The tax year runs from 6 April to 5 April the next year. This means that the most crucial UK tax deadline occurs every April.

That’s because there exist various annual allowances and tax reliefs that you need to make use of to legally mitigate your income tax bill and stop taxes devouring your investment returns.

Most of these are ‘use it or lose it’ allowances with a 5 April deadline.

It’s no good bemoaning in June that you should have filled your ISA allocation by 5 April, but you were too preoccupied by the Donald Trump Show or the Six Nations rugby!

No point cursing if you create a £500 capital gains tax liability in July that you might have defused in March!

Ch-ch-changes

Of course you read Monevator. You know this kind of stuff. But it’s still all too easy to overlook something.

Especially when the tax rules keep changing! For example, the capital gains allowance was halved in the 2024-25 tax year to just £3,000.

So let’s run through a checklist of what to think about as the UK tax deadline draws near.

Follow the links in each section to go deeper.

ISA allowance

The annual ISA allowance is the maximum amount of new money you can put each year into the range of tax-free savings and investment accounts that comprise the ISA family.

The ISA allowance for the current tax year to 5 April is £20,000.

You cannot carry forward or rollback this ISA allowance. What you don’t use in the tax year is lost forever.

ISAs are a superb vehicle for growing your wealth tax-free. But the fiddly rules – seemingly made up by a bureaucrat with a grudge against mankind – are subject to change over time.

Watch out for rule tweaks

For example, as of the 2024-25 tax year you can now open multiple ISAs of the same type in the same tax year.

Previously you could only open one new ISA of each type in a tax year.

Note though that you can only contribute £20,000 in total to your ISAs a year – old or new. And it’s down to you to keep track of your running total.

Also, you can still only pay into one Lifetime ISA per year. The maximum contribution here is £4,000. This counts towards your £20,000 annual ISA allowance.

Another change is that you can now make partial ISA transfers – although not all platforms will accept them. (Under the old rules, if you contributed to an ISA and then wanted to transfer the funds to a different provider in the same tax year, you had to transfer all of that year’s ISA contributions).

And another: fractional shares can now be held in a stocks and shares ISAs. They’re listed as ‘fractional interests’ on this page of qualifying investments.

My co-blogger wrote the definitive guide to the ISA allowance.

• The ISA allowance: how it works and how to use it

Pension contributions annual allowance

There is a limit to how much money you can contribute to your pension in a given tax year while still receiving tax relief on those contributions.

It is sometimes referred to as the pension annual allowance.

Despite massive speculation with every Budget, the allowance is still £60,000.1

However the rules about inheritance tax and pensions were thrown into the Magimix blender in late 2024:

• Pensions and inheritance tax: rugged by Reeves

Note that saving into a pension is mostly a tax-deferral strategy. That’s because you’re eventually taxed on pension withdrawals, unlike money you take out of an ISA tax-free.

In theory this makes ISAs and pensions equivalent from the perspective of tax.

In practice though, the fact that you can also draw a special tax-free lump sum from your pension gives pensions an edge in tax-terms – albeit at the cost of locking away your money for years.

Weigh up the pros and cons of each tax wrapper. We think most people should do a bit of both.

You can reduce your marginal tax rate by making pension contributions, if you can afford to go without the money today. Those on higher-rate tax bands should definitely do the maths:

• The rich person’s guide to pension contributions

Personal savings allowance

Under the personal savings allowance:

• Basic-rate taxpayers can earn £1,000 per year in savings interest without having to pay tax.
• Higher-rate taxpayers can earn £500 per year.
• Additional rate taxpayers don’t get any personal savings allowance.

Back when interest rates were very low, these savings allowances seemed quite generous.

But rising rates have changed everything. Even interest on unsheltered emergency funds can now take you over the personal savings allowance and see some of your interest being taxed.

Redo your sums. Higher-rate tax payers might look into holding low-coupon short duration gilts instead. Recently these have offered a lower-taxed alternative to savings interest.

• Why the personal savings allowance is important again

Dividend allowance

As of 6 April 2024, the annual tax-free dividend allowance was reduced to £500.

Dividends you receive within the tax-free dividend allowance are not taxed. But breach the allowance and you’ll pay a special dividend tax rate on the rest, according to your income tax band.

You can avoid the whole palaver by investing inside an ISA or pension.

• UK dividend tax explained

Capital gains tax allowance

Everyone has an annual capital gains tax allowance, or ‘annual exempt amount’ in the lingo of HMRC.

This allowance was halved to £3,000 from 6 April 2024.

It is (for now) frozen at this level.

Capital gains tax is levied on the profits you make when you sell or transfer most assets. These assets include everything from shares and buy-to-let properties to antiques and gold bars.

