For 2026/27, the ISA allowance is £20,000, the dividend allowance is £500, and the Capital Gains Tax annual exempt amount for individuals is £3,000.
Simple rule: ISAs shelter future dividends and gains; dividend and CGT allowances mainly matter once investments sit outside an ISA or pension.
Use the ISA Dividend and CGT Allowances Explained
Use the ISA, dividend yield and Capital Gains Tax calculators together to estimate how allowances may affect your situation.
2026/27 allowances at a glance
These are the key figures used throughout this guide.
| Allowance or rate | 2026/27 figure | What it affects |
|---|---|---|
| ISA allowance | £20,000 | Total amount you can subscribe to ISAs in the tax year. |
| Dividend allowance | £500 | Dividend income outside ISAs and pensions before dividend tax may apply. |
| Dividend tax rates | 10.75%, 35.75%, 39.35% | Basic, higher and additional-rate dividend tax above the allowance. |
| CGT annual exempt amount | £3,000 | Capital gains outside tax wrappers before CGT may apply. |
| CGT rates on gains from 6 April 2026 | 18% and 24% | Gains within or above the basic-rate band. |
How the ISA allowance works
The ISA Allowance is the amount you can pay into ISAs during a tax year. For 2026/27, the limit is £20,000.
The allowance can be split across ISA types, such as a Cash ISA, a Stocks and Shares ISA, an Innovative Finance ISA and a Lifetime ISA.
The main benefit is that eligible interest, dividends and capital gains inside an ISA are normally sheltered from UK tax. That can become more valuable as balances and investment income grow.
Plan ISA contributions
Use the ISA calculator to model contributions, growth and remaining annual allowance.
How the dividend allowance works
The Dividend Allowance is the amount of dividend income you can receive before dividend tax may apply, after considering personal allowance rules.
For 2026/27, the dividend allowance is £500. Dividend tax is then charged on taxable dividends above the allowance, using the dividend tax rate that applies to your income band.
Dividends from shares held inside an ISA are normally sheltered from dividend tax. That is one reason dividend-paying investments are often held inside a Stocks and Shares ISA where possible.
| Tax band | Dividend tax rate above allowance |
|---|---|
| Basic rate | 10.75% |
| Higher rate | 35.75% |
| Additional rate | 39.35% |
How the Capital Gains Tax allowance works
Capital Gains Tax can apply when you sell or dispose of an asset for more than it cost, after deducting allowable costs, losses and reliefs.
For 2026/27, the CGT annual exempt amount for individuals is £3,000. Gains above this may be taxable if they are not sheltered inside an ISA or pension.
For gains made from 6 April 2026, basic-rate taxpayers may pay 18% on gains that fall within the basic-rate band and 24% on gains above it. Higher and additional-rate taxpayers generally pay 24% on gains.
Estimate taxable gains
Use the Capital Gains Tax calculator to estimate tax on investments outside an ISA or pension.
Inside an ISA vs outside an ISA
The same investment can have different tax treatment depending on where it is held. Inside an ISA, dividends and gains are normally sheltered. Outside an ISA, the dividend allowance and CGT allowance become more important.
| Holding location | Dividends | Capital gains | Planning point |
|---|---|---|---|
| Stocks and Shares ISA | Normally sheltered from UK dividend tax. | Normally sheltered from UK CGT. | Useful for long-term investments and dividend-paying funds. |
| General investment account | Dividend allowance and dividend tax rules apply. | CGT annual exempt amount and CGT rates may apply. | Useful after ISA allowance is used, but needs tax tracking. |
| Pension | Investment income is generally sheltered inside the pension. | Growth is generally sheltered inside the pension. | Powerful for retirement, but access is restricted. |
A practical order for using allowances
The best order depends on your income, goals, tax band and access needs, but a common structure is:
- Build an emergency fund in accessible cash.
- Use workplace pension contributions where employer matching is available.
- Use ISA allowance for flexible tax-sheltered saving or investing.
- Use pensions for longer-term retirement money where access is not needed soon.
- Use taxable investment accounts once ISA and pension planning are already considered.
The main idea is to keep future tax drag as low as possible without locking money away that you may need soon.
Examples of when allowances matter
| Situation | Allowance involved | Why it matters |
|---|---|---|
| You invest £500 per month into a Stocks and Shares ISA | ISA allowance | £6,000 of annual subscriptions sits inside the ISA wrapper. |
| You receive £1,200 in dividends outside an ISA | Dividend allowance | Part of the dividend income may be taxable after the £500 allowance. |
| You sell funds outside an ISA with a £7,000 gain | CGT allowance | The gain may exceed the £3,000 annual exempt amount. |
| You hold dividend shares inside an ISA | ISA tax shelter | Dividends are normally sheltered from UK dividend tax. |
| You have used your ISA allowance and keep investing | Dividend and CGT rules | Taxable accounts need more careful records and tax planning. |
Why record keeping matters
If investments sit outside an ISA or pension, keep records of purchase prices, sale proceeds, fees, dividends and fund distributions.
This matters because tax calculations often depend on the total gain, allowable costs and income already received during the tax year.
ISA holdings are simpler for many investors because dividend and gain calculations are normally sheltered inside the wrapper.
Common mistakes to avoid
- Leaving ISA allowance unused without reason: unused allowance normally does not carry forward.
- Ignoring dividends outside an ISA: dividend income can become taxable once the allowance is used.
- Selling taxable investments without checking gains: CGT can depend on timing and previous gains or losses.
- Assuming all investment accounts are tax-free: a general investment account is not the same as an ISA.
- Forgetting income band effects: dividend and CGT rates can depend on your wider taxable income.
- Not using calculators before selling: estimating the tax before a sale can prevent surprises.
Estimate the allowance impact before you act
Use the ISA, dividend yield and Capital Gains Tax calculators before deciding where to hold investments or when to sell.
ISA, dividend and CGT allowance FAQs
What is the ISA allowance for 2026/27?
The ISA allowance for the 2026/27 tax year is £20,000.
What is the dividend allowance for 2026/27?
The dividend allowance is £500, meaning dividend income above that may be taxable unless sheltered in an ISA.
What is the Capital Gains Tax allowance for 2026/27?
The Capital Gains Tax annual exempt amount for individuals is £3,000 for the 2026/27 tax year.
Are ISA dividends and gains taxable?
Dividends and gains inside an ISA are normally sheltered from UK dividend tax and Capital Gains Tax.
Should I use an ISA before a general investment account?
Many people use their ISA allowance before investing in a taxable general investment account, because the ISA can shelter future dividends and gains.
Key terms
These glossary pages explain the main terms used in this guide.