There are limits to how much you can invest each year into one of the four types of Individual Savings Accounts (ISAs), but over time you can accumulate a lot of ISA accounts. Keeping track of them might become overwhelming if you use the maximum £20,000 ISA allowance each tax year by splitting it across several ISAs.
Each tax year, you can open one of each ISA type: cash ISA, stocks and shares ISA, innovative finance ISA, or Lifetime ISA. This means you can’t open two stocks and shares ISAs in the same year, but you can open one stocks and shares ISA and one cash ISA, for example.
Let’s take a concrete example! For instance, you decide to invest the maximum £20,000 in a cash ISA this tax year. But the next year, you decide you want to take a bit more risk, and set up a stocks and shares ISA for £15,000. You also decide to invest the remaining £5,000 allowance available for that year into a cash ISA with a different provider than the previous year because this one offers better rates. Now you already have three ISAs, and this could continue to multiply as the years go on. Some people don’t like the idea of having multiple accounts because it can get difficult to keep track of them.
Instead of opening new ISAs there is also the opportunity to transfer ISAs to a different provider. You can transfer your ISAs any time, but if you want to transfer money you’ve invested in an ISA during the current year, you have to transfer all of it. From investments made in previous years, you can choose to transfer all or part of your savings.
In order not to lose the tax advantages for that year, you should initiate the transfer through the new provider. If you would simply withdraw your funds to move them, you would lose all your tax benefits. Before starting the procedure, check with your current provider, they might have restrictions or make you pay a charge.
- Everything you wanted to know about ISAs
- What is an ISA allowance?
- What is an ISA: an in-depth guide to tax-advantaged savings for UK residents
- What is an ISA: a guide to tax-free savings in the UK
- How much can you put in an ISA?
- What is a stocks and shares ISA?
- What is a Lifetime ISA and how best to use it?
- How to open a Lifetime ISA
- What is a cash ISA?
- What is a Junior ISA?
- What is a flexible ISA?
- What is an Innovative Finance ISA?
- How to transfer your ISA?
- How does an ISA work?
- Which is the better investment: pension or ISA?
- Is ISA only for UK citizens?
- What is the safest ISA?
- What happens to my ISA if I move abroad?
- Does an ISA beat inflation?
- Interest on cash ISA: much do they pay?
- IBKR offers global access with local benefits for ISA holders