You can shield your gains from capital gains tax by investing within ISAs and pensions. Go re-read the relevant bits above if you skimmed them!

• Capital gains tax in the UK

EIS and VCT investments

You can also reduce your taxes by investing in Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EIS).

These vehicles are mostly marketed at wealthy high-earners for whom the large income tax breaks are attractive.

But be aware that these tax reliefs come with all kinds of risks, rules, and regulations.

VCTs

VCTs are venture capital funds run by professional managers who make investments into startup companies.

But somewhat quixotically, VCTs don’t even pretend to try to deliver high venture-style returns for investors.

Instead they aim to return cash via steady tax-free dividends.

You can invest up to £200,000 a year into VCTs. You must hold them for at least five years to keep your 30% income tax relief.

VCT fund charges are invariably expensive, and the returns mostly mediocre – especially if you back out the tax reliefs.

EIS

EIS investing is even riskier. Qualifying companies are usually very young, and many investors buy into them via crowdfunding platforms rather than professional fund managers.

The quality of these EIS opportunities is extremely variable, and information usually scanty.

And while there have been a few big crowdfunded winners, the majority do poorly and often go to zero.

If you’re a baller who buys Lamborghinis before breakfast, you may already know you can put up to £1m a year into EIS investments. (Up to £2m if you’re investing in ‘knowledge intensive companies’).

Again, you can knock 30% of your EIS investment amount from your income tax bill – and there are other reliefs should things go wrong.

You must hold EIS investments for three years to qualify for the tax relief.

Most people shouldn’t put more than fun money into EIS or even VCT schemes, in our opinion. Certainly not unless they’re very sophisticated investors or getting excellent financial advice.

• The risks of Venture Capital Trusts
• What are Enterprise Investment Schemes?
• Running a 31-fold gain in pursuit of a 100-bagger

Check in on your tax band and personal allowances

The rate of income tax you pay depends on your total income from all sources. This includes salary, interest, dividends, pensions, property letting, and so on.

You add up all this income to get your total income figure.

You then subtract your personal allowance from the total to see which tax bracket you fit into.

Everyone starts with the same personal allowance, regardless of age:

• This personal allowance is currently £12,570

Your personal allowance may be bigger if you qualify for Married Couple’s Allowance or Blind Person’s Allowance.

However the Personal Allowance goes down by £1 for every £2 of income above a £100,000 limit. It can go down to zero.

For England, Wales, and Northern Ireland, the income bands after deducting allowances are:

Income Tax Rate	Income band
Starting rate for savings: 0%	£0-£5,000
Basic rate: 20%	£0- £37,700
Higher rate: 40%	£37,701-£125,140
Additional 45% rate	£125,141 and above

Source: HMRC

Note: If your non-savings taxable income is above the starting rate limit, then the starting savings rate does not apply to your savings income.

Scotland has its own income tax rates.

As we’ve seen above, there are further allowances and reliefs for income from certain sources – such as dividends and savings – that can reduce how much of that particular income is taxable.

You can take steps such as making additional pension contributions or having a spouse hold certain assets to further reduce your taxable income or the highest rate of tax you pay.

• UK tax brackets and personal allowances

Don’t make the UK tax deadline into a crisis

Scrambling to exploit these allowances before the tax year ends is not only stressful – it’s financially suboptimal.

If you had cash lying around that you might have put into an ISA earlier in the year, for example, then it could have been earning a tax-free return for months already.

But don’t blush too hard if you find yourself in this position.

Most of us are similar, which is why we wrote this article – and why the financial services industry bombards us with ISA promotions every March.

Try to automate your finances to invest smoothly and intentionally over the year.

And remember that April also brings warmer weather and longer days. Life is about much more than money and taxes!

Save and invest hard, take sensible steps to mitigate your tax bill, and enjoy life like a billionaire with whatever you’ve got leftover.

1. Very high-earners are subject to a much-fiddled with taper that reduces their allowance. It is reduced by £1 for every £2 someone earns over £260,000, including pension contributions. [↩]

The ISA allowance1 is the maximum amount of new money you can put into the range of tax-free savings and investment accounts that make up the ISA family.

The ISA allowance for the current tax year to 5 April is £20,000.

The tax year runs from 6 April to 5 April the following year.

ISAs are a superb vehicle for growing your wealth tax-free. But the rules are complicated – seemingly made up by a bureaucrat with a grudge against mankind.

So this article is here to help you make the most of your ISA allowance.

What is an ISA?

ISA stands for Individual Savings Account. It’s the UK’s most important tax-free account for those savings and investments you want to access before retirement age.

ISAs are called tax-free wrappers because they legally protect the assets inside the account from:

• Income tax on interest paid by cash, bonds, and bond funds.

