Individual Savings Accounts (ISAs) offer a tax-free way to save or invest. Unlike many other savings or investment accounts, there is no income tax to pay on your earnings from ISAs. There is a maximum ISA subscription limit or allowance for each tax year, which runs from 6th April to 5th April in the following year. The ISA allowance for the 2017/2018 tax year is £20,000.
A number of investors have asked us about opening more than one ISA – this blog looks at the rules on how many ISAs an individual can have. We hope you find it useful!
Can I have more than one ISA?
There are 4 main types of ISA:
Cash ISA – can include savings in bank and building society accounts and some National Savings & Investments products
Stocks & Shares ISA – can include shares in companies, bonds and unit trusts
Innovative Finance ISA – include peer-to-peer loans and crowdfunding debentures
Lifetime ISA – may include either cash or stocks & shares
Innovative Finance ISAs and Lifetime ISAs were introduced by the Government recently, expanding the options available for investors looking to earn tax-free returns.
Under the ISA regulations set by HMRC, only one type of each ISA can be ‘subscribed to’ in each tax year. You can have more than one ISA, but you can only pay into one Cash, one Stocks & Shares, one Innovative Finance and one Lifetime ISA in the same tax year. The Lifetime ISA has a subscription limit of £4,000 in each tax year.
You can split your ISA allowance across the different types of ISA, as long as the total amount you pay into all your ISAs in the tax year does not exceed the allowance. For the 2017/2018 tax year the limit is £20,000.
If you subscribe to a flexible ISA, funds can be withdrawn during the tax year and then paid back in without the ISA allowance being affected. For example, a customer with £15,000 in an Innovative Finance ISA who withdrew £3,000 would then have a total ISA investment of £12,0000 and could still invest a further £8,000 in ISAs in the same tax year (the remaining allowance of £5,000 plus the £3,000 withdrawn).
Can I transfer my ISAs?
Many ISA providers allow ISA transfers in, which allows you to transfer ISAs from previous tax years and the current tax year to the new provider.
Transferring ISAs from previous years into an ISA opened in the current year does not affect your ISA allowance for the current year. You can transfer all or part of the value of the ISA. There is no limit to the number of ‘old’ ISAs that you can transfer, but you should check that your new provider accepts transfers in before starting this process.
Current Tax Year Transfers
You can also transfer an ISA that you opened and paid into in the current tax year, but this will count against your ISA allowance for the tax year. You must transfer the entire balance of the ISA. As an example, a Cash ISA with £5,000 that was opened in the current tax year could be transferred to an Innovative Finance ISA, leaving a remaining ISA allowance of £15,000.
When an ISA is being transferred, your new provider should arrange the transfer with your existing ISA provider. If you withdraw the cash from the existing ISA and then pay it into another ISA, it will lose its tax-efficient status.
Can I invest in an ISA with LendingCrowd?
LendingCrowd’s Innovative Finance ISA offers a target rate of 6% p.a.* and funds are invested automatically in at least 20 loans through our Loan Market. All repayments are automatically reinvested and there is no fixed term.
Your capital is at risk when you invest. This is a variable target rate net of ongoing management fees, estimated bad debt and before the 1% exit fee. Tax treatment depends on the individual circumstances of each client and may be subject to change in future.