I tend to receive a smattering of ISA questions throughout the year, then a deluge of them leading up to the tax year-end in April. One I seem to get regularly is “How many ISAs can I have?”, but there are several related questions which I thought I’d group together and answer in a single post (following on from my post last week about how to become an ISA millionaire without ever maxing out your ISA). It also serves my own interests, as it gives me the ability to link to a post rather than emailing the answer each time someone asks.
This isn’t meant to be an ISA deep-dive – there are plenty of other resources out there which do a much better job than I could on going into the details on ISAs. Where relevant, I’ve provided links in this post.
This is more of a collection of ISA FAQs.
It even has pictures.
What are the different types of ISA?
Starting with the basics, then.
Each tax year you get a brand-new ISA allowance. For this tax year (6 April 2022 to 5 April 2023) the allowance is £20,000.
You can split your £20,000 allowance across the four different types of ISAs:
- Cash ISA. These are similar to a regular savings account, but you don’t pay tax on any interest earned. The drawbacks are that savings accounts tend to pay higher rates of interest, and most people can earn up to £1,000 in interest on their savings account tax-free due to the personal savings allowance. So they’re not worth using up your ISA allowance for most people.
- Stocks and Shares ISA. These allow you to invest your money in stocks and shares (funnily enough). One of the main benefits of a Stocks and Shares ISA is not having to pay capital gains tax or tax on income generated by your investments.
- Lifetime ISA. These are only available if you are under 40. They’re specifically for those saving for a first home or life after retirement. The government pays in an extra £1 for every £4 you save, and you can save up to £4,000 a year into a LISA (£5,000 if you include the government contributions). To invest in a LISA, you must be under 40, and can make contributions up to your 50th birthday. You can hold cash or stocks and shares in your LISA, or have a combination of both.
- Innovative Finance ISA. These are high risk. They allow you to invest in peer-to-peer loans, where you lend money to other people or small companies. Importantly, savings or investment platforms, peer-to-peer platforms aren’t covered by the Financial Services Compensation Scheme should they collapse.
But there’s also a fifth ISA which you can invest into.
You can use a Junior ISA (JISA) to invest for your children. These have slightly different rules – they have a separate allowance of £9,000 per year. Any contributions made to a JISA don’t count towards your £20,000 personal ISA allowance.
How many ISAs can I have?
You can distribute your ISA allowance across the five different types of ISAs in any way you want – as long as you stay within the rules. You can only pay £4,000 into a Lifetime ISA, but can pay up to £20,000 into the other types of ISAs. On top of your £20,000 allowance, you can pay an additional £9,000 into a JISA.
I tend to think of these sorts of things in pictures, so here’s a couple of examples.
With every tax year, you get a fresh set of allowances. LISAs, Cash ISAs, Stocks and Shares ISAs, and IFISAs all count towards the £20,000 limit. JISAs have their own £9,000 allowance.
So here’s the position at the start of a new tax year before any ISA contributions are made:
Someone could decide to contribute £3,000 to their LISA (receiving an extra £750 top-up from the government), £7,000 into their cash ISA, £5,000 into their Stocks and Shares ISA, and £5,000 into their Innovative Finance ISA. That would take them up to the £20,000 limit. On top of that, they could contribute an extra £6,000 into a JISA for their child:
Alternatively, they could invest the full £20,000 allowance into a Stocks and Shares ISA, plus the full £9,000 into a JISA:
There are all sorts of different combinations of ISA contributions, any of which are fine as long as you stay within the ISA limits.
How many Stocks and Shares ISAs can I have?
While you can pay into five different types of ISA in any tax year, you can’t pay into more than one ISA of the same type. So you can only pay into one Stocks and Shares ISA in the same tax year.
If you have an ISA account from a previous tax year, you don’t need to pay into the same one this tax year. You can open a new ISA account with a different provider without having to close your old one.
Can I transfer my ISA between different ISA providers?
Yes. You can both transfer an ISA from a previous tax year, and transfer to a different ISA provider during a tax year.
If you want to transfer money you’ve invested in an ISA during the current year, you must transfer all of it. For money you’ve invested in previous years, you can choose to transfer all or part of it.
Moving funds from one ISA to another doesn’t use up any of your annual ISA allowance. But when transferring, do not close your ISA and withdraw the money to pay into your new account. If you do this, you’ll lose the tax benefits. Instead, you need to transfer from one ISA to another without withdrawing.
Can I have different ISA types at different providers?
Yes. You could, for example, have a cash ISA with one provider, and a Stocks and Shares ISA with a different one. But remember not to exceed your £20,000 annual allowance across all your ISA providers.
Can I transfer between ISA types?
Yes. You could, for example, decide to move your money from a cash ISA into a Stocks and Shares ISA. But again, remember not to withdraw the money from the ISA you’re transferring out of – you’ll need to transfer into the Stocks and Shares ISA without withdrawing your cash (your ISA provider will give you instructions on how to do this).
Hopefully that clears up some basic ISA questions.
If you have an ISA-related question I haven’t answered, and you can’t find it in one of the sites I’ve linked to above, feel free to leave a comment below, or send me an email using the contact form above. I’ll add it to the list and update this post!