• Dividend income tax on dividends paid by shares and equity funds.

• Capital gains tax paid on the growth in value of assets such as shares, bonds, and funds.

You don’t even have to declare your ISA assets on your self-assessment tax return. This can save you a ton of tax paperwork.

Your assets remain tax-free as long they’re held in an ISA account… so long as you don’t have the cheek to die.

And you don’t lose out if you move abroad. (At least not from the perspective of the UK government.)

Unlike a pension, your ISA funds are typically2 accessible at any time.

You’re also not charged income tax on withdrawals from an ISA – again unlike a pension. So there’s no danger of being pushed into a higher tax bracket by the wealth you accumulate in your ISA.

• Read up on ISAs Vs SIPPs to learn how best to allocate between them.

ISA accounts: what types are there?

ISA type	Allowance3	Eligible investments	Notes
Stocks and shares ISA	£20,000	OEICs, Unit Trusts, Investment Trusts, ETFs, individual shares and bonds	Age 18+. Can be flexible, but only cash can be added and withdrawn
Cash ISA	£20,000	Savings in instant access, fixed rate, and regular varieties	18+. Again can be flexible
Innovative Finance ISA (IFISA)	£20,000	Peer-to-peer loans (P2P), crowdfunding investments, property loans	Age 18+. Can be flexible. Not covered by FSCS compensation scheme
Lifetime ISA (LISA)	£4,000	As per cash ISA or stocks and shares ISA	Open account from age 18 until 40. Pay in until age 50. Only use for buying first home, or from age 60, otherwise penalty charge
Junior ISA (JISA)	£9,0004	As per cash ISA or stocks and shares ISA	Open until age 18. Child may withdraw funds from 18+

The ISA allowances are currently frozen until 2030.

New Help to Buy ISAs are no longer available. If you have one already you can continue to save into it until 30 November 2029.

What about the NISA? NISA stands for New Individual Savings Account. This term described the new-style ISAs brought in by rule changes in 2014. Today every ISA follows the NISA rules, so the jargon is obsolete.

How much can I put in an ISA in 2025 – 2026?

You can save up to £20,000 of new money into your ISAs during the tax year 6 April 2025 to 5 April 2026. 

All £20,000 of your ISA allowance can go into one ISA5 or you can split it across any combination of the following ISA types:

• Cash ISA
• Stocks and shares ISA
• Lifetime ISA (£4,000 annual limit)
• Innovative Finance ISA

You can now pay new money into multiple ISAs of the same type. The exception is the LISA. You’re still restricted to just one of those per year. 

But you can open and fund two stocks and shares ISAs in the same year – or seven different cash ISAs if you feel the need – just so long as you don’t pay in more than £20,000 total into all your ISAs within the tax year.

What about money in previous years’ ISAs? That money does not count towards your annual ISA allowance for the current tax year.

For clarity’s sake, we’ll refer to assets in your previous years’ ISAs as old money. Assets in the current tax year’s ISAs we’ll term new money.

Interest, dividends, and capital gains earned on assets already held within an ISA do not count towards your ISA allowance.

Your £20,000 ISA annual allowance is a ‘use it or lose it’ deal. You can’t rollover any of it into the following tax year.

ISA transfers

An ISA transfer enables you to officially switch an ISA’s holdings to another provider. This way you avoid losing the tax exemption on your assets when moving them.

The transfer rules for any ISA opened in the current tax year are straightforward:

• You can transfer any amount of your ISA’s balance from one provider to another. You used to have to transfer the whole balance of your current tax year ISA but that rule has been scrapped.

• You’re free to transfer your ISA at any time to another provider. No buyer’s remorse with ISAs! 

• You can also transfer to any other type of ISA, or even the same type. (Let’s live a little!)

• If you transfer from one type of ISA to another, then you count as subscribing to the receiving ISA type. For example, you transfer from a cash ISA to a LISA. 

• If you transfer from a Lifetime ISA to a different ISA type before age 60, you’ll have to pay a nasty penalty charge.

• Beware any transfer fees imposed by your current ISA provider.

• Transfers into a Lifetime ISA must not exceed the £4,000 current tax year limit.

The golden rule with any ISA move is always to transfer your money. Don’t just go “sod it!” and withdraw your cash in a flounce. If you transfer your ISA to another provider, your assets retain their tax-free status. If you just withdraw the money they don’t.

• Find out how to transfer a stocks and shares ISA.

ISA transfer rules for previous years’ ISAs

You can transfer any amount from any of your old ISAs to the same or any other type of ISA.

• Any number of your old ISAs can be consolidated into a new ISA of the same or different type.

• Any of your old ISAs can be split by transferring a portion of the balance into multiple ISAs of the same or different types.

