocks and Shares ISA.
If you are aged 65 and over, you will still be able to contribute £20,000 to a Cash ISA each year.
The choice between saving and investing will be dependent on your time frame
There are two common ways to save money in an ISA:
- A Cash ISA, which pays annual interest.
- A Stocks and Shares ISA, which offers market returns.
How much you set aside for each may depend on your circumstances and your objectives.
For example, we would strongly recommend you have an emergency fund of between three and six months’ household income. As you might need to access this money at short notice, you may want to keep that sum in an instant-access Cash ISA.
You may also want to save for short-term objectives, such as home improvements, holidays, or a new car. We would normally suggest that if your time frame is five years or less, a savings account is likely more appropriate than investing your money.
Investing in stocks and shares can help you grow your wealth over the long term
The nature of stock markets means that the value of shares will rise and fall.
There is also the potential for adverse economic conditions to trigger market upheaval, which could cause share values to fall dramatically.
Because of this, we would normally recommend that you invest for a minimum of five years to ride out the effects of any short-term market decline.
You may have specific reasons for long-term investing, such planning an international move, or accruing wealth for your children to access when they are older.
Alternatively, you may want to grow your long-term wealth to create future financial freedom and security. In these circumstances, investing will usually be the most effective approach.
Find out more: Australia – UK investors: Why your cross-border investment strategy should involve investing in all sectors, not just one.
The proposed ISA changes could prompt you to review your savings strategy
The tax advantages ISAs provide mean they should form an integral part of your financial strategy, whether you are saving or investing.
If you are under 65 and currently using your full £20,000 ISA allowance for savings, you can still contribute this amount to Cash ISAs in the 2025/26 and 2026/27 tax years before the limit changes.
However, from April 2027, you must place at least £8,000 in Stocks and Shares ISA if you want to use your maximum allowance.
It’s worth reviewing your savings and investment strategy in the light of these announced changes. You may find that you are saving money over an extended period where investing could be more appropriate and help you achieve better gains.
You should always try to maximise your ISA allowance as far as possible. You should also look to make the most of the £40,000 allowance with your partner and use it tactically to enhance your returns.
Your ISAs will lose their tax advantages if you move or return to Australia
If you move to Australia, you can keep your UK ISAs, but you can’t add any new money once you become an Australian resident.
Furthermore, you will be liable for tax through your Australian tax return on the interest, dividends, and gains that were previously tax-free in the UK.
Because of this, it’s worth considering what to do with your accrued ISAs before you move.
To avoid any future tax liability, you may want to consider drawing the value of your ISAs and, subject to your eligibility, making a lump sum contribution to your UK pension. Not only will this help boost your retirement fund, but you will also benefit from tax relief at your marginal rate on your contribution.
Find out more: If you’re an Australian resident, ISAs and General Investment Accounts could create tax issues for you
Get in touch to find out more
Expert advice and regular reviews of your savings and investment strategy can help ensure that you are best positioned to achieve your long-term goals.
At bdhSterling, we specialise in helping clients navigate the complexities of international financial planning. Whether you’re looking to grow your wealth and build an investment portfolio, our expert advisers can help you build a resilient, long-term financial strategy.
If you’d like to discuss the changes recent ISA changes, please get in touch with us.
Please note
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
This article is for information only, it does not take into account your personal objectives, financial situation, or needs. Please do not solely rely on anything you have read in this article and ensure that you conduct your own research to ensure any actions you may take are suitable for your circumstances. All contents are based on our understanding of HMRC and ATO legislation, which is subject to change.