As of early 2026, Individual Savings Accounts (ISAs) remain fundamentally tax-free in the UK, meaning no income or capital gains tax is paid on interest or investment growth. However, potential future changes may include taxing cash held within Stocks and Shares ISAs to close loopholes.
Tax-free allowances remain frozen at £20,000 until 2030
This is called a “tax-free allowance”. The annual tax-free allowance for an adult ISA is £20,000. This limit has been confirmed to be frozen until 2030. If you're looking for a longer-term investment, a stocks and shares ISA might be something worth considering.
US taxpayers are required to report all ISA income and capital gains on their annual US tax return. The nature of the income determines its tax treatment: Interest income, ordinary dividends, and short-term capital gains are taxed at ordinary tax rates.
ISA income is not taxable, so it does not count towards the personal savings allowance or the dividend allowance and you do not need to tell HMRC about it. Across all types of ISA (except junior ISAs), the maximum you can put in, during 2025/26, is £20,000.
If you're not paying tax on your savings interest, cash ISAs have no benefit – so many should ditch them for higher-paying standard accounts. That's the message from MoneySavingExpert.com founder Martin Lewis in the third episode of the latest series of ITV's The Martin Lewis Money Show Live.
Investments that pay interest (like government and corporate bonds), or rental income (like some property funds) provide 100% tax-free income if held within an ISA. Everyone gets a £500 tax-free Dividend Allowance. This is on top of your personal allowance – the amount you can earn each tax year before paying tax.
Disadvantages: Interest rates may decrease, funds might be locked in fixed-rate ISAs, and not all accounts permit transfers, sometimes incurring exit fees.
Treasury securities are considered one of the safest investments in the market. These include Treasury Bills, Treasury Notes, Treasury Bonds, Treasury Inflation-Protected Securities (TIPS), and Floating Rate Notes (FRNs). They aren't the most exciting investments, but you won't owe state and local taxes on them.
Putting money into an ISA
Every tax year you can save up to £20,000 in one account or split the allowance across multiple accounts. The tax year runs from 6 April to 5 April.
What were the Cash ISA changes announced in the Autumn Budget? The Budget confirmed that the Cash ISA allowance is set to be cut from April 2027. For under-65s, the Cash ISA allowance will reduce from £20,000 to £12,000. For 65s, and older, the Cash ISA allowance will remain at £20,000.
Your ISA will be taxed in the United States subject to local capital gains tax rules, which are scaled depending on your income level, but generally preferable to tax rates in the United Kingdom. For a full breakdown, so our financial advice page for expats in the United States here.
If you want to buy or hold US shares the US government will charge you a tax on any income you earn from those shares as you are not a US resident or citizen. Chances are you'd prefer to pay less of this tax (known as withholding tax) on your shares, which is where a W-8BEN form comes in.
The 20k limit only applies to deposits within any one financial year. If you exceed that limit, at their discretion HMRC can require that the money be returned, impose tax on the interest it earned, or fine you.
For US citizens, ISAs create complex reporting obligations because the US doesn't recognize their tax-free status: Cash ISAs: Treated as regular foreign bank accounts. Interest income gets taxed at ordinary US rates and must be reported on your return.
If your ISA grows above £85,000 due to good performance, the extra money won't be protected by the FSCS. You can choose to leave it where it is (and accept the risk), or move part of your ISA to another provider to stay under the limit.
Whilst investors may enjoy the certainty that cash ISAs provide, when looking to invest for the long term, there is a risk attached to cash. Over the long term, interest on savings accounts tends not to keep pace with inflation. And that means your cash loses value in real terms.
The HMRC document also said there were around 3,080 Isa accounts with a market value of £1 million-plus in 2022/23. It counted 30 cash Isa accounts with £500,000-plus in them and 38,680 stocks and shares accounts containing at least £500,000 in the tax year 2022/23. The figures were rounded to the nearest 10.
Ideally, the rate of return on your investments is enough for you to live off of, so you never need to touch your principal. With $200,000 in your retirement savings and factoring in the average annual rate of return between 10–12%, you'll have between $20,000 and $24,000 to live off of each year.
Becoming an ISA millionaire through consistent contributions
Assuming you contribute £20,000 a year and an annual growth rate of 5%, you could become an ISA millionaire in approximately 25 years. Having a tax-free portfolio worth over £1 million is highly beneficial for anyone.
No, cash ISAs do not always pay the best interest rates, so it's worth shopping around. Historically, to beat an ISA you would need to find a net interest rate on a savings account that was higher than an ISA's gross interest rate. Net interest represents the rate you get on your savings after tax has been deducted.
Consider Fixed-Term Options: If you don't need immediate access to your funds, fixed-term cash ISAs often provide higher interest rates compared with easy-access accounts—but ensure that locking away money aligns with your needs.