• You can transfer to the same or different providers.

Transferring previous years’ ISAs leaves your current tax year’s allowance untouched.

For example, moving £40,000 from an old ISA into a new ISA still leaves you with a £20,000 ISA allowance for the current tax year.

You could transfer £4,000 into this year’s LISA from an old ISA (of any type), gain the government bonus, and leave your £20,000 allowance entirely intact.

This move maxes out your LISA allowance for the tax year. You must not then exceed that £4,000 LISA limit by transferring more cash into the LISA during the current tax year.

As before, make sure you transfer an ISA. Employ the new provider’s ISA transfer process to maintain your ISA money’s tax-free status. Don’t withdraw cash or re-register assets using any other method.

Withdrawing from an ISA

If you withdraw money from your ISA, can you replace it and not reduce your ISA limit?

Yes, but only if your ISA is designated as ‘flexible’.

If your ISA is not flexible (ask your provider) then a withdrawal reduces your tax-free ISA savings as follows:

• You put £10,000 into your ISA. That reduces your ISA allowance to £10,000.
• Next you withdraw £5,000 from your ISA.
• You can only contribute another £10,000 into your ISAs this tax year.
• Put that money in, and you’ll have added £15,000 to your ISAs in total by the end of the tax year.

Obviously £15,000 is less than £20,000, and so you’ll not have maximised your annual allowance.

Enter Flexible ISAs, which get around this problem. 

Flexible ISAs

Flexible ISAs let you withdraw cash and put it back in again later the same tax year without losing any of your current tax year’s ISA allowance or reducing how much you’ve saved tax-free.

The following ISA types can be designated as flexible:

• Stocks and shares ISA
• Cash ISA
• Innovative Finance ISA

Flexibility is not an inalienable right. An ISA provider must decide to offer it and to deal with the administrative faff. Providers may offer flexible and inflexible versions of the same ISA type.

Here’s how the flexible ISA rules work:

• ISA allowance = £20,000
• Contributed so far = £10,000
• Remaining contribution = £10,000
• You choose to withdraw = £5,000

In this case you can still pay £15,000 into your flexible ISA before the ISA deadline at the end of the tax year because:

Remaining ISA allowance = £15,000 (£10,000 remaining contribution + £5,000 replacement of the withdrawal.)

If your ISA was inflexible then your remaining ISA allowance would be just £10,000. In other words, you couldn’t replace the withdrawn amount and it would have lost its tax-free status.

Flexible ISAs: contributing factors

Contributions made to an ISA in the same tax year as withdrawals work in this order:

1. Replace the withdrawal.
2. Reduce your remaining ISA annual allowance.

Withdrawals from an old flexible ISA can be replaced in the same tax year. This won’t reduce your current ISA allowance, provided the ISA is no longer active.6

When flexible ISAs contain assets from previous tax years and the current tax year it works like this:

Withdrawals

1. From money contributed in the current tax year.
2. From money contributed in previous tax years.

Replacement contributions

1. Replace previous tax year’s withdrawals.
2. Replace current tax year withdrawals.
3. Reduce your remaining ISA annual allowance.

All replacement contributions must happen in the same tax year as the withdrawal.

Some providers say the withdrawal has to be replaced in the same ISA account you took it from.

More quirky than an octogenarian British actor

The ISA rules enable you to put your withdrawn money back into different ISA type(s) with the same provider, if they make that facility available.

Check your provider’s T&Cs. Or send them thousands of emails in BLOCK CAPITALS until they respond.

A flexible stocks and shares ISA allows you to replace the value of cash withdrawn. You can’t replace the value of shares, or other investment types that you moved out of the account, should they afterwards change.

You can sell down your assets, withdraw the cash, and then replace that cash later in the tax year, and buy more assets with it.

Dividend income should also be flexible in a flexible ISA scenario.

If you transfer your flexible ISA to another provider, then check its product is also flexible.

You may lose the ability to replace withdrawals if you don’t replace them before you transfer a flexible ISA. Again, this is determined by your provider’s T&Cs rather than the rules. (Subject them to a paid social media campaign to get an answer on this one.)

If your withdrawals result in your account being closed, your provider can allow you to reopen your flexible ISA in the same tax year and replace the money. That applies to old and new ISA accounts.

Again, check with your provider. (Via a billboard installed outside their office if need be.)

