The money-saving expert warned that time is running out
Martin Lewis has warned Brits that the window is closing to make tax savings. During ITV’s The Martin Lewis Money Show Live, the financial guru outlined the implications of the current tax year ending on April 5.
Among those implications is the commencement of the fresh Individual Savings Account (ISA) allowance. An ISA functions as a tax wrapper, shielding the funds contained within from taxation.
Presently, all ISAs – excluding the lifetime ISA and junior ISA – permit individuals to deposit £20,000 per tax year. This means people have just weeks remaining to maximise their 2025/26 allowance, potentially creating additional capacity for their 2026/27 allocation.
Mr Lewis stated: “The clock is ticking. There is less than a month before the tax year ends so the ISA deadline is upon us. If you don’t use this year’s ISA tax-free allowance, you lose it. The reason it is getting urgent right now is that your annual allowance doesn’t carry over, and if you don’t use it, you lose it. You get a new £20,000 ISA allowance on April 6 as that is a new tax year.
“But, if you’ve got money to put in now, even if you don’t feel you’re going to use it this year and haven’t got enough to fill the ISA allowance, you may as well get it in now just in case something happens next year and you are more flush than you thought you would be.
“The really important thing to understand about ISAs though is that, once you put your savings or investments into an ISA, it stays tax-free year after year. So, five years ago, you might have put in 20 grand and four years ago, another 20 grand, and another 20 grand, and another 20 grand, and another 20 grand, all protected in an ISA.
“Some people have been doing it for years with the interest have hundreds of thousands of pounds in cash ISAs. Some share investors, where their shares have been invested, are ISA millionaires – that’s over a million pounds in investments protected from tax in an ISA. That’s why it’s important.”
The most popular form of ISA is a cash ISA. Individuals can deposit up to £20,000 annually inside one, with the funds shielded from tax, though this will alter in April 2027 following Chancellor Rachel Reeves’ decision to reduce the threshold in a bid to encourage investment rather than holding substantial cash reserves, which are negatively impacted by inflation.
The stocks and shares ISA, which permits individuals to invest funds on the stock market, also carries a £20,000 ceiling. All returns generated from dividends and the sale of stocks and shares are exempt from taxation as they’re earned within the ISA.
Innovative finance ISAs involve the provider using your funds to lend to borrowers or businesses. You can earn interest on lending your money tax-free, although you risk losing money if those you’ve lent to cannot repay.
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Regarding the two ISAs without a £20,000 threshold, the junior ISA is designed for children and permits up to £9,000 to be deposited annually tax-free. The funds remain untouchable until they reach 18, though they gain control from age 16.
Meanwhile, the lifetime ISA has a £4,000 limit and is intended for saving towards either a first property or retirement. These can only be opened between ages 18-39, with the Government adding 25 per cent to whatever you deposit each month.
Withdrawals are permitted only when purchasing your first home – subject to certain conditions – or upon reaching 60, otherwise you face a financial penalty.
Mr Lewis explained that the crucial aspect of ISAs is their ‘tax-wrapper’ effect. He used the comparison of a cake representing your money.
Ordinarily, each year, the taxman takes a slice from your cake, diminishing what you have. But a tax-wrapper functions like clingfilm covering the cake, preventing anyone from taking a slice.
“Final note – not from this April but next April, the cash ISA limit will drop to £12,000 for those under the age of 65. The shares ISA limit stays at £20,000,” Mr Lewis continued.
“You can have a mix of cash and shares ISAs, so you could put £12000 in a cash ISA and £8000 in shares, or all £20,000 in shares. You can have a mix of the two. The reason that is changing is because the Chancellor argues it encourages young people to invest.”
