Can You Have More Than One ISA At Once?
One of the most common questions every year is if you can hold more than one ISA at the same time. Here is your hot guide to ISAs.
Can you hold more than one ISA?
The answer is both yes and no. The short answer is yes, but you can only open one of each ISA in each tax year and fund one of each type every year. Although technically you can have older ISAs with different providers. This means you can have Cash, Stocks & Shares, Lifetime, and Innovative Finance at the same time.
For the 2021/22 tax year, the maximum one is allowed to invest is £20,000 across all ISAs. This means any new ISA accounts or pre-existing accounts.
A brief history of ISA
ISA was launched in 1999 by the government to replace the older versions, PEPs and TESSAs. Each year, investors and savers get a maximum annual allowance to place into ISAs. Currently, the allowance is set at £20,000 since 2017/18. 2022/23 may see a rise in allowance but it’s not guaranteed.
ISAs give investors tax-free** profit from their investments. The capital gain depends on inflation and time length. Below we’ll give a brief description of each ISA.
Cash ISAs
The most common type of ISA, Cash ISA is a regular savings account with tax-free interest. Unfortunately, its value may be ruined if the interest is lower than the inflation rate. And given that a high majority of ISAs are Cash, where does that leave us?
In a brief nutshell, not in a good place. The current inflation rate is 7.0% (as of 14 April 2022) with a very low average rate of return. High inflation poses an extreme threat level to investors.
Stocks & Shares ISAs
This ISA enables people to invest in a range of company shares, bonds, and funds using the tax-free allowance. This ISA is aimed at investors with a longer-term viewership, similar to a fundamental trader.
There is a degree of risk with this ISA as the nature of the market can affect returns.
Lifetime ISAs
Lifetime ISA can only be used for either buying your first house or funding your retirement. To qualify, you need to be between 18 and 39.
For the retirement section, you may benefit from a 25% bonus on a deposit of investment up to £4000 per year. You cannot access these funds until you reach 60 or else there is a 25% penalty on withdrawals.
One is only able to invest up to £4000 per year, leaving you with £16,000 to place into other ISAs.
Innovative Finance ISAs
Innovative Finance ISA was introduced in 2016/17 but it’s not a traditional ‘savings account’ unlike the others. Instead, it allows you to lend money on a peer-to-peer basis using your allowance.
Any interest you earn is tax-free. Any interest payments are paid monthly and can be withdrawn or re-invested. Each provider offers different return rates and lengths when you want to withdraw.
As with the Stocks and Shares, your capital is at risk with an Innovative Finance account.
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**The tax treatment of interest and reliefs on defaults may be subject to change and tax treatment will depend on your individual circumstances.
In Summary
Before investing, we recommend that you weigh up the pros and cons of each of the various ISAs available. Do think about your financial goals and if you are unsure, do seek an independent financial adviser before any investments.