Flexible ISA hack to build your tax-free ISA allowance

1. Open a flexible, easy access cash ISA that accepts ISA transfers.
2. Transfer your non-flexible old ISAs into the flexible ISA.
3. Your flexible ISA now accommodates the value of the old ISAs – say £40,000.
4. If your flexible ISA doesn’t pay table-topping interest then withdraw your cash and spread it liberally among the humdinger savings accounts of your choice, or an offset mortgage.
5. Move your cash back into the flexible ISA by 5 April of the current tax year. Fill as much of the current year’s ISA allowance as you can, too. For instance another £20,000.
6. In our example, you now have £40,000 + £20,000 = £60,000 tax-free and flexible.
7. From April 6 of the new tax year: withdraw your cash and liberally spread it.
8. Repeat as required.

This method builds up a large and flexible tax-free shelter. One that could prove valuable later in life, when you have more money to tuck away.

For example, perhaps it could become a place to shelter and grow your 25% tax-free pension cash when you take it. This could be instantly transferred into a stocks and shares ISA, come the day.

Or maybe you’ll sell a business, or receive some other windfall.

Watch out for the £85,000 FSCS compensation limit (see below). Open a new flexible ISA with a different authorised firm before you go over that line.

What happens if you exceed the ISA allowance?

HMRC should get in touch if you exceed the ISA allowance. You may be let off for a first offence, but otherwise it will instruct your ISA provider on what action to take.

Action is likely to include your extraordinary rendition to an offshore black site where you will be forced to read HMRC compliance manuals for the rest of your life.

Alternatively, HMRC may require overpayments and excess income to be removed from your account. And also invite you to pay income tax and capital gains (potentially on all assets in the ISA) from the date of the invalid subscription until the problem is fixed.

Eek!

Your ISA provider may also charge you a fee for the hassle.

You can similarly get into hot water for dropping new money into your ISA as a UK non-resident or for breaking the age restrictions.

You can call HMRC on 0300 200 3300 to discuss all this.

Just don’t expect them to admit to the Deep State stuff. Open your eyes sheeple! [Editor’s note: we’re joking.]

FSCS compensation scheme

What if your ISA provider goes bust and your money can’t be recovered? In that case the Financial Services Compensation Scheme (FSCS) waits in the wings.

• Cash – You can claim up to £85,000 compensation on cash held with each authorised firm.

• Stocks and shares – It’s more complicated, quelle surprise. But you can claim up to £85,000 compensation on investments held with each authorised firm.

• Innovative Finance – Not covered by the FSCS. You’re on your own.

Watch out for the definition of an ‘authorised firm’. Often multiple brand names sit under the same authorised firm umbrella.

For example, if you have cash at HSBC and First Direct then you’re only covered for £85,000 across both. They are one and the same authorised firm.

Investments parked at the same bank should be covered for another £85,000. That’s on top of your cash.

• Check the FCA’s Financial Services Register to see what services your provider is authorised for.  
• Firms with matching FRN numbers (also known as registration numbers) are sister brands that only provide you with £85,000 of compensation cover between them. 

Inheriting an ISA

The tax-free benefits of an ISA can be passed on to a surviving spouse or civil partner. 

(We’ll refer to a ‘spouse’ in the rest of this section but the ISA inheritance rules apply equally to a civil partner. Unfortunately they do not apply to unmarried partners). 

Upon death, all types of ISA (except a JISA) transform into a ‘continuing account of a deceased investor’. 

This so-called ‘continuing ISA’ can then grow tax-free until the deceased’s affairs are settled. 

The tax benefits of the deceased ISAs transfer to their spouse using an Additional Permitted Subscription (APS). 

The APS is a one-time ISA allowance that enables the surviving spouse to expand their ISA holdings up to the value of the deceased’s ISA accounts. 

By this mechanism, the tax-free status of the deceased’s ISAs are passed on to their spouse. 

Unfortunately, the rules descend into a bureaucratic quagmire from there. 

ISA inheritance rules for the Additional Permitted Subscription

A surviving spouse qualifies for the APS even if the ISAs are actually willed to someone else. 

However, a spouse does not qualify if the couple are not living together at the time of death, or the marriage has broken down, they are legally separated, or in the process of being legally separated. 

The value of the APS is the higher of:

• The ISA’s worth at the date of death
• Its value when the continuing ISA account is finally closed (assuming part of the APS hasn’t already been used)

The APS must be claimed separately from each of the deceased’s ISA providers. 

You can choose which of the two valuation options above apply to each ISA provider. You don’t have to pick one option that applies across the board with every provider

The APS can be used from the date of death. 

Although you’d normally expect an APS to be funded by the inherited ISA assets, this is not necessary. An APS can be fulfilled by any assets the spouse owns. 

The APS must be used within:

• Three years from the date of death
• 180 days after the completion of the administration of the estate, if that’s later. 

The APS does not interfere with the spouse’s own ISA allowance. They get that as normal. 

APS subscriptions count as previous tax year subscriptions.

You should check the terms and conditions of all your ISAs to ensure they adhere to APS provisions. ISA providers aren’t automatically obliged to comply with the APS rules. 

APS rules per ISA provider

One common restriction is that the spouse must use their APS with the same provider that runs the deceased’s ISA account. This leads to extra complications, as we’ll cover below. 

As mentioned, the APS is divided into separate amounts that align to the value of the deceased’s continuing ISA accounts – as held with each of their providers.

For example:

• A continuing ISA worth £100,000 is held with provider A
• A continuing ISA worth £50,000 is held with provider B

The surviving spouse can now fund up to £100,000 of APS in ISAs with provider A, and up to £50,000 with provider B. 

You can’t fill ISAs worth £75,000 with both providers. You can only ‘spend’ up to the limit of each APS per provider. 

However, you can split each APS between any number and type of ISA per provider. (Although there are restrictions on the Lifetime ISA.)

You can fill both new and existing ISAs with each provider. 

Transferring inherited ISA assets

In specie transfers from a continuing stocks and shares ISA must be made within 180 days of the assets passing into the beneficial ownership of the surviving spouse.

The in specie transfer can only be made to a stocks and shares ISA held by the spouse with the continuing ISA’s provider. 

The assets must be the same as those held on the date of death. 

Alternatively you can sell the investments for cash. The money can then be used to fund the APS with slightly fewer restrictions. 

You can always transfer your ISAs to another provider as normal – after you’ve used your APS. 

Lifetime ISA APS restrictions 

You can’t open a new Lifetime ISA unless you’re aged between 18 to 40. 

You can’t pay into an existing Lifetime ISA unless you’re under 50. 

The APS does use up your £4,000 annual Lifetime ISA allowance. 

You can’t pay APS into a Lifetime ISA if you’ve already paid into one in the current tax year. 

A continuing ISA’s tax-free growth limits

Before the deceased assets are transferred via the mechanism we’ve just described, they grow tax-free in continuing ISAs until:

• Completion of the administration of the estate
• The accounts closure by the deceased’s executor
• Three years and one day after the date of death. Then the account can be closed by the ISA provider 

The earliest of these dates applies. 

The value of the deceased’s ISA holdings count towards their estate. The tax-free benefits are only passed to a surviving spouse. 

Inheritance ISAs are a marketing label not an additional type of ISA. Every ISA can be inherited as described above. But please check your provider’s T&Cs for additional restrictions. 

What happens to my ISA if I move abroad?

You can still put new money into your ISA for the remainder of the tax year when you stop being a UK resident. But you can’t contribute new money again until your residential status changes back.

Your ISA assets will continue to grow free of UK tax. But watch out! Your new country of residence may demand a slice.

In addition:

• You should still be able to transfer ISAs without losing your tax exemption.
• Ditto for withdrawing money from a flexible ISA and replacing it.
• You can still inherit an ISA using the APS even if you’re resident abroad.

Check with your provider before doing anything, just to be safe.

You should also tell your ISA provider when you’re no longer a UK resident. The UK means England, Wales, Scotland, and Northern Ireland. The Channel Islands and the Isle of Man are excluded.

If you split your time between the UK and other territories you can do a residency test. This will determine your status. Fun!

You don’t lose your ISA annual allowance if you’re a Crown employee serving overseas, or their spouse or civil partner.

A few final ISA wrinkles

• Each ISA can be held with the same or a different provider.

• Payment into a JISA uses up the child’s allowance, not yours.

• You can now hold fractional shares in a stocks and shares ISAs. They are ‘fractional interests’ in this list of qualifying investments.

• Some providers have all-in-one cash ISAs. With these you can split new money between instant access and fixed-rate options, within a single ISA wrapper. 

• A workplace ISA counts as a stocks and shares ISA.

• You can only claim the government bonus when buying your first home from a Help to Buy ISA or a Lifetime ISA. Not both.

Any questions?

Well, we’re sure this brief post has cleared everything up… But do let us know in the comments if we’ve missed a bit.

You can also check out the government’s official ISA pages if you’re a completist!

Take it steady,

The Accumulator

Note: This article on the ISA allowance was updated in February 2025. Reader comments below may refer to older ISA rules. Check the date to be sure.

1. Also known to the government but to nobody else as the ‘subscription limit’. [↩]
2. Exceptions: funds in a Junior ISA before the child reaches age 18, Lifetime ISA, Innovative Finance ISA loan lock-ins, and fixed-term/regular saver Cash ISAs where you’ll pay various penalties for early release. [↩]
3. Max per year, per person. [↩]
4. per child [↩]
5. The max contribution into a LISA is £4,000 a year. [↩]
6. That is to say you’re no longer filling it with new money. [↩]

The failure of index-linked bond funds to perform post-Covid has really been bothering me. What’s the point of these things if they don’t actually protect you from inflation? Meanwhile, individual index-linked gilts – correctly used – are meant to be a proper inflation hedge. But is that true?

Can we empirically prove individual linkers1 worked when inflation let rip?

First, some context. Our favoured linker fund holding at House Monevator prior to the post-pandemic price surge was a short-duration model. That’s because short-duration index-linked fund returns are more likely to reflect their bonds’ inflation ratchets, and are less prone to price convulsions triggered by rocketing interest rates.

Longer duration linker funds, meanwhile, got hammered in 2022 because they’re more vulnerable to rising interest rates. When rates soared, prices dropped so hard and fast that their bond’s inflation-adjustment element was rendered as effective as wellies in a tsunami.

Hopefully you at least avoided that fate…

The weakest link(ers)

So it’s October 2021, and you’re duly positioned on the coastline, scanning the horizon for inflation, with ample resources invested in short-duration linker bond fund units.

Here’s how our defences performed once the inflation Kaiju was unleashed:

Inflation versus short-duration linker fund

Index-linked bond fund is the GISG ETF. Data from JustETF and ONS. February 2025. NB. The linker fund trend line was corrected on 18 Feb 2025.

Oh. As that calm-voiced announcer-of-doom on Grandstand might have intoned: “Inflation One, Passive Investing Defence Force, Nil.”

Or, in numbers more appropriate to an investing article, the annualised returns from October 2021 (when inflation lifted off) to year-end 2024 are:

• UK CPI inflation: 5.9%
• Short-duration linker fund: 0.6%

Note: all returns in this article are nominal, dividends reinvested.

In other words, this linker fund fell far behind rising inflation and posted real-terms losses over the period.

Right-ho. So that was a learning curve.

Since then I’ve put a lot of time into researching individual index-linked gilts, commodities, gold and money market funds – all assets fancied as offering some degree of inflation protection.

The most reliable should be individual index-linked gilts. After all, they come with UK inflation-suppression built-in. Put your cash in, and it pops out at maturity, with a price-adjusted enamel on top. Purchasing power protected!

All you must do is not sell your linkers before maturity. Buying-and-holding prevents the kind of losses bond funds are vulnerable to realising. Funds’ constant duration mandates make them forced sellers when bond prices are down.

Excelente! But one thing was still nagging me. Did individual linkers actually deliver on their inflation-hedging promise during the recent price spiral?

Inflation versus individual index-linked gilts

To answer that question, I simulated the performance of a small portfolio of individual index-linked gilts using price and dividend data from October 2021 to year-end 2024.

Then I pitted the individual linkers against CPI inflation and GISG, the short-duration linker ETF discussed above.

Here’s the chart:

Data from JustETF, Tradeweb and ONS. February 2025. NB. The linker fund trend line was corrected on 18 Feb 2025.

Okay, the individual linkers (pink line) did better than the fund but they still lagged inflation. The annualised return numbers are:

• Inflation: 5.9%
• Individual linkers: 4.1%
• Linker fund: 0.6%

That’s still an unhealthy gap as far as I’m concerned – like buying a peep-hole bulletproof vest.

Proving a negative

Why did the individual index-linked gilts lose money versus inflation?

Because way back in 2021 they were saddled with negative yields. That is, the buy-in price for linkers was so high that their remaining cashflows were guaranteed to sock you with a loss, if you held them until maturity.

The best a linker portfolio held to maturity could do was limit the damage against inflation. But that negative yield drag meant it was always going to underperform.

But that’s a historical problem. Today index-linked gilts are priced on positive yields, so they can keep pace with inflation while sweetening the deal with real-return chocolate sprinkles on top.

The other point worth making is that my clutch of individual linkers were still susceptible to the downward price lurches that afflicted constant-duration bond funds.

The chart above shows a big dip in late 2022 when prices fell as interest rates took a hike, for instance. Think Trussonomics and other traumas of the era.

These are only paper losses to the individual linker investor who holds until maturity or death. Hold fast and eventually your bond’s price will return to meet its face value on redemption day (plus inflation-matching bonus in the case of linkers.)

Meanwhile, the bond fund is flogging off its securities all the time – profiting when prices rise and losing when they fall. That was a very bad design feature during the post-pandemic inflation shock.

My individual linkers’ price dip was smaller than the fund’s largely because I could choose to populate my modelled portfolio with shorter-duration bonds. Short bonds are less affected by interest rate gyrations, as discussed.

Still, I wondered if I was being unfair to the fund. After all, linker funds previously gained in 2020 as money flooded into the asset class.

One last chance for the linker fund

The next chart shows annual returns including 2020, the year before inflation ran hot.

Index-linked bond fund is Royal London Short Duration Global Index Linked M – GBP hedged.2 Data from Royal London, Tradeweb and ONS. February 2025.

Yep, 2020 was a good year for the linker fund. Interest rates fell and its price rose giving it a healthy lead over inflation, and the individual linkers. (Remember the fund profits by selling bonds as prices rise. Meanwhile, the longer average duration of the fund’s holdings meant that it enjoyed a stronger bounce versus my battery of gilts.)

There’s not much to see in 2021 – bar inflation engorging itself – but 2022 is the fund’s annus horribilis. It’s down 5.4% at face value and 16% in real terms. (Horrifyingly, the long-duration UK linker ETF, INXG, was down 45% in real terms that same year.)

Overall, incorporating 2020 does improve the linker fund’s showing. The annualised returns for the five year period 2020 – 2024 are:

• Inflation: 4.6%
• Individual linkers: 3.7%
• Linker fund: 2.2%

It’s still not enough. In my view, the best linker funds available were a fail when inflation actually came calling. I personally held both GISG and the Royal London fund at the time and became deeply disillusioned with them.

All change

The issue driving all this drama was that as inflation accelerated, investors demanded a higher real yield for holding bonds.

The average yield of the simulated linker portfolio above was -4.2% in October 2021. It had risen to 0.5% by December 2024.

When bond yields go up, prices go down. And that exposes the fatal flaw in linker fund design from an inflation-hedger’s perspective – the available products are always selling and even the short duration versions aren’t short enough.

Perhaps yields won’t surge as violently in a future inflationary episode.

But I don’t see why I’d take the risk when I can now buy individual index-linked gilts on positive real yields, hold them to maturity, and neutralise that problem. Individual linkers aren’t going to be slow-punctured by negative yields from here.

So I’ve ditched my index-linked bond funds. They were better against inflation than the equivalent nominal bond funds. But that’s not saying much.

There are other places to store your money so I’ll extend this comparison to the most interesting and accessible of those alternative assets in the next post.

Take it steady,

The Accumulator

Bonus appendix

If you’re interested in buying individual index-linked gilts then these pieces will help:

• Should you build an index-linked gilt ladder
• How to buy index-linked gilts
• Index-linked gilts: how to price, value, and track them in your portfolio
• How to build an index-linked gilt ladder

Are individual linkers better than linker funds?

At hedging inflation yes. At being more profitable, no.

For the avoidance of doubt, I’m not saying that a portfolio of individual index-linked bonds can magick up more return than a bond fund containing precisely the same securities.

What I am saying is that the individual linker portfolio is the superior inflation hedge when each bond is held to maturity. The design of constant maturity bond funds mitigates against matching inflation in the short-term, but should provide a similar overall return in the long run.

If you don’t care about hedging inflation then there’s nothing to gain by swapping your bond funds for a rolling linker ladder.

Fixed duration index-linked gilt funds could also hedge inflation effectively, but they don’t exist.

UK inflation versus globalised inflation

It’s worth mentioning that individual index-linked gilts are linked to UK RPI inflation (switching to CPIH in 2030). RPI was higher than CPI during the period so that’s helped my simulated portfolio claw back some ground against CPI.

By contrast, the short-duration linker ETF, GISG, currently allocates 14% of its portfolio to index-linked gilts. The rest is composed of other developed market, CPI-linked, government bonds: 56% US, 10% France, 7% Italy and so on. The point being that these other linkers don’t protect against UK inflation, though they do match related measures i.e. inflation in highly interconnected, peer economies.

As it was, inflation in these other countries was typically less than the UK’s post-pandemic. I haven’t attempted to calculate what difference this made but I think it’s another reason to favour an index-linked gilt investment product when you can get it.

Individual linker portfolio simulation

I didn’t want to bog the main piece down with a wander through the weeds (well, more than I already have) but for the record I’ll now show my workings.

The individual linker portfolio was constructed from three index-linked gilts, TIDM codes: T22, TR24, and TR26. Each gilt matures in the year indicated by the numbers in the code.

When each gilt matures, the redemption payment is reinvested into the next shortest gilt. For example, T22 is reinvested into TR24. I did not include trading costs for reinvesting dividends or redemption monies.

Relatedly, the performance figures for GISG and the Royal London fund are slightly affected by their OCFs of 0.2% and 0.27% respectively. But I don’t think these charges made a meaningful difference to the comparison over such a short time-period. The differential is too big to be explained by fund fees.

1. Index-linked bonds are colloquially known as ‘linkers’. [↩]
2. Full year data wasn’t available for GISG in 2020 or 2021 as it launched April 2021. However, only annual data is available for the Royal London fund. [